For ideological reasons, many Bitcoiners lean towards economic conservatism. Money-saving measures are seen as ideal and the progressive agenda is viewed with considerable suspicion. Cryptoliberals in particular have difficulty accepting current economic practices. In other words, according to most of these critics, the authorities are managing the economy terribly. That is, everything is a major disaster because of the “system”. In other words, the government and the Federal Reserve don’t know what they’re doing. Or, worse, they are malicious actors who act at will.
“The system is always guilty”. “People are always innocent”. Now let’s analyze what happened. It is clear that we have two crises. On the one hand we have the health crisis. In other words, the pandemic as such. Contagions, Illnesses, Deaths and Restrictions. On the other hand, we have rooted the crisis in economic stagnation. In other words, the decline in demand. Which in turn created a terrible deflationary picture at the time. Deflation is particularly dangerous because it affects income. Which increases unemployment and increases the debt burden. Obviously a problem.
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What is the solution now? According to the ultra-conservatives, the solution is to do absolutely nothing. The economy adapts. Sure, there will be a “temporary pain”, but that pain is necessary. It’s a pretty spartan solution. But it was the solution proposed by ultraconservatives of all generations in all crises. As we can imagine, not many people support this solution. Exactly. The ultra-conservatives are a small minority in the great theater of things. Easy. The utopia of “temporary pain” is simply not feasible because it would cause an unsustainable political and social crisis.
Then what’s the solution? Well, today everyone agrees that this type of crisis will be resolved with heavy injections of liquidity. Experience has shown that an increase in the supply of money stimulates an increase in demand. Which of course combats deflation. And finally, it drives job creation. This is basically the progressive agenda. In other words, a solution through government intervention. Which libertarians hate because it obviously means an increase in state power over everyday life.
Now the progressive agenda is not immune to danger. Progressives tend to exaggerate. And they’re not very good when it comes to discipline. In other words, the problem with the ongoing solution is the risk of economic overheating. In short, the problem is inflation.
Joe Biden has already spent his first 100 days in office. And a lot has happened in the past three months. In many ways, the US economy is already on track. The vaccines are working. The prices increase. The employment is known. And everything is gradually returning to normal. The population has received aid checks. And, of course, we have the controversial $ 2.3 trillion infrastructure plan funded by a corporate tax hike.
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At this point, many have voiced their (legitimate) concerns about the possible overheating of the economy. And in many areas we already have inflation. In particular, prices in the construction, food and raw materials sectors have risen faster than expected and are already affecting many companies. Of course, this was not the same in all sectors. The service sector, for example, is experiencing a much more gradual recovery. And we can’t forget that the service sector is one of the largest employers in the United States.
However, many are frustrated by the Federal Reserve’s alleged rejection of such overheating. After all, the Fed is continuing its monetary policy. In other words, the flexibility remains. This “blindness,” many warn, can lead to an inflationary picture in the United States. If we factor in Biden’s infrastructure plan, which will dramatically increase budget spending, the consequences can be disastrous. Great moderation could come to an end and the United States could return to an inflationary crisis like the one it experienced in the 1970s.
Job creation is a priority right now, according to Federal Reserve director Jerome Powell. Furthermore, the inflation currently being seen is actually “reflation”. Yes, prices have risen sharply in some sectors. In many cases, however, these are temporary distortions caused by failures in the sales and production chain. In other words, It’s temporary inflation. Here is Powell’s opinion.
Not everyone is very convinced of Powell’s arguments. Many think he’s wrong. In fact, he’s a grossly irresponsible person who makes the same mistakes that were made in the 1970s. For better or for worse, Powell Biden has the support that he expressed his great optimism in his first 100-day speech to Congress on the Economic Front.
What does this mean for the price of Bitcoin? If progressives are successful with their guidelines, Bitcoin will be one of the big winners. That is, if inflation manages to stay under control as promised, the Fed continues its monetary policy, and the economy continues to grow, there is no reason to believe that the price of Bitcoin will not continue to rise. On the other hand, if the Conservatives are right and inflation is spiraling out of control and the Fed is forced to drain liquidity from the system, ironically, it would not be very beneficial to the price of Bitcoin.
Of course, despite inflation, the Fed can refuse to withdraw liquidity to encourage job creation. This is one possibility. Another scenario is that while the reserve needs to be cut, the economic recovery is such that somehow everything is evened out and the financial markets are not as badly affected. In the past, there were financial credit balances despite a rigid monetary policy. However, it remains to be seen how Bitcoin compares in such a scenario.
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With the pragmatism of an investor, I don’t care if the macroeconomy is spiraling out of control just so I can say that progressives make the difference. It seems to me that many actually wish things to go wrong so that they can say he is right. This is not my case. My concern is my investment. Not my ideological pride.
Personally, I strive not to be right per se. What I am looking for is to expand my investment portfolio. In other words, the goal is to make money. The liquidity injections have been beneficial as the price of financial assets has increased. Biden’s household spending will do something similar to the economy. That could increase the demand for Bitcoin. In other words, the progressive agenda isn’t bad for the price of Bitcoin. As simple as that.