Donald Trump might frequently complain about the Federal Reserve and Jerome Powell, but until now no one cared. His latest move to recommend Stephen Moore for a seat on the Fed’s board is potentially explosive, with ripple effects that could hit the global monetary system hard. Puppet central banks and inflation go hand in hand, so over the long-term, this could be extremely bullish for Bitcoin.
Trump’s Assault on Fed’s Independence Could be Great for Bitcoin
The Federal Reserve has always been sacred. Presidents will appoint yes-men in every walk of life to ensure they get their agenda passed, but the Fed was still where you picked the best person for the job. By preparing to nominate the unqualified-but-loyal Moore, Trump is performing an almost sacrilegious act in the eyes of the establishment.
Why are the stakes so high? The US dollar is the world’s currency as 62% of all central bank holdings are in USD. The conventional economic system cannot survive a lack of credibility in the dollar. This is where an alternative, deflationary asset like Bitcoin can enter the fray.
Puppet Central Bank = Spiraling Inflation
Central banks that lose their independence nearly always suffer from spiraling inflation, mainly because poor policy decisions and a lack of confidence from investors abroad cause capital flight. Venezuela and Zimbabwe are two notable examples. Even in Turkey, where the CBT does retain some independence, strong words from the ruling party were enough to spook investors away for fear there was a transitioning dictatorship.
Bitcoin Is a Hedge Against the End of the Financial Establishment
Bitcoin has proven to be of great benefit to those people in countries where government mismanagement has seen their assets de-valued to almost nothing. While the US dollar continues to be the world’s favorite medium for exchange, there is currently no fiat currency that could replace it.
Some people say crypto is a hedge against the end of the world. This isn’t true. It’s a hedge against the end of the economic system that we currently employ.
Consider this plausible, if unlikely, scenario:
Trump successfully appoints Moore to the board of the Fed and makes him Fed chair (booting out Powell) after winning the 2020 election. Loose financial policy continues for longer than is safe given creeping inflation. Trump continues to stack the board with his supporters while national debt snowballs. Civil unrest worsens as wealth inequality rises. Outside investment dries up as investors lose confidence.
All this doesn’t sound like an excellent situation for the dollar, the bedrock of the global financial system. Enter cryptocurrencies like bitcoin as a means to avoid Federal Reserve correlated investments (hint: everything).
Crypto is a Pure Hedge in a World of Dollar-Correlated Assets
More aggressive institutional investment seems inevitable in Bitcoin. For now, there hasn’t been a compelling enough reason to spark an influx, but if Yes-Man Moore finds his way to the Fed, the clock has ticked closer to midnight.
Given the highly correlated nature of asset-classes, Bitcoin might be the only pure play left to evade the Fed. We know one thing for sure, and that’s if anything close to the above scenario happens, there isn’t enough BTC to go around.
Disclaimer: The views expressed in the article are solely those of the author and do not represent those of, nor should they be attributed to, CCN.