The results of next month’s US presidential election may not be so important to Bitcoin price: a trillion dollar stimulus package can happen regardless of who wins, reinforcing Bitcoin’s appeal as a hedge against inflation.
President Donald Trump over the past week reversed his opposition to the government’s new spending stimulus package following April’s $ 2 trillion corona virus aid package. in reaching an agreement with the leaders of the Democrats (the opposition party), who have proposed a $ 2.2 trillion stimulus package. According to Axios, he told his own senior Republican lawmakers he wanted “a big deal.”
Should Trump win in November, he is likely to continue to support spending stimulus or easy monetary policy from the US Federal Reserve (Fed), with his 4-year track record of pushing pushes the US central bank to cut interest rates whenever there are signs of weakness, while boasting of US job growth and stock market surge. He could also push for a new tax cut.
Trump’s Democratic rival, former Vice President Joe Biden, has launched his own $ 5.4 trillion agenda, including increasing budget allocations for education, housing, and care. health care, paid leave and repair of dilapidated infrastructure, according to the Wall Street Journal. Operation Biden has pledged to cancel a substantial portion of the American $ 1.5 trillion worth of federal debt.
The US government budget deficit for fiscal year 2020 has tripled to $ 3.1 trillion. And economists say the Federal Reserve is likely to continue printing money in the coming years to help finance the budget gap.
Wall Street analysts have debated in recent weeks that it would be better for either Trump or Biden to win for stocks. What is good for Bitcoin can be easier to define, as most digital asset market analysts say the $ 3 trillion in new Fed money printed this year has helped push the price of Bitcoin up. Bitcoin is up 63% so far, compared with 9.4% for the S&P 500 of US stocks.
Mike Wilson, equity strategist for Morgan Stanley on Wall Street told CNBC on Monday that, “whoever wins the election, in the first quarter we’ll have an additional stimulus that perhaps still needs. necessary to ensure that recovery continues ”.
Pantheon Macroeconomics’ Ian Shepherdson wrote Monday in a report that the next bailout bill likely won’t go into effect until early February, but “the stimulus is coming and the longer it is delayed the bigger it will be. ”And the more likely the Fed is to finance additional costs.
“It seems the market doesn’t really care who the winner is,” Mati Greenspan, founder of cryptocurrency and forex research firm Quantum Economics, wrote in a client note last week. “All investors are concerned with is stimulus, which both sides seem ready to provide in full.”
There is a long way to go before the economy recovers. About 12.6 million Americans were unemployed at the end of September, more than double the number earlier this year, before the pandemic. And some health experts are now warning of a new wave of corona virus infections that could undermine consumer confidence or lead to new lockdown measures that could reduce output.
Any cost to get the economy out of a recession could be decoupled from the growing portfolio needed to address persistent environmental and social concerns.
According to a report last month by the U.S. Commodity Futures Trading Commission’s Climate-Related Market Risk Subcommittee, it could take as much as $ 110 trillion in investments by 2050 to eliminate production. to generate energy from carbon-intensive fuels. That number is about 3.7 trillion dollars a year.
There is also the prospect of a cost to reduce racial inequality. In addition to the fundamental inequity of activities such as marking, suppressing voters and filing by the police, institutionalized racism compromises the economic potential of the United States by Limited opportunities “for a large number of Americans,” argued Federal Reserve Bank of Atlanta President Raphael Bostic in a speech last month. A study cited by Black Entertainment Television’s founder, Robert Johnson, estimated the cost of slavery compensation at $ 14 trillion.
Federal Reserve Chairman Jerome Powell made no secret of his stance that the government needs to increase spending to spur recovery from the corona virus recession. In a speech last week, Powell said that without more aid, households and businesses will experience increasing “default”, which could harm “capacity. production of the economy ”.
Fitch, the bond rating firm wrote in a report on Monday that voters see the economy as the top issue in the 2020 election and the stimulus package is about $ 1 trillion more than who will win. .
If the federal government doesn’t boost the economy with trillions of dollars it spends, the traditional equity and bond markets could quickly sell off. And such exhausted market “liquidity” could force the Fed to increase monthly asset purchases or offer new forms of emergency lending. Currently, the Fed is buying $ 120 billion in US treasury bonds and mortgage securities each month, up to $ 1.44 trillion a year.
“This cycle needs central bank liquidity support on an unprecedented scale and will need significant additional liquidity support, if for whatever reason the global recovery is defeated,” Deutsche Bank’s director of international strategy, Alan Ruskin, wrote last week in a report.
Result? For voters, it’s a choice between Trump and Biden. But Bitcoin can be the winner in some way.