Unleashing the Potential of Gold and Bitcoin with Lower Interest Rates
Jurrien Timmer, a macroeconomic expert at Fidelity, suggests that a potential adjustment in the Federal Reserve's interest rates could spark new bullish markets for both gold and Bitcoin (BTC).
Timmer highlights that gold and Bitcoin have outperformed most other financial assets this year:
So what’s going on? Is it just excessive sentiment, or is there a deeper justification beneath the surface? Could it be that another era of financial repression looms, creating a regime in which the Fed’s independence is once again threatened, as it was some eight decades ago?
If… pic.twitter.com/ceyaW6Ga9d— Jurrien Timmer (@TimmerFidelity) May 12, 2023
He envisions a scenario where the US government may need to lower interest rates to address its growing debt. This could adversely affect the dollar and drive BTC and gold prices upwards.
The potential urgency for lower rates to tackle the massive debt burden could undermine the independence of the Federal Reserve.
Consequently, a weaker dollar and suppressed real rates would benefit gold, and since Bitcoin is often considered gold’s high-powered counterpart, it is expected to experience a similar trend.
History shows that excessive debt burdens typically require devaluation or surpassing through rising nominal GDP.
READ MORE: US Dollar Supremacy: Chamath Palihapitiya Sheds Light on Global Currency Reliance
The 1940s provide a relevant example in this regard. It is plausible that policymakers would once again consider below-market rates as an attractive option to protect their spending power amidst mounting debt costs. This might explain the message conveyed by gold and Bitcoin.
Timmer also notes that the Federal Reserve currently maintains a moderately restrictive monetary policy. However, he believes that inflation is already subsiding, which suggests a possible pivot by the Federal Reserve.
We’ve seen a relentless series of rate hikes over the past 14 months as the Fed aimed to slay inflation. Was it too much? Not enough?
The Fed’s new 5-5.25% target rate is above the core-PCE’s (personal consumption expenditures) annual change of 4.6%. So, by that definition the… pic.twitter.com/ftQEeAcQMV
— Jurrien Timmer (@TimmerFidelity) May 11, 2023
Alexander Stefanov
Reporter at CoinsPress
Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.
