Yellen flip flops on rates and bitcoin recovers
Curious why bitcoin dipped yesterday, thank Janet Yellen
The Treasury Secretary didn't choose her words very well early yesterday and seemed to imply that she wanted rates to rise sooner than the FED seemed to indicate...
The result?
A big tech self off that bitcoin got caught up in.
What a difference a day and some clarification makes...
Today, Yellen went on record saying she doesn't want interest rates to rise sooner than the FED anticipates but instead was just making a generic statement that if the economy goes gang busters then rates would probably have to rise.
Well, yea that's pretty much what we all already know.
The result of this clarification?
Tech rebounds bigly and so does bitcoin.
Bitcoin is currently trading back over $57k and looks good for more over the coming days:
(Source: https://bittrex.com/Market/Index?MarketName=USD-BTC)
This is pretty much why people like bitcoin so much in the first place.
It is governed by math instead of people.
Why do a handful of people get to decide when to raise and lower interest rates that impact the rest of the world?
It's pretty crazy when you think about it.
Sure the interest rates are supposed to be set by the free markets but when you have the FED buying $120 billion a month or whatever that number is, in order to keep the rates artificially low, that is rate manipulation by a handful.
This is why bitcoin matters.
Nice! You are so fast!! Good update!
When Yellen said this and then back peddled...my initial thoughts were how is a Treasury Secretary hinting at higher interest rates when the federal government is in as much debt as they (or Americans) are and wants to spend much more (with debt) on the infrastructure packages that Biden is talking about?
With the current debt load and any additional debt coming forward, lower interest rates is the only way the US can sustain this leverage, besides debt monetization, and that presents its problems also.
I think we (Americans) are between a rock and a hard place. Lower interest rates and monetization both fuel frothy asset markets (in this context), but as soon as we take away the punch bowl and the music by raising rates, there is gonna be one hell of a hangover after this inflationary party is over.
Yep I agree. I think they (the government) can manage higher interest rates because they are basically just paying themselves back right?! Moving money from their right pocket to their left pocket. It's not like the majority of the debt is owed to other countries, it's actually pretty small. I do agree though that when they do raise interest rates eventually it's going to crush everything, stocks/crypto/housing... everything.
“I think they (the government) can manage higher interest rates because they are basically just paying themselves back right?!...It's not like the majority of the debt is owed to other countries, it's actually pretty small.”
That is a really good point, most of our debt is owed to ourselves...that's far better than if it was owed to others.
That said, I think we can sustain higher rates for a little while. But what concerns me, is the US dollar dominance is going to wane over time, and that is going to affect the dollar-denominated debt that we can issue at favorable rates, even domestically, without pushing inflation up too much.
Domestic economies are heavily dependent on international forces, obviously, and because of the relative nature of capital assets (realestate, crypto, stocks, bonds, fiat, etc…), if too much debt (even domestically borrowed and owed) composes too much of the pie of all capital assets, relative to other nations, it seems that is not a favorable position to be in, especially if interest rates are higher. Does that make sense?
Yeah, I'm prepping for that “it's going to crush everything” scenario by paying off all of our family debt within the next 12 months.
When debt is plentiful, and interest rates are really low, and asset prices go to the Moon, history has taught me, it doesn’t end well. I want to have plenty of cash with very little expences when that reality finally sets in for all of us.
Yes, that makes a lot of sense and I agree. Getting out of debt or locking in very low rates sounds like a good move to me as well.
I think basically is what is going to happen is that rates are going to rise and there is going to be major fallout, and they will be forced to lower them right back down. Like you said, it's going to be uncomfortable and there isn't much appetite for being uncomfortable for very long.
That being said, it will probably be a good spot to buy things during this time of un-comfortableness, so yes probably a good idea to have some dry powder for when that time comes.