“This is a world of fiscal dominance and ultimately will dictate Fed policy. Rates must necessarily be kept artificially low and liquidity must be made available to help finance the refinancing cycle,” the founders told CoinDesk. “The debasement trade was a popular narrative last year, but has gone quiet. Yet it’s set to go into overdrive!,” the founders told CoinDesk.
Several observers have sounded the alarm over the ballooning debt in recent months.
Apollo chief economist Torsten Slok warned that the US debt-to-GDP ratio of over 120% means there is little room to spend more money should a recession come. Also, the Fed cannot cut interest rates as aggressively as during past recessions because that would increase inflation and, more importantly, reduce bond yields. The government must issue more bonds to finance deficits, and they must provide a high yield to attract demand.
“The United States has never entered a recession with this little fiscal buffer,” he wrote in a blog post in May.
All of this means that if a recession occurs, the pain could be prolonged and could trigger demand for assets that largely fall outside the financial system, such as BTC and cryptocurrencies. That said, since its inception in 2010, BTC has largely moved like a technology stock and not a safe haven investment.
