During this week, the United States Federal Reserve (FED) continued its program of support for the American economy hit hard by the spread of the coronavirus around the world. While the Federal Reserve had already decided to lower interest rates by 50 basis points on March 3, 2020, this time it decided to lower them by another 100 basis points.
Federal Reserve interest rates are now 0-0.25%. You read correctly. The red line of zero rates has just been crossed by the Federal Reserve in a historic move that was immediately praised by Donald Trump.
It must be said that Donald Trump has been asking for this drop for months so that the Federal Reserve aligns with the rates of the European Central Bank.
In addition to this drop in interest rates, the Federal Reserve has also taken other key measures which aim to stimulate the American monetary system for the umpteenth time:
- A quantitative easing program for 700 billion dollars this time. In detail, the Fed will buy $ 500 billion in treasury securities and $ 200 billion in mortgage-backed securities.
- 0% reserve requirement for banks.
Green light for the printing press
With this latest measure, banks will be able to lend, or more precisely print, as much money as they want.
The purpose of this new monetary stimulus was to meet the expectations of Wall Street who had found previous Fed announcements hardly satisfactory.
Wall Street’s reaction seems to indicate, however, that this monetary stimulus from the Federal Reserve is being rejected by the market. The Dow Jones ends the week all just above 19,000 points.
In the past month, the Dow Jones thus lost more than 30%, and trading has been suspended many times. Some gossip is even starting to say that a day without a break becomes the exception, not the norm.
The Federal Reserve has therefore probably not finished with its actions to reassure Wall Street. In the weeks to come, or perhaps even before, I am even ready to bet that the Federal Reserve will follow the path of European Central Bank (BCE) by offering negative interest rates.
A more intensive program of quantitative easing is also to be expected before summer in my opinion.
All this shows once again that this system is no longer tenable. From my point of view, the Federal Reserve, and generally all the central bankers in the world, have several great lessons to learn from Bitcoin.
1. Monetary stimuli benefit only a minority
Monetary stimuli from the Federal Reserve are being sold to support the US economy. In fact, they would benefit the entire American population.
Central bankers around the world also make the same fallacious arguments when they do so.
In reality, these monetary stimuli benefit only a minority. They benefit those who have abused this monetary and financial system for decades now.
These monetary stimuli benefit only to banks and Wall Street. The majority of the population suffers from these monetary stimuli since it devalues each time a little more what they have.
The worst in my opinion is that many do not understand it. Those who understand it cannot, however, do anything more than suffer. Unless Bitcoin is the solution that can give hope to the majority who suffer from the vagaries of the current system.
Bitcoin is the only real free market in the world.
As such, Bitcoin does not need to be saved via central bank support. Bitcoin lets the market, and therefore its users, decide its equilibrium price.
Last week, the capitalization of Bitcoin lost nearly $ 60 billion in a few hours. Users needed cash. Nobody has them censored. They were able to withdraw their money the same way they bought Bitcoins: by using their free will.
Bitcoin therefore benefits a majority by its completely democratic side.
In the coming weeks, don’t be surprised if banks were to limit withdrawals for fear that their panicked customers may want to withdraw all their cash.
2. Growth cannot be infinite in life
Wall Street investors, or Donald trumpwould like to believe – or let believe – than the growth of the equity market can be endless. Since the 2008 financial and banking crisis, central bankers around the world have continued to take measures to support the economy.
All the support measures taken by the Federal Reserve and the other central banks of the world have artificially inflated the financial markets.
Wall Street is full of extremely fragile publicly traded companies. Many of these companies should have gone bankrupt for a long time. They only survive by the policy of ever lower interest rates as well as massive injections of cash.
These companies are like patients on artificial respirators who are assured that they will never wake up, but that families cannot let go.
We are currently witnessing the end of this utopia of infinite growth in the financial markets.
Bitcoin lets its users decide the break-even price. When Bitcoin is at $ 20K, it’s only because its users have decided.
When Bitcoin drops 50% in a few hours like it did on March 12, 2020, once again because its users have decided. Growth is not endless, and there is no point in trying to maintain it at all costs.
On this point again, the Federal Reserve has a great lesson to learn by looking at the functioning of Bitcoin.
3. A monetary and financial system must be simple
I don’t know how you feel when you hear the Federal Reserve talking about interest rates, of quantitative easing or even redemptions in cash. For my part, I always have the feeling that such announcements only speak to a minority of people.
This minority is made up of people who have taken the trouble to genuinely take an interest in the economy by going beyond what they are taught.
All Bitcoiners are in this minority of people who really understand the impacts of the monetary stimuli decided by the Federal Reserve.
Bitcoiners understand that what the Federal Reserve has decided actually devalues what a majority of people own. These Decisions Reinforce Bitcoiners’ Belief That Bitcoin is the solution we need for the future.
Unfortunately, a majority of people only see it as a fire. One day or another, however, this silent majority will wake up, and will see that Bitcoin is their best option to get out of this monetary and financial system.
When these people discover Bitcoin, they will realize that a monetary and financial system must be simple so that everyone can understand how it works.
In the meantime, remember that whenever a person loses faith in the current monetary and financial system, a new potential user of Bitcoin is created.
Bitcoin can therefore only continue to grow given the regular hundreds of billions of dollars in marketing campaigns in its favor led by the Federal Reserve.
4. Resilience when things go wrong is an essential quality
Wall Street investors have lost an essential quality to the people who do great things in life: resilience. At the slightest drop of more than 5%, they panic.
It must be said that Wall Street has locked them in an artificially protective system that is closer to socialism than to real capitalism.
As soon as Wall Street loses more than 7%, trading is automatically stopped. A further fall of more than 13%, and trade is interrupted again. A third fall of more than 20%, and Wall Street closes for the day.
These measures have been put in place to protect investors, according to Wall Street tenants. In reality, they are only intended to protect the powerful at the head of the current monetary and financial system.
When things go wrong, Bitcoin teaches its users to be resilient.
Infinite growth does not exist, and life is made of ups and downs. The best example of these roller coasters is to be found in the evolution of the price of Bitcoin since its creation:
Bitcoin price is volatile, but it’s an exact reflection of what users in its market are doing. Bitcoin allows them to find the true balance point for its price by never interrupting trade.
Bitcoin operates continuously 365 days a year, 7 days a week, and 24 hours a day.
5. A monetary and financial system must act for the benefit of the greatest number
The decisions taken by the Federal Reserve aim above all to support Wall Street and the banks. These same players who are the source of the ills plaguing the economy today still enjoy leniency from the powerful in the system.
A monetary and financial system must act for the benefit of the greatest number.
With the current system, this is no longer the case. It is no coincidence that the very rich are a little richer each time, while the poor see their standard of living progress too slowly. In this context, the gaps are only widening in society.
Bitcoin is available in limited quantities so you can be sure that what you have in Bitcoins will never be devalued.
If you own 1 Bitcoin today, you will still have 1 in 21 million Bitcoin in 10, 25 or 50 years.
This is an essential guarantee for all Bitcoin users. Again, this is a great lesson that Bitcoin can teach central bankers.
Make no mistake about it. These central bankers know very well what they are doing by constantly increasing the money supply in circulation. They are not stupid. On the contrary!
They know that they act for a minority, and simply to protect their outdated system. Bitcoin was built precisely to fix these problems, and it will do so in the future. as more and more people believe in him.
6. A real free market must let users decide the equilibrium price
I already mentioned it quickly in the previous points, but I will come back to it in a dedicated point. Indeed, it is essential that you understand thata real free market in the sense of capitalism must let its users decide the equilibrium price.
Bitcoin is a real free market. Bitcoin is even the only free market in the world.
Bitcoin works continuously to allow its users to choose what is its break-even price. When Bitcoin loses $ 60 billion in valuation within hours, Bitcoiners see this as a unique opportunity.
A unique opportunity to accumulate even more Bitcoins.
You will never see a Bitcoiner calling for help from any central bank. There isn’t, because Bitcoin doesn’t need it. It is its users who will decide its success, or simply its failure.
The stock market is filled with fragile companies that couldn’t handle the volatility of Bitcoin.
Bitcoiners can endure such volatility because they have complete confidence in a system that gives them back full power. New users entering the Bitcoin world are shocked by the resilience of Bitcoiners, but sooner or later they develop this essential quality.
The Federal Reserve continues to apply the same revenue: lower interest rates, then massive injection of cash. Wall Street calls out to him loudly and loudly when the stock market loses 10% for more than a week.
Donald Trump, the President of the United States, is also in this philosophy. That of a failing monetary and financial system that must be artificially supported in order for it to continue to grow.
This artificial economic growth reassures a minority that is not yet aware of the limits of a system that cannot continue to do so for very long.
Even the financial markets seem to no longer be satisfied with these monetary stimuli, the effects of which are less and less tangible. Little by little, more and more people will lose faith in the current system.
Those disappointed with a broken and outdated system will be welcomed with open arms in a world of Bitcoin which will protect them as they have never been so far in their life.
A developer by training, I discovered Bitcoin in 2014 but I did not immediately understand the importance it could have for the world of tomorrow. I got into it more deeply from the start of 2017 and since then I haven’t given up on the business.
Passionate about Bitcoin and the new system it is trying to build for the future, I decided to participate in its evangelism at my modest level by writing on Bitcoin, Blockchain and crypto currencies on different supports.
It is with pleasure that I publish some of my texts in French on The Coin Tribune.
I also write a lot about personal development and self-improvement.
Do not hesitate to exchange with me via social networks or in comments on my articles if you have questions about my articles.