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Despite St. Louis Branch Warnings, New York Fed Pumps $108 Billion Into US Economy

On Wednesday, November 27, the U.S. Federal Reserve pumped $108 billion into the American economy using overnight repo tactics and 15-day repos. The central bank explained the move will stimulate more liquidity into the faltering U.S. economy, but economists from the St. Louis Federal Reserve branch say too much money-printing could lead the country into “economic ruin.”

Also read: US to Strictly Enforce Crypto Rules Similar to FATF Guidelines

New York Fed Injects Billions Into the Financial Sector

The Federal Reserve has been pumping money into the American economy for weeks on end and many economists believe the stimulus won’t help. The central bank has slashed interest rates multiple times during the last few months and injected more than $270 billion to the balance sheet since September. The Federal Reserve is now adamant that interest rates will remain unchanged for now, but federal debt has surpassed $22 trillion this year. To tackle this issue the central bank has been injecting billions into the economy using repurchase agreements (also known as repos) with primary dealers, which are authorized by the Federal Open Market Committee (FOMC). Essentially, the Federal Reserve purchases massive amounts of securities and Treasuries in order to adjust the supply of reserve balances. The New York Fed calls the practice “fine-tuning the supply of reserves in the system.”

Despite St. Louis Branch Warnings, New York Fed Pumps $108 Billion Into US Economy

On Wednesday, the FOMC authorized more stimulus intervention, which was done using two different repo schemes. Reports reveal that the NY Fed purchased “all of the securities it was offered” by injecting $87.95 billion in overnight repos and $21 billion in 15-day repos. Wednesday’s stimulus pumped a grand total of $108.95 billion into the American financial system and the NY Fed thinks operations like these will continue until mid-2020. Of course, after the massive money printing spree, free-market economists and crypto activists stressed that central bankers are doomed. The founder of, Sven Henrich explained that these days, central banks can’t even survive without the money injections.

“The global economy is on crutches,” Henrich remarked on Thursday. “This is why it requires constant central bank intervention and hence the talk of fiscal stimulus everywhere — The plain truth is that it can’t do without. Organically it already is in recession — Intervention/stimulus/debt keeps kicking the can.” The market analyst added:

10 years after the financial crisis we’re exactly back to where we started: Requiring intervention, low rates and QE. Except now the world has $250 trillion of debt. And the only solution is to do more of the same — Genius.

St. Louis Fed Paper: ‘This Type of Policy Often Ends in Economic Ruin’

Even economists that work within the Fed’s infrastructure think that burgeoning U.S. debt and massive central bank printing could lead to “economic ruin.” Scott Wolla, of the St. Louis Fed, and Kaitlyn Frerking, from the University of Missouri, in their latest research paper state that “the U.S. government debt is currently on an unsustainable path.” “Trends that are unsustainable will not continue because the economy will adjust, sometimes in abrupt and jarring ways,” the paper by Wolla and Frerking notes.

“While governments never have to entirely pay off debt, there are debt levels that investors might perceive as unsustainable,” the St. Louis Fed paper highlights. “A solution some countries with high levels of unsustainable debt have tried is printing money. In this scenario, the government borrows money by issuing bonds and then orders the central bank to buy those bonds by creating (printing) money. History has taught us, however, that this type of policy leads to extremely high rates of inflation (hyperinflation) and often ends in economic ruin.”

Despite St. Louis Branch Warnings, New York Fed Pumps $108 Billion Into US Economy

Economist and gold bug Peter Schiff believes all the QE (quantitative easing) tactics are an “abject failure” and the central bank’s financial fires cannot be watered down. “Soon the markets are going to discover that QE is permanent and that there’s never going to be a real reduction in the balance sheet,” Schiff recently wrote. “The balance sheet is going to grow into perpetuity and I think we’re going to have a dollar crisis. I think we’re going to have a sovereign debt crisis. I think this is going to end very poorly for people who have been enjoying the paper gains in this stock market bubble.”

Despite St. Louis Branch Warnings, New York Fed Pumps $108 Billion Into US Economy

Despite the warning signs, left-wing leaders and Modern Money Theory (MMT) supporters like Alexandria Ocasio-Cortez (AOC), Elizabeth Warren, Andrew Yang, and Bernie Sanders are advocating the Fed print money to pay off government debt. According to believers in MMT, as long as the overall debt is paid off using government-issued tender and the inflation rate stays stable, ‘defaulting’ is near impossible. Politicians from both the left and the right seem to concur in unison that government deficit spending is fine. As of right now, central banks like the Federal Reserve also agree with the notion of deficit spending tactics and continue to orchestrate massive repos and monetary easing.

What do you think about the Fed’s latest easing tactics? Do you think people will continue to seek a safe-haven in cryptocurrencies and precious metals? Let us know what you think about this subject in the comments section below.

Image credits: Shutterstock, Twitter, Wiki Commons, Fair Use, Pixabay, and Yahoo Finance.

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Jamie Redman

Jamie Redman is a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open source code, and decentralized applications. Redman has written thousands of articles for about the disruptive protocols emerging today.

Jamie Redman , 2019-11-29 01:50:26 ,

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NewsBlock © 2019 - 2020 All rights reserved.

NewsBlock © 2019 - 2020. All rights reserved.

While Bitcoin’s price seemingly moves without rhyme or reason — collapsing by dozens of percent and embarking on face-melting rallies on a whim — the cryptocurrency market is filled to the brim with fractals.

Related Reading: Analyst: Bitcoin Price Likely to Fall to Low-$8,000s as Chart Remains Weak

A brief aside: A fractal, in the context of technical analysis and financial markets anyway, is when an asset’s price action is seen during a different time. This form of analysis isn’t that popular, but it has proven to be somewhat valuable in analyzing Bitcoin.

One recent fractal popularized by a well-known cryptocurrency trader is implying that BTC is going to return to the low-$7,000s in the coming days.

Bitcoin Fractal Implies Retracement to Low-$7,000s

A well-known crypto trader going by “Tyler Durden” on Twitter recently posted the chart below, which shows that a Bitcoin price fractal may be playing out. The fractal has four phases: horizontal consolidation marked by one fakeout, a surge above the consolidation phase, a distribution, then a strong drop to fresh lows.

If the fractal plays out in full, BTC could reach the low-$7,000s again, potentially as low as $7,100. This would represent a 20-odd percent collapse from the current price point of $8,800.

It isn’t only a fractal that is hinting Bitcoin has the potential to visit its lows. As we reported on Saturday, Bloomberg believes that if the GTI Vera Convergence Divergence Indicator flips red, a downtrend could push the cryptocurrency back to $7,300.

Related Reading: Stephen Colbert Pokes Fun at Bitcoin in Monologue: Mainstream Gone Wrong?

Can Bulls Step In?

But again, many believe it is irrational to have such bearish interpretations of the cryptocurrency’s chart at the moment. As reported by NewsBTC earlier, Popular crypto trader Mayne recently noted that the “people waiting for $6,000” are irrational. He quipped that Bitcoin retracing and consolidating after its fourth-biggest bull move in history ($7,300 to $10,500, a 42% gain) is perfectly par for the course, but noted that it’s totally possible we can go lower from $8,800.

The medium-term technicals support this.

Trader and CoinTelegraph contributor FilbFilb found that by the end of November or start of December, the 50-week and 100-week moving averages will see a “golden cross,” which he claims is far more significant” for the Bitcoin market that other technical crosses.

Also, a Bitcoin price model created using Facebook Prophet machine learning found that the leading cryptocurrency is likely to end the year at just over $12,000. What’s notable about this model is that it called the price drop to $8,000 months in advance, and forecasted a ~$7,500 price bottom for BTC.

To put a cherry on the cryptocurrency cake, Crypto Thies observed that when Bitcoin bottomed at $7,300, it bounced decisively off the 0.618 Fibonacci Retracement of the move from $3,000 to $14,000, which correlates with the two-week volume-weighted moving average. He added that summer 2019’s consolidation was marked by Bitcoin flipping major resistances into support levels, implying that a bullish reversal and subsequent continuation is likely possible in the coming weeks.

Featured Image from Shutterstock

Nick Chong , 2019-11-10 12:00:38

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