QE + Fiscal Stimulus = 2020

The last few blogs have been more specific to Bitcoin.  This one will be more Global Macro.  It appears the stimulus will be post-election.  That discussion has wavered back and forth like a merry go round.  There should be no surprise that the stimulus will be delayed.  The ramifications are too political right now.  However, in comparing the $3 Trillion in Stimulus already approved earlier this year to the QE (quantitative easing) of 2008-2012-time frame during that recession.  We turn to Lyn Alden our favorite global macro economist, click here to view thread on twitter.

Here's why QE-alone, and QE+massive fiscal spending, are different. The latter gets into public bank deposits; the former doesn't.

This chart shows the change from year ago in billions$ of bank deposits (blue), fed balance sheet (red), and government transfer payments (green): pic.twitter.com/jV6168Pixd

— Lyn Alden (@LynAldenContact) October 12, 2020

The difference between the QE of the great recession of 2008-2009 and this year is now we have QE plus Fiscal Stimulus going straight to individuals and businesses.  The size of this stimulus and QE is much greater.  In 2020, 22% to 23% of all the USD currency circulating in the world has been printed this year.  If there is another stimulus approved this year (doubtful) that number will increase significantly.  This devaluates the dollar.  However, it is also unavoidable that the FAANG stocks have been very dominant for the NASDAQ and it has vastly outperformed the S&P and the DJIA.  Tech stocks like Facebook, Alphabet, Apple, Netflix, Google plus Tesla, are known as deflationary.  That means the products produced by these tech companies go down in price and up in value and capability over time.  Electric cars and smart phones are cheaper and more advanced now than in 2015 or 2010.  This is an unavoidable truth.  It is likewise unavoidable that the US economy is dominated by technology and service-based companies.  These prices go down as technology advances.  Governments across the globe must devalue their currency to keep up with the deflationary environment the world’s economies are in.  Interest rates are near zero and in Europe they’re going negative.  The US is likely to follow suit by end of 2022.  If or when rates do go negative this will be very hard on banks.  Many smaller banks will close.  Negative interest rates are deflationary. 

 

Comparing the time period pre-election 2020 to pre-election 2000.  The SPX looks very similar both the RSI and the price chart.  This is simply something to watch, but many global macro economists have compared stocks now to 1999-2000.  Regardless of stock price action, Bitcoin long-term remains bullish due to the low interest rate environment and currency devaluation through QE and fiscal stimulus in 2020 and beyond.  We have discussed the May 2020 halving and what that does to Bitcoin supply in many previous blogs.  Bitcoin is tightening over time as currency is loosening over time.  Again, deflationary technology forces currencies worldwide to be devalued over time.  Thus, currency devaluation is NOT a short-term trend.  Even if there is a crash short term, the long term global macro outlook does not change.  The HODLing(hold on for dear life) of Bitcoin like Tuesday and Wednesday’s blogs outlined, should keep Bitcoin very strong even after a stock market crash.  60% of Bitcoin holders (HODLers) did not sell even after the 60% crash on March 13^th brought on by Covid 19.  Bitcoin would be affected by an SPX and NASDAQ retracement, but it would not be long term.  Even Gold and Silver are not as bullish as Bitcoin considering the macro backdrop in 2020.  Bitcoin is up 59% - 60% YTD 2020 and that is likely to rise significantly by end of year.

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