That was the opinion of the ex-president of the Minneapolis Fed, who on April 24 argued that interest rates, already at lows of 0.25%, should fall further – even if they cannot.
The United States Federal Reserve could be the next central bank to take up previously unthinkable negative interest rates.
Kocherlakota: Fed “should” fight recession with negative rates
“Unprecedented situations require unprecedented actions,” Narayana Kocherlakota wrote for Bloomberg.
That’s why the U.S. Federal Reserve should fight a rapidly deepening recession by taking interest rates below zero for the first time ever.
Negative rates essentially mean that banks must pay to hold their deposits, passing on the costs to clients. The phenomenon is already at work in Europe, while Kocherlakota foresees U.S. institutions swallowing the pain instead of hoarding money as cash.
“…Economists now recognize that doesn’t happen, because it’s costly to store billions (or trillions) of dollars of paper currency safely,” he continued.
President Donald Trump has repeatedly voiced his support for lower rates, last year directly criticizing Fed Chair Jerome Powell for failing to make cuts dramatic enough. Now, he may finally get his wish.
Fed interest rate 60-year chart.
“Does E = mc2 any longer?”
For proponents of Bitcoin as sound money, however, such decisions are causing increasing alarm.
Negative rates and negative commodity prices, combined with unprecedented government spending, creates a paradoxical situation which many economists throughout the past century have concluded is unsustainable.
As RT hosts Max Keiser and Stacy Herbert explained in the latest edition of their Keiser Report financial news show, negative rates equate to time costing nothing.
“When we got to negative interest rates, when time had no value, that was one thing,” Herbert said.
“…Now we have the negative cost of energy, so does E = mc2 any longer?”
Earlier, Cointelegraph reported on criticism from ex-presidential candidate Ron Paul, who says that the Fed’s model has already fallen apart.
BitPay Exec: ‘Something Unforeseen’ to Push Bitcoin Over $20K in 2020
Bitcoin (BTC) will reach its highest price ever this year due to “unforeseen” events, which will draw in new buyers, one senior cryptocurrency industry executive says.
In an interview with Bloomberg on Jan. 8, Sonny Singh, chief commercial officer at payment processor BitPay, claimed BTC/USD would pass its all-time highs of $20,000 in 2020.
Singh: a few buyers make a big difference
The reason, however, would remain unknown until the bullish surge kicked in.
“Something unforeseen that could happen could really move it faster,” he summarized.
Supporting his prediction, Singh pointed to historical trends. In 2015, the Greek sovereign debt crisis sparked gains for Bitcoin, while last year saw the sudden announcement of Facebook’s Libra digital currency and a worldwide reaction from lawmakers and the wider community.
More recently, rising tensions between the United States and Iran were attributed by some commentators and news media to BTC price rising around 20% over the past week. One publication noted that this may be due to Bitcoin being “free from state interference or geopolitical risk.”
The net result of all such events, he explained, was a small number of new buyers entering the Bitcoin space:
“I don’t think people actually went and sold their GD stock and all that and bought Bitcoin, but I see what happens is just a little bit of people start buying Bitcoin and that, with technical trading, really bumps it up and makes it go a lot higher a lot faster.”
Is the second time lucky on BTC price?
Singh almost successfully called Bitcoin’s 2019 high of $13,800. At the height of the 2018 bear market, when the cryptocurrency traded at just $3,100, he went on record to forecast a $15,000-$20,000 price tag at some point in the coming twelve months.
$20,000 nonetheless remains on the more optimistic end of the spate of recent price predictions from cryptocurrency figures.
As Cointelegraph reported, Galaxy Digital CEO Mike Novogratz said he expects $12,000 this year, while veteran trader Peter Brandt considers a bearish $5,500 likely in July.
By contrast, entrepreneur John McAfee recently reneged on a potentially compromising wager with himself which calls for Bitcoin to trade at $1 million by 2021.