Hayes thinks that the global printing of money will worsen inflation, causing the prices of cryptocurrencies to rise. The entrepreneur considers the rise in quantitative easing will benefit cryptocurrencies and gold, whose markets are smaller than the trillions of printed fiat money.
The Bank of England recently announced that it would buy government bonds to reduce the effects of inflation. That led Arthur Hayes, the co-creator of BitMEX, to comment on how tax authorities will respond to unfavorable economic conditions.
The American entrepreneur thinks that central banks worldwide will soon start printing money, thus worsening inflation. He predicted that the prices of cryptocurrencies would rise because of that move.
The Fiscal Adjustment Resulting from Current Inflation
According to a post titled Infection, in- and out-of-office politicians usually choose quick and short-term policies. Hayes outlined pre-crisis responses, saying prominent central banks printed money to reduce market pressures.
The economist said the inflow of funds caused inflation to rise, leading the authorities to reduce fiat liquidity and tighten monetary conditions. However, sovereign debt markets have suffered the most with that move, whose subsequent consequences he describes as the worst in history.
Hayes pointed out bond yields have risen as officials keep withdrawing cash in some countries. He also mentioned the influence of the war between Russia and Ukraine and other global issues. He explained that those factors complicate the fight against inflation by the fiscal authorities.
The rising tension due to undeclared World War III is affecting the current global economy. Hayes stated that there is evidence of the compounding financial effects of a credit withdrawal from the system.
The Printing of Money to Occur in More Countries
The co-founder of BitMEX believes that central banks will start printing more money to deal with global inflation. He said the Bank of England (BoE) has already sought to help its financial system by adopting Quantitative Easing (QE).
Through that policy, central banks buy government bonds or other assets to introduce monetary reserves into the economy to stimulate financial activity. The BoE aims to reduce the yields on some bonds, nearly causing the insolvency of many UK pension funds.
Besides the British central bank, other institutions have not stuck to their plans to combat inflation. Hayes said that the US Federal Reserve (Fed) has struggled, while other central banks have given in in other nations. For example, the European Central Bank (ECB) has started to hoard assets for the least stable member countries.
The energy laws of Germany have created a crisis amid the rising gas prices. Hayes predicted that the situation would affect the country’s export sector negatively. If there is a short energy supply, the syndicate might provide Germany with its quantitative easing policy.
Cryptocurrencies and Gold Might Benefit from Quantitative Easing
Hayes considers that the rise in quantitative easing will benefit fungible global risk assets like cryptocurrencies and gold. He explained that their markets are smaller than the trillions that central bank fiats will print, driving their prices higher.
The entrepreneur recognized the continuous fight against inflation by the US Federal Reserve. However, he said that Bitcoin and gold might appreciate as other central banks pump funds into the economy.
Arthur Hayes thinks this will not occur soon, citing the actions by the BoE as proof that money printing will fail. He concluded that yield would rise and the over-indebted fiat debt-based financial system would crash quickly.
By Alexander Salazar
