Fidelity macro expert Jurrien Timmer says that a Fed pivot back to lower interest rates could ignite fresh bull markets for gold and Bitcoin (
Timmer out to his 162,000 Twitter followers that gold and Bitcoin have outperformed virtually all other financial assets so far this year.
He says an economic scenario could develop whereby the US government decides it must lower interest rates in order to make it easier to address its debt.
According to Timmer, a Fed pivot could hurt the dollar and push BTC and the precious metal skyward.
“If the country develops an urgent need for lower rates to pay for the massive debt stock, that could undermine the Fed’s autonomy. In such a scenario, it would be easy to see the dollar weaken and real rates get suppressed once again. That would trigger two of gold’s main drivers. And if Bitcoin is gold’s high-octane cousin, it makes sense that Bitcoin is along for the ride.
History shows that when debt burdens become excessive, that debt needs to be devalued, or outgrown by rising nominal GDP (gross domestic product). The 1940s were a useful history lesson in that regard. Below-market rates may once again become the lowest hanging fruit for policymakers on both sides of the aisle looking to preserve their spending power in an era or rising debt costs. Maybe this is what gold and Bitcoin are telling us?”
Timmer also that the Fed is historically already being “moderately restrictive” when it comes to monetary policy. However, the macro expert believes that inflation is already retreating, which suggests that a Fed pivot could be near.
At time of writing, Bitcoin is trading at $26,845.
