Why the Fed Will Go Back to Easy Money

Amid a recession and political inaction, what choice does it have?

So, what now?

 

Fast forward to 2022. Political divisions are arguably even worse than they were in the Obama era. And confidence in the government to resolve our economic challenges is at all-time lows. 

 

So, what happens when this year's financial meltdown leads to the inevitable pullback in financing for everything from startup ventures to homes? Growth will dramatically stall and jobs will be lost. And while that slowdown in demand should help to stall inflation, there's a legitimate fear that COVID-led supply chain problems will mean that shortages and price appreciation continue. 

 

It's hard to believe Congress will agree to aggressive stimulus to solve this. So, as the midterm elections approach and the problem becomes politicized, the pressure will grow on the Fed to act.

 

But what then? The effectiveness of monetary policy depends on confidence in the overarching system – that people trust that the Fed will protect the value of the dollar even as it boosts money supply. It's not clear that that confidence will last in response to such an about-face. 

 

In other words, the failure of the overarching system, writ large, will become apparent. And that's where Bitcoin and blockchain solutions pose the alternative.

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