A new Joe Biden presidency will very likely mean trillions of dollars will be printed and it looks like that will be with a very obliging Federal Reserve Banks (Fed).
During summer Biden announced “a new plan to spend $2 trillion over four years to significantly escalate the use of clean energy in the transportation, electricity and building sectors, part of a suite of sweeping proposals designed to create economic opportunities and strengthen infrastructure while also tackling climate change.”
That $2 trillion is on top of a new “Buy American” plan that aims to spend some $700 billion.
Both worthy goals and aims but in combination these cost nearly as much as the American government receives in total taxes for one year.
That means much of it will be borrowed while America is deeply in debt, surpassing 100% of GDP.
This huge debt level is not being felt however due to debt monetization. That is, fed is just printing money and buying government debt with it, sending interest rates to near zero and in Greece, they have gone into negative despite Greek debt standing at 175% of GDP.
This new unfettered printing is likely to accelerate instead of finding some breaks, with Fed implicitly giving blessing to Biden’s plan to spend $2 trillion on climate change. Fed said:
“Staff members throughout the Federal Reserve System continue to research the relationships among climate risks and economic and financial risks and, ultimately, to better identify the transmission channels through which climate risks could affect the financial sector.
This work is conducted in close consultation with other U.S. agencies and international groups in an effort to strengthen the knowledge and understanding of this growing economic and financial stability issue.
The Federal Reserve is evaluating and investing in ways to deepen its understanding of the full scope of implications of climate change for markets, financial exposures, and interconnections between markets and financial institutions. It will monitor and assess the financial system for vulnerabilities related to climate change through its financial stability framework.
Moreover, Federal Reserve supervisors expect banks to have systems in place that appropriately identify, measure, control, and monitor all of their material risks, which for many banks are likely to extend to climate risks.”
In short: Print Biden Print! Except all this printing is actually debt, rather than minted block rewards, so it will have to be paid back and with interest.
Biden plans to increase taxes on those earning over $500,000, but that’s unlikely to make a significant difference to the huge and very quickly growing pile of debt.
So ultimately they’ll probably have no choice but to mass devalue the dollar, and cross their fingers in the hope it doesn’t go the way of the Weimar Republic.
For everyone else there’s always bitcoin, which is arguably the best hedge against significant devaluation due to its code based 21 million limit that is unchangeable.
The effects of this fixed limit on devaluation can easily be seen in Brazil, Argentina, Iran, and other places, where bitcoin has reached all time high in their own money, and in some cases far above it, even when it was at $13,000. So nearly 50% away from the global all time high.
It’s response to a dollar and euro devaluation is likely to be very much the same. Euro because they will be forced to devalue if the dollar mass devalues as otherwise European goods become too expensive to buy.
All translating to bitcoin being necessary in investable savings as it tends to respond to devaluations.