Tuesday, 02 June 2020
Sovrano

Fed makes noise about buying ETFs and catches the ire of Bitcoin advocates

Are we headed toward the uber-rich and the peasant poor? One pundit thinks that’s possible


The Fed is getting some dirty looks from cryptocurrency cheerleaders for buying up ETFs so that it can regulate the digital currency market.
The timing is a bit odd -- coming just days after Bitcoin had its second big week in a row.

What’s an ETF?

“ETF” stands for “exchange traded fund,” and is a type of investment fund that tracks the price of an underlying asset -- gold, oil, an index, or a collection of stocks -- explains Alex Lielacher of Bitcoin Market Journal. “It is traded on exchanges in the same way as stocks.”

That means that any investors -- retail or institutional -- can buy and sell holdings in an ETF to other market participants over the stock exchange,” Lielacher says.

A win-win or a win-lose?

One would think that if a rising tide lifts all boats, everyone wins in this gambit. In theory that sounds like a win-win, but some believe the Fed is ignoring its own rules so it can get in on the crypto action.

Others have previously suggested that the Fed is jumping the gun. Earlier this year, a Bitcoin ETF tried to get the Securities and Exchange Commission’s approval but was rejected.

“The Federal Reserve is presently acting in blatant non-compliance with the Federal Reserve Act of 1913,” wrote Jeffery Gundlach, CEO of asset manager DoubleLine, in publicly questioning the legality of the move.

“An institution violating the rules of its own charter is de facto admitting that said institution has failed and is fundamentally broken,” he tweeted.

A Goldman Sachs analyst agrees with Gundlach to a certain degree. In a client memo, Goldman analyst Jan Hatzius argued that workers returning to work too soon risked triggering new coronavirus infections. In Hatzius’ way of thinking, central banks should boost the economy by adding in more cash instead.

“The response in Europe needs to be scaled up, via greater (and ideally centrally funded) fiscal easing and a more unconditional ‘whatever it takes’ commitment to the integrity of the euro area,” Hatzius wrote.

The rich get richer, and the poor get poorer?

If the Fed is allowed to fight the pandemic by printing all the money it wants, the result is likely to be something Max Keiser calls “neo-feudalism.”

To Keiser, the math is pretty simple: boundless quantitative easing drives unemployment and deflation, and a move like that could create a very wealthy class on one end and a peasant class on the other.

Why the stare-down between the proponents of printing money and the ones championing Bitcoin? “The grim reality of money printing is a regular point of debate in Bitcoin circles,” writes CoinTelegraph’s William Suberg. “Long before Bitcoin existed, dissenting voices railed against the irrational behavior of central banks inflating the money supply.”


source: consumeraffairs.com

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