Re: Fed Does Nothing: Gold and Bitcoin to Benefit?

...

Our pals at the Federal Reserve did nothing (ie, did not raise interest rates from the close to zero where we are now). Their infamous "dot plots" (member predictions of rates for the next couple of years) show their expectations of rates for a long time. Low!

One would think this will benefit gold (approx. $1335 now) and Bitcoin ($600).

Any guesses?

I guess screwing over the middle class and creating free money is too cushy to end now..

Low rates don't screw over the middle class, kid. Low rates make it easier for the middle class to buy a home, carry that credit card debt, buy a car, take out a student loan. Don't be so foolish!

To the OP, I don't think the low rates will help gold or bitcoin much (but bitcoin more than gold). The people that will "flock" to bitcoin specifically due to low interest rates is really low, it's only the people that are purely looking for a growth appreciation investment opportunity. And simply put, interest rates don't factor in to the decision to choose a growth appreciation investment. It's not like bitcoin offers an interest rate. So the risk profiles are different.

Low rates motivate people to take out loans (which spurs economic activity and more spending), spend money, or invest in the stock market. All three of those things spur the economy. That's why the Fed is keeping things the way they are, they don't want to stifle economic activity.

But governments, the private sector and the public are up to the eyeballs in debt, while raising the rates will have a negative impact, I dont think keeping the rates as they are does that much, it just keeps the ship afloat for a little bit longer.

Haha, so it's the Fed's fault that people don't have any self control to keep their spending and lending habits within their means of income? Come on, man! Do you want the Fed to tell everyone what they should and shouldn't buy?

The problem here is the premise of this thread is incorrect to begin with. The FED has done nothing, no this is not the current situation, this month or decade. They run constant interference on every dollar transaction. We believe in certain things because they have always been that way for the duration of our lifetimes, it becomes invisible and a default state but it has not always been the case that a central bank dictates a fixed and artificial interest rate. The natural point for rates in the USA is not 0.5% as it is currently set, headline inflation and effective interest rates are more market based but to say the FED has done nothing would be ignoring ongoing QE programs.

Not only has previous QE not been reversed but the FED is still actively buying into new US treasury debt in order to ensure no unwinding of previous leverage occurs. Of course this is needed or pressure would accumulate due to the continual deficit spending by central government, none of this resembles a natural state of balance or that the FED has done nothing. Even those who believe the FED should be closed and brought to an end for its failures know they cannot just have the FED do nothing or the dollar ceases to exist. Its nonense to insist they do nothing when they are struggling to do everything and one day even that will not be enough, the difference will be obvious at that point

https://mises.org/library/central-banks-dont-dictate-interest-rates