Bitcoin Dips as President Trump Blasts Fed’s Call for More Stimulus
After handing out trillions in fiscal support, small businesses are preparing for even more stimulus. They may have to wait, however, as the U.S. balances opposing views from its President and central bank.
- The Chairman of the Federal Reserve Jerome Powell called for continued aggressive fiscal policies and more monetary stimulus.
- The Managing Director of the IMF holds similar views on providing more stimulus.
- But, President Donald Trump has tweeted against the Fed’s policies, causing a dump in the stock market and Bitcoin prices.
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President Trump shot down Chairman Powell’s calls to add more stimulus to the economy. Markets, including Bitcoin, have since dumped following the clash.
Economic Stimulus: Choosing the Lesser of Two Evils
Powell told the National Association for Business Economics (NABE) on Tuesday that the risk of “overdoing it seems smaller” than pausing the stimulus.
The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, also gave an online speech to the London School of Economics, which echoes Powell’s views. She said:
“We are very clear in the message we are communicating to not withdraw support prematurely. If we do so, then we risk massive bankruptcies and massive unemployment.”
Although the American GDP is likely to rebound after its 31% plunge during the second quarter, Powell said recovery still has “a long way to go.” Indeed, both organization heads believe that holding off the stimulus now can lead to worse outcomes than the last quarter.
This is because any economic progress made this year has all been thanks to previous stimulus efforts. The national U.S. debt has now surpassed $27 trillion, and the Federal Reserve has increased its asset by $3 trillion since March 2020, a whopping 75% increase.
Trump Goes Against the Federal Reserve
While the Fed Chairman’s initial announcement received muted reactions from gold and Bitcoin traders, President Trump’s follow-up tweet later in the afternoon caused a drop in the stock market.
Trump plans to put the talks of stimulus on hold for “until after the elections.” Trump added:
“I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major stimulus bill that focuses on hardworking Americans and small business.”
The S&P 500 index broke below the $3,395 to test lows of $3,354 in the hour following Trump’s tweet.
Would you look at that. Bitcoin selling off alongside the stock market on that last tweet from @realDonaldTrump.
I guess crypto does care about fiscal stimulus. #NoMoreBrrrrrrrrrr pic.twitter.com/cJyiJ0LSzT
— Mati Greenspan (@MatiGreenspan) October 6, 2020
Bitcoin also dropped by 1.7% to lows of $10,525, whereas gold fell from the $1,900 per ounce level to test lows of $1,887 per ounce. The greenback also continues to trade at the lows.
The VIX index, an indicator of expected volatility in the market, rose 5.44% to trade at $29.5. The index rises as a function of perceived uncertainty in the market. In 2020, it has become an oft-referenced metric.
As mentioned earlier, the U.S. election and lingering fears of a resurgence in new cases of COVID-19 are already weighing down on the economy.
The emerging rift between the government and its central bank only adds to this confusion.