Bitcoin bulls were quite pleased on Saturday morning when Bloomberg’s Joe Weisenthal shared the “Automatic BOOST to Communities Act” published by Congresswoman Rashida Tlaib of Michigan.
While all politicians in the U.S. have responded to the coronavirus outbreak by proposing stimulus, Tlaib’s took the cake for being extreme. The program she proposed, which included a temporary Universal Basic Income, was to get the U.S. Mint to issue “two $1 trillion platinum coins” which the Federal Reserve would purchase, crediting $2 trillion to the Mint.
Although some have deemed this measure necessary to ensure the economy doesn’t crumble further, many in the Bitcoin space have laughed, arguing that this news only proves the absurdity of fiat economics.
Bullish For Bitcoin
Bitcoin bulls have understandably been pleased by this proposal. President of the Nakamoto Institute Michael Goldstein jokingly remarked in response to the news: “don’t worry, you will be able to buy a fraction of a Bitcoin with a $1 trillion coin.”
This was in evident reference to the belief amongst certain economists and analysts that this plan will cause rampant inflation of the money supply in the U.S., which should theoretically result in the rapid inflation of goods.
Don't worry, you will be able to buy a fraction of a Bitcoin with a $1 trillion coin. https://t.co/OBD4RvkkST
— Michael Goldstein (@bitstein) March 21, 2020
Others in the cryptocurrency space echoed this, writing how the incessant printing of money by authorities will only cause inflation, thereby proving the value of Bitcoin, which is algorithmically limited to a supply of 21 million coins.
Money Printing Gone Mainstream
Even if this extreme plan doesn’t become reality, the U.S. government and Federal Reserve have already announced dramatic stimulus measures that analysts say will prove Bitcoin’s value as a disinflationary asset.
On Tuesday, the White House announced emergency measures to save the economy.
The measures include the sending of cheques to every American — what many have dubbed in the Bitcoin space believe is “Helicopter Money” — to help cover the cost of living while unemployment rises and billions of dollars worth of small business loans and “stabilization funds.”
Along with these measures, the Federal Reserve — the American central bank — has announced its own efforts to keep the economy stable. These include but are not limited to:
- $700 billion in large-scale asset purchases, open market operations, quantitative easing, or whatever you want to call it; $200 million of mortgage-backed securities and $500 billion in Treasuries will be purchased by the Fed.
- An abolishment to reserve requirements: banks don’t need to hold any of your money on-hand, a far cry from the bearer asset that is Bitcoin.
- An emergency policy interest rate cut of one whole percent, 100 basis points.
BitMEX’s research team released a report Tuesday on the matter of fiscal and monetary stimulus in this macro environment. They concluded that while they can’t predict when it will come, there will be an inflationary shock potentially on the levels of the 1970s (7% to 15% inflation per annum) that will change the economic paradigm as a result of the stimulus.
They wrote that this will only help Bitcoin:
In our view, in this changed economic regime, where the economy and financial markets are set loose, with no significant anchor at all, not even inflation targeting, it could be the biggest opportunity Bitcoin has seen, in its short lifetime.
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