Dec 6, 2020
Is Janet Yellen Good for The Crypto Economy?
Yellen’s history with the Fed does give me some concern over her ability to manage the current economic crisis and the growing mountain of debt we all carry (and don’t seem to worry about).
Last week, President-Elect Joe Biden officially announced his plan to nominate former Federal Reserve Chair Janet Yellen as Secretary of the Treasury. This announcement comes at a time when Americans are more financially frustrated and anxious than ever. Ms. Yellen will oversee a Treasury department tasked with reinvigorating the economy in the wake of a worldwide recession that is just in its first inning. Global debt is starting to spiral out of control.
Yellen is held in high esteem in Washington, and her track record as an economist and civil servant is unimpeachable. But despite her obvious bona fides, Yellen’s history with the Fed does give me some concern over her ability to manage the current economic crisis and the growing mountain of debt we all carry (and don’t seem to worry about).
Janet Yellen comes from a long line of Keynesian believers in the Modern Monetary Theory Policy. In short, she advocates that countries can create and spend near-limitless amounts of FIAT (currency not backed by assets) to grow the economy to its full capacity, enrich the private sector, eliminate unemployment, and finance major programs such as universal healthcare, free college tuition, and green energy.It seems that no matter what the problem is, the answer is print more money.
Pandemic = Print.
Banks take too much risk and need a bailout = Print.
Recession = Print more.
When will we decide to take the Debt medicine and get cured of using MMT?
Here is the history of FIAT currencies vs Gold for the past 100 years, to date there is 100% certainty that printing money devalues a currency to 0 over time. US Dollar is no exception.
But look at where the policy of unbridled spending has gotten us this year. As I mentioned in my previous columns, the Fed has printed over 20% of the dollars that have EVER existed in 2020. MMT is a dangerous ideology that injects boatloads of cash into traditional markets, which causes an increase in asset prices. In the end, this only benefits large corporations and billionaires without any long term solutions to our debt. The charts below illustrate what has happened to our economy since MMT was used again and again to solve all our problems since 2008.
I can see Ms. Yellen and the Biden administration developing many new social programs that assist Americans suffering from the economic damage of Covid-19. These new programs will allow us to bridge many Americans to make it across the recession and the pandemic. But this additional spending will grow our deficit to over $30T.
What does this mean for the Crypto Community?
Janet Yellen’s economic philosophy is alarming, but her views on crypto are even more concerning. In the past, Ms. Yellen has said that Bitcoin is a “Highly Speculative Asset.” And just like many others, she has expressed concerns about the “Volatility of Bitcoin.” Oddly enough, Janet Yellen should have had more concern about the dramatic drop in the velocity of the USD and the decreasing value of the US dollar when she was the Federal Reserve Chair in 2018.
Take a look at the graph below.
Now let’s take a look at the increase in the velocity of crypto assets below. We can see clearly that stable coins are the only thing pushing use of the USD up.
I believe that the appointment of Ms. Yellen can lead to the Treasury to enforce Bitcoin restrictions, the free flow of money in the crypto community and push to regulate Decentralized Finance. We already see other governments do so as their FIAT currency loses its value.
Here is a great article about why governments are afraid of Bitcoin: https://www.investopedia.com/articles/forex/042015/why-governments-are-afraid-bitcoin.asp
Here is a great resource to what is the current regulation on Crypto around the world: https://www.loc.gov/law/help/cryptocurrency/world-survey.php
What Needs To Be Done?
Crypto is the solution, not the problem. If US citizens were not worried about printing money or the velocity of the US Dollar, Bitcoin would not fetch $19,000.
Janet Yellen and the Biden Administration need to work on long-term solutions with the FED to make sure the US Dollar remains the reserve currency of the world and we use dollars to navigate the world out of this pandemic and a very severe global economic recession.
This starts by funding new businesses and technologies in future industries such as Blockchain, Machine Learning, and AI.
We need to use new debt to fund the future, not to bail out the past.
This type of funding would contribute to the many Americans who are unemployed or are working jobs that simply aren’t providing livable wages. Unchecked printing of the dollar for a short-term boost to zombie companies and social programs is a temporary solution that will leave our children to deal with an economic reckoning: higher unemployment rates and an increased unsustainable national debt.
People deserve opportunity. At Celsius, we have given people the opportunity to experience long term financial freedom by investing in high yield Stable coins, tokenized gold and 40 crypto currencies. With compounding interest of 6.2%–15% one can actually save for retirement and diversify from the USD.
It’s overdue for the Fed & Treasury to give up on their old ways and take advantage of Blockchain and Crypto Financial Technology to build our future.
The FED and the White House will be filled with Keynesian MMT FIAT maximalists in 2021.
This guarantees that Bitcoin continues to hit new highs during the 2021–2025.
“The Crypto Blockchain future is here but to use it we have to leave the MMT past behind.”
Alex Mashinsky
Founder & CEO, Celsius
