BitMEX founder: The Federal Reserve may cut interest rates sharply or even restart quantitative easing

Odaily Planet Daily News BitMEX founder Arthur Hayes wrote in his blog that the Fed is currently raising interest rates and shrinking its balance sheet, and the two policies cancel each other out. Raising interest rates will increase the US government's debt interest payments, which is equivalent to providing fiscal stimulus to the rich; while shrinking the balance sheet will directly withdraw liquidity from the banking system. But on the other hand, the Fed controls money prices by paying interest on reverse repos and reserves, and these interest payments also increase the money supply. In Hayes' view, the current financial situation in the United States is different from that in the 1980s. The ratio of US government debt to GDP is four times that of that time. Now the Federal Reserve raising interest rates will not only fail to achieve the effect of tightening the monetary environment, but will also make it more difficult for the US government to issue debt financing. Hayes predicts that as the U.S. Treasury market spirals further out of control, the Fed will eventually be forced to give up controlling the price of money and instead focus solely on the quantity of money. This will cause the Fed to cut interest rates sharply or even restart quantitative easing. At the same time, in order to reduce inflation and achieve fiscal sustainability, the Federal Reserve may cancel the payment of interest on deposit reserves to commercial banks, forcing commercial banks to buy government bonds. Hayes advises investors to hold cash and cryptocurrencies as a hedge against inflation. He believes that cash and certain assets such as cryptocurrencies could be a safe-haven against inflation and other economic risks due to the dominance of fiscal policy.