Coinbase CEO Brian Armstrong has recommended crypto-assets, once again, as the solution to economic woes, debt-monetization, and other problems facing the global economy. Armstrong specifically referenced troubles with the repo market, making the point that younger investors are far more comfortable with natively digital crypto-assets, than older generations.
Coinbase CEO believes crypto is the answer
Consider crypto
"U.S. National Debt Will Rise to 98% of GDP by 2030, CBO Projects" https://t.co/PNniOjpZUV
— Brian Armstrong (@brian_armstrong) January 29, 2020
Coinbase is one of the largest crypto-asset companies in the world, and they have pioneered a number of innovative business strategies over the years. Founded by Brian Armstrong the current CEO, and Fred Ehrsam in 2012, they started selling Bitcoin to investors, and expanded into Ethereum and a multitude of other crypto-assets, long-term coin storage, staking, and other services.
Armstrong Tweeted his endorsement for crypto-assets and went on to cite a report from the Congressional Budget Office which projects that US national debt will increase to 98% of GDP by 2030. He expanded on his sentiments by noting that Millenials and Gen Z, who have grown up with the internet, are far more comfortable with the idea of digital currencies and tokenization of real-world assets than older investors.
Most people today probably still think of cryptocurrency as funny money, or a speculative asset class.
But I believe we're going to see this perspective flip, probably starting with young people as with many things, where holding a government's currency is seen as funny money. pic.twitter.com/IJj6sd9uc1
— Brian Armstrong (@brian_armstrong) January 29, 2020
Armstrong may be onto something. While older generations may not understand or trust the value proposition of Bitcoin and other crypto-assets, younger investors not only “get it”, they see these emerging technologies as a vast improvement to a flawed, and unsustainable legacy financial system.
The Repo Market is the interbank lending market that banks use for very short-term loans to maintain liquidity. When the business cycle takes a downturn, banks run into liquidity issues when it becomes to risky for other banks to make these short term loans, or too expensive. In this case the FED steps in as a lender of last resort and injects liquidity into the repo market to keep things afloat.
The FED keeps on printing dollars
In September of last year, the FED injected $63.5 billion USD into the Repo Market, after the first three Quantitative-Easing (Q/E) rounds were officially over. This was seen by many investors as unsettling and an unofficial continuation of Q/E in a fourth round.
In January, we have seen a continued decline in the strength of the dollar, as well as another cash injection by the FED of another $70 billion USD into the troubled Repo Markets. The CBO report mentioned by Armstrong puts the Federal Budget Deficit at $1.0 trillion USD for 2020, and projects it to increase by $1.3 trillion per year until 2030. This means the Federal Deficit is currently at 79% of GDP, and is projected to grow to 98% in the next decade.
The Federal Deficit under President Trump was at $20 trillion Dollars when he entered office, it currently sits at $23 trillion Dollars, and is expected to grow to $29 trillion by the 2020 election. This is contrary to his promise to eliminate the Federal deficit in 8 years, which he stated while campaigning for office.
It’s this runaway debt growth that has younger investors looking towards Bitcoin and other crypto-assets as a faster, more secure and far more transparent alternative to Central Bankers and their Keynesian monetary policies. “Bitcoin fixes this” has become one of the most popular memes of the last year, on social media for good reason.
What do you think about the FED’s cash injections? Let us know in the comments!
Images via Shutterstock, Twitter @brian_armstrong
