Gold and Bitcoin a ‘safe haven family’ for the impending recession – Jeffrey Tucker

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(Kitco News) – The Fed will push the US economy into recession by summer, and Bitcoin’s lows in December were a clear buying opportunity, according to Jeffrey Tucker, founder and president of the Brownstone Institute.

“It was pretty clear where the low points were,” Tucker said. “Me and anyone who has confidence in the technology, it was a very obvious buying opportunity.”

Tucker spoke with Kitco News reporter Ernest Hoffman on April 14. He said Bitcoin’s recent strength is no surprise to him and investors need to learn their lesson about the leading cryptocurrency.

“It’s so funny to me,” Tucker said. “I’ve been in Bitcoin for more than 10 years and every time it goes through one of these dips everyone panics and leaves the market. The smart money just sees it as a bargain and goes for it and then they take advantage .”

Tucker said the fundamental case for Bitcoin became clear almost from the beginning. “As far as I’m concerned, the proof of concept of Bitcoin was achieved when it achieved dollar parity,” he said. “The miracle was over. We had finally invented the equivalent of gold for the internet age. Digital gold is what it has always been.”

He said that Bitcoin fulfills both main functions in the current environment. “One is to be a medium of exchange, and that’s great,” he said. “But then also to work as the equivalent of gold, which is a safe haven for assets in times of financial, monetary and economic problems, and we are certainly in them.”

Tucker said the Federal Reserve has undergone a massive “loss of credibility” on monetary policy in recent years. “For the better part of 28 months, they’ve been telling us that inflation is under control, and that it’s going down, and that it’s temporary,” he said. – It just doesn’t happen.

However, he does not place all the blame for the current conditions on the Fed’s beleaguered chairman. “Powell tried to solve this in 2019, but the Trump administration started railing against him like he was trying to cause a recession,” Tucker said. “So when the great pandemic hit, Powell completely sold his soul and engaged in a Weimar-style monetary policy.”

“When he found out he was being trolled and got angry about it and started trying to get inflation under control, it was really too late.”

Tucker also said that the central bank is now “sucking money out of the economy” and that banks are no longer lending. “There is a danger that the Fed, in trying to fix the mistakes of the past, actually creates more problems and drives conditions that lead to recession,” he said. – That seems to be where we are today.

Interest rate increases led to the banking crisis

Addressing the ongoing banking crisis, Tucker said attempts by some regulators and lawmakers to blame digital assets for the recent bank failures were misleading, as the real cause was a rapid repricing of sovereign debt.

“It wasn’t crypto,” he said. “Obviously, Silicon Valley Bank had too many risky investments, but in this environment, what isn’t a risky investment? The regulators had told the banks that the safest place for their money is in U.S. Treasuries of various maturities, so they bought maturities that paid the most, like is on the right side of the yield curve, so 3, 5, 10, 30 years, and that’s where they kept the money.”

“Which was great until Federal Reserve policy changed and therefore devalued the asset portfolios of all these banks.”

Tucker also said the broader contagion is there, even if other U.S. banks haven’t imploded yet. “The only reason we haven’t seen it spread is not because other banks don’t have these problems, but because Janet Yellen came along and promised Weimar-style inflation,” he said. “Now what was funny to me about Janet Yellen’s incredibly irresponsible announcement is that it directly contradicts the policy of the Federal Reserve. So it’s a big problem.”

The job of the Federal Reserve, Tucker said, is to be the buyer of last resort of government debt. “People can talk about a dual mandate from the Fed over inflation and unemployment,” he said. “It’s nonsense. They have a single mandate, and that is always to keep the government afloat.”

Tucker also said the recent PPI figures, which came in well below expectations, are no cause for celebration. “The question is why did PPI come in the way it did? There could be two reasons,” he said. an old fashioned recession that is developing.”

“I looked at the manufacturing sector and there are all the signs of a real, statistical recession waiting if not already here,” he said. “That, more than anything else, could explain the decline in PPI. Just a direct loss in demand for manufactured goods and a decline in productivity overall.”

“If I had to bet, I’d say that’s my best bet.”

Tucker said the recession will be obvious by July, and will become clear to everyone as inflation begins to fall below three percent. – Everything will happen at the same time.

In today’s market environment, Tucker said gold and Bitcoin are good places to be.

“Gold is the golden constant, it’s going to be there for you no matter what and that, in times of upheaval, is very worthwhile,” he said. “Bitcoin is the newest member of this kind of ‘safe haven’ family, and it really is a smart investment for people who are willing to take high risks.”

To hear Tucker’s analysis of the effects of dedollarization, US household debt and demographic change, watch the video above.