QE is not over and will drive gold to $3,000 and Bitcoin to $100,000 over the next decade – Crossborder Capital
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(Kitco News) – Persistently elevated inflation has forced central banks around the world to tighten monetary policy by aggressively raising interest rates and reducing the amount of liquidity sloshing around in the market.
Analysts have noted that central banks’ quantitative easing has drastically reduced the global money supply, with some economists sounding the alarm that this will lead to recession and deflation. Some economists note that the global money supply has fallen 6.6% in the last 12 months from February. This is the most significant contraction in more than 50 years, according to some reports.
Despite the current environment, a research firm said monetary inflation has not disappeared, which will bode well for gold, bitcoin and other inflation hedges.
Last week, Crossborder Capital said gold prices could push above $3,000 an ounce and Bitcoin could hit $100,000 over the next decade as central banks will be forced to cover increased government spending.
“We believe that a major recovery in the global liquidity cycle is underway,” the analysts said in the report. “This will mean potentially significant monetary inflation that will be further fueled by the need for central banks to plug rapidly growing holes in government finances. The sheer size of America’s (and others’) debt burden will force a rapid and permanent return to QE-type policies . As monetary inflation rages, asset prices will be lifted higher, but traditional monetary hedges, such as gold, and new ones, such as Bitcoin, may prove to be the biggest winners.”
Citing the latest data from the Congressional Budgetary Office (CBO), the analysts said rising costs, aging population demographics and lower tax revenue growth will continue to add to the growing deficit. The analysts noted that according to CBO estimates, the national debt is expected to nearly double to $46.4 trillion by 2033, up from $24.3 trillion in fiscal 2022.
“This represents 118.2% of future GDP and an annual growth rate of 6.1% per year,” the analysts said. “The Fed will be asked to finance a significant portion of this debt, not least because it seems likely that foreigners, namely China, which together own a third of US government debt, will buy less in the future.”
Looking at the Federal Reserve’s balance sheet, Crossborder said it could rise back to 2022 levels by 2029 and could be at least 50% higher by 2033. However, the report noted that money growth is likely to rise by 75% in the next ten years .
“QE is coming back!” the analysts said.
While the British research firm has used US data for its research, the analysts noted that rising debt is a global problem. They pointed out that the United States could be considered “the cleanest dirty shirt in the laundry basket.”
“The demographic pressure is greater outside the United States, the spending obligations are greater and
many foreign tax bases have already been squeezed out, the analysts said.
Looking at the effect this increased spending will have on gold, Crossborder noted that their regression models show that a 10% increase in global liquidity leads to a 14% increase in monetary hedges.
“Using these simple extrapolations, a 75% increase in monetary inflation would easily take bullion prices through $3,000/oz, even using the 2022 average price as a base,” the analysts said.
Looking at the crypto market, the analysts noted that Bitcoin is even more sensitive to market liquidity than gold, meaning that a 10% increase in the Federal Reserve’s balance sheet can lead to a 75% increase in the digital currency.
“The 75% potential increase in liquidity could mean a more than 500% increase in crypto prices, thus suggesting that Bitcoin could easily trade through $100,000,” the analysts said. “Sure, this couldn’t be happening! Could it?”
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