Yes, the US Dollar is FIAT currency (not backed by a precious commodity like gold, silver or even iron pyrite).
Bitcoin, the largest crypto-currency, has more than recoverd from the “correction” last week. It has resumed its all-time high price This is happening as the US Dollar weakens.
Here is Bitcoin relative to Gold. Check out their relative performance since September.
Is it digital gold? Well, Bitcoin is an alternative to FIAT currency like the US greenback, the Euro and the Yen. The massive expansion of Central Bank balance sheets has certainly concerned investors.
It is doubtful that we will learn much from today’s Open Market Committee (FOMC). Hopefully we will get additional clarity on the Fed Balance Sheet unwind schedule (it was supposed to start in October and it is now November).
Ahead of the meeting, both the 10Y-2Y and 30Y-5Y Treasury slopes fell to near 10 year lows.
And the 10 year Treasury Note volatility index, TYVIX, remains near historical lows.
And just a reminder, core PCE prices YoY (“inflation”) is at 1.33%, well below the 2% Fed target rate for inflation.
Well, apparently Janet Yellen and The FOMC aren’t following the Taylor Rule (or ANY rule that I can detect).
I am sure that Janet Yellen would like to lock up John Taylor (in gold) and throw away the key.
Check it out. Home prices are seemingly unstoppable and the S&P500 index is relentless. The unstoppable asset price bubbles started in the mid-1990s when M2 Money Velocity peaked. The housing bubble burst then rallied back it bubble levels again, but the stock market has outpaced its former glory.
Of course, the M2 Money stock is over 3 times greater than in 1995 (that’s a lot of printing!) and interest rates have been depresssed since December 2008.
Now, The Federal Reserve is tapping the brakes by ever-so-slowly raising The Fed Funds Target Rate while at the same time slowing M2 Money Supply YoY (we are now at the slowest YoY growth rate of money since early 2011. Next up? Today’s FOMC meeting.
The US Treasury curve slope (30Y-5Y) continues to flatten and has just hit the low point since mid-November 2007, nearly a year before The Fed’s annoucement of QE1 (their first round of asset purchases).
And as of Q2 2017, M2 Money Velocity has sunk to its all-time time low.
Here is photo of The Fed announcing their QE1 asset purchase program.
And here is The Fed signalling a rate increase at their December FOMC meeting.