Investment professionals at Pimco, a multinational asset management company focusing on active fixed income management, argue that monetary policy easing by central banks, a key strategy for supporting global economic growth in 2020, might not be able to help fight an upcoming recession.
Joachim Fels, economic advisor at Pimco, and the firm’s global fixed income chief investment officer Andrew Balls explain,
“Whenever the next economic downturn or major risk market drawdown hits, policymakers will have even less policy capacity to maneuver, thus limiting their ability to fight future recessionary forces.”
Financial problems and uncertainty throughout 2019 were attributed to the trade war tensions between the US and China, prompting the US Federal Reserve, the European Central Bank and other major reserve banks to slash interest rates or take part in asset purchases to reduce the adverse effects of a potential global economic crisis.
Mark Carney, governor of the Bank of England, says the global economy is heading towards a “liquidity trap” and similarly warns that central banks are running low on maneuvers. In a recent interview with the Financial Times, Carney says,
“It’s generally true that there’s much less ammunition for all the major central banks than they previously had and I’m of the opinion that this situation will persist for some time.”
He adds,
“If there were to be a deeper downturn, [that requires] more stimulus than a conventional recession, then it’s not clear that monetary policy would have sufficient space.”
His remarks underscore arguments made by industry leaders and innovators in the cryptosphere who say Bitcoin, Ethereum and their digital clones are inescapable assets that are fueling a new blockchain-based economy destined to rewrite the rules of deeply flawed and failing traditional monetary policies that have led to negative interest rates, hyperinflation, recessions, depressions, poverty and economic manipulations to achieve political goals.
Cryptocurrency advocates suggest that blockchain-based systems powered by digital assets are creating new monetary systems that rely on math and cryptography instead of politically motivated policies and quantitative easing.
Writes Mason Nystrom, content marketer at the Ethereum incubator ConsenSys,
“The interoperable, programmable, and composable nature of the open financial stack built on Ethereum provides the foundation for a new financial economy…
While 2019 saw significant strides forward in the development of decentralized finance, 2020 looks set to make a leap.”
Lucas Nuzzi, the director of technology research at New York-based Digital Asset Research, says Bitcoin is an entire monetary system that is challenging the status quo and not likely to disappear.
“As we approach a new decade of social anxieties, geopolitical tension and crazy monetary policy, you can be sure Bitcoin will still be here.”
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