Warren Buffett hates cryptocurrencies. Treasury Secretary Janet Yellen isn’t a fan and neither is Bill Gates. Ditto for scores of great economic minds who call the rise of cryptos like Bitcoin a “bubble,” and a lot worse.
I have my doubts as well. I’ve seen too many Pets.coms in my career covering Wall Street to embrace a so-called currency that can’t even be used to buy a slice of pizza.
What has me thinking twice, however, is what’s going on in Washington. If the cryptos are a bubble, what do we make of the US dollar, which is being debased even as I write this?
Increasingly, investors are waking up to the reality that the massive spending in Washington won’t end well. Yes, drug deals are transacted in Bitcoin, and speculating day traders have pushed its price up 667 percent (you read that right) over the past year.
But based on my reporting, it’s more than just a bunch of Robinhood types becoming crypto believers. Mainstream investors are also snapping it up as they become worried about inflation and the dollar.
“World War II was the last time we had deficits like this, and the Fed intervened to keep interest rates low,” said Jason DeSena Trennert, chief executive of Strategas, a firm that provides research to large investors. “There was inflation during the war, but nowhere really to go. Investors today have a greater ability to park their money somewhere else. That’s one of the reasons you have higher Bitcoin prices.”
Of course, you can raise taxes to plug deficits that have grown to more than $3 trillion and are heading to $4 trillion. President Biden has plans to do that as well, even if there aren’t enough rich people alive to pay down all the pandemic-related debt we’ve issued over the last 12 months.
Some of these trillions created a much-needed cushion for the unemployed, but a lot went to more wasteful stuff (handing checks to people with jobs). That’s why these shenanigans are creating a wall of worry — and a rush into what’s known on Wall Street as safe havens.
Those havens used to be commodities like gold. Now they’re cryptocurrencies like Bitcoin. A key point of attraction for the latter, according to some, is that Bitcoins are difficult and costly to mine, and there is a set number that can ever be mined — 21 million, versus the 18.6 million currently in existence.
Compare that to dollars, which are getting printed by the Fed with no end in sight as it scrambles to prop up growth and paper over deficits.
Things are poised to get worse. Dems possess a tenuous control of Congress. Their window for doing big things will likely end next year because, if history is any guide, the party holding the White House loses House seats in the midterms.
That’s why Biden, Chuck Schumer and Nancy Pelosi are…