- Arthur Hayes claims the Federal Reserve’s “reserve management purchases” program functions as a form of quantitative easing.
- The program involves buying short-term Treasury bills to provide liquidity, effectively funding government spending.
- Hayes argues this policy increases fiat money supply, benefiting scarce assets like Bitcoin, Gold, and silver.
- The Federal Open Market Committee cut interest rates by 25 basis points on December 10 and announced Treasury purchases to maintain reserves.
- Market expectations suggest the Federal Reserve will likely hold rates steady in January, with limited probability of further cuts.
Arthur Hayes, co-founder and former CEO of crypto exchange Bitmex, stated in a recent Substack essay that the Federal Reserve’s new “reserve management purchases” (RMP) program is essentially a disguised version of quantitative easing. He argues the Fed buys short-term Treasury bills and recycles liquidity through money markets, which supplies funding for government spending while avoiding the political criticism usually associated with quantitative easing, as outlined in his essay.
Hayes describes the RMP as “a thinly disguised way for the Fed to cash the government’s checks”, adding that it is highly inflationary from both financial and real goods and services perspectives. He points out that expanding fiat liquidity through policies like RMP tends to favor scarce assets such as Bitcoin, gold, and silver. In his words, “I love QE because it means money printing, and thankfully I own financial assets like gold, gold/silver mining stocks, and Bitcoin that rise faster than the pace of fiat money creation.” He warns, however, that those without assets suffer as money creation reduces purchasing power, erodes wages compared to prices, and shifts wealth toward asset holders. Hayes further explains, “When the government intentionally debases the currency, it destroys the link between energy inputs and economic outputs.”
On December 10, the Federal Open Market Committee (FOMC) lowered interest rates by 25 basis points and announced plans to purchase about $40 billion worth of short-term Treasury securities initially to maintain ample reserves, according to Fed Chair Jerome Powell’s statement. These purchases aim to ease near-term money market pressures due to seasonal factors such as tax payments. Powell emphasized that this operation is separate from the Fed’s monetary policy stance.
Following these moves, Bitcoin’s price was approximately $92,695 on December 10 based on Yahoo Finance data and was trading near $87,300 at the time of writing, according to CoinGecko. Market predictions on Polymarket show that traders assign about a 77% chance of no change in Federal Reserve policy in January, with roughly a 21% chance of a 25 basis point rate cut, and larger changes considered unlikely, as seen on the Polymarket platform.
Donald Trump, whose presidential term ended, has encouraged aggressive rate cuts for the next Fed chair and is reportedly interviewing candidates to replace Powell, with National Economic Council Director Kevin Hassett regarded as the leading contender.
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