For the past couple months, pessimistic prognoses regarding the economic situation not only in the US, but around the world as well, have been increasingly common. But it’s not often that someone with a direct influence on the world’s economy is honest enough to admit that the situation isn’t looking good - and recently Jerome Powell, Chairman of the Federal Reserve, has done exactly that.
The speech of Jerome Powell
In his recent speech at the annual meeting of the National Association for Business Economics, Powell has discussed in detail the global economic situation. He focused in particular on the long-term effects of the Covid-19 pandemic and the resulting lockdown policies introduced by governments around the world.
Although it's common knowledge that the Covid-19 pandemic is likely to cause not only a health crisis, but also an economic one, Jerome Powell highlighted the exact scale of the pandemic's impact on the federal budget of the United States. According to Powell, the situation of the American budget isn’t looking bright as “the U.S. federal budget is on an unsustainable path”.
Jerome Powell claims that the fight against Covid-19 is far from over, and much more funds will have to be spent until the pandemic is overcome. Although Powell considers the fact that $9 trillion from the federal budget has been funelled to private trading houses to be troubling, he believes that “now is not the time to give priority to those concerns”, as all focus should be paid to combating Covid-19 effectively.
As Jerome Powell admits that the forecasts regarding the economic situation in the United States aren’t good, it seems like Powell’s own Federal Reserve also isn’t without a blame. Fed is being criticized for helping Wall Street and big corporations instead of small and medium businesses.
Money from the CARES Act
Recently, investigative journalists Pam and Russ Martens writing for Wall Street on Parade, have disclosed that the Federal Reserve sits on a huge amount of funds from the CARES Act. CARES - the Coronavirus Aid, Relief, and Economic Security Act - has been the United States’ main response to the Covid-19 pandemic. However according to Pam and Russ Martens, the Federal Reserve hasn’t distributed all the funds from the CARES Act properly, and is still sitting on $340 billion of untapped CARES Act money.
The Bitcoin price
Jerome Powell’s pessimistic opinion about the American economy certainly wasn’t the only one in the recent months, but it might be among the most important ones. The Covid-19 aftermath is almost certain to take its toll on the US economy, and as inflation is predicted to rise, the near future of the US Dollar doesn’t seem to look too bright. Many people are starting to look for safe haven assets able to protect their life’s savings from the crisis - and as the US Dollar loses value, the bitcoin price keeps rising.