As the financial world grapples with divergent views on what's coming in 2024, Preston Pysh, co-founder of the Investors Podcast Network, warns that the Federal Reserve could surprise markets next year with massive money printing during an election year.
With just over one month left of the year, Wall Street is very much divided over the likelihood of a recession and the Federal Reserve's reaction to it.
On the one hand, Goldman Sachs is relatively optimistic, pricing in a 15% chance of a contraction in the U.S. economy next year, citing an exogenous shock, according to Goldman Sachs chief economist Jan Hatzius. At the same time, the bank sees the first rate cut only in the fourth quarter of 2024.
On the other hand, banks like UBS and Morgan Stanley call for a recession in 2024, followed by rate cuts as early as the first half of this year. UBS is not ruling out a rate cut as early as March, with cuts amounting to 275 basis points next year, UBS chief strategist Bhanu Baweja told Bloomberg in November.
According to Pysh, the 2024 outcome highly depends on the Federal Reserve's response.
"The thing few acknowledge is that we're not necessarily operating in a free and open market," Pysh told Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News. "And depending on the speed and the size of the response from central banks, you can get interesting things that can happen. Do they show up because it's an election year with so much dry powder of monetary units?"
Pysh anticipates a scenario where the Fed is forced to implement significant rate cuts, potentially starting in early 2024.
"Considering it's an election year, the speed of the response is going to be much faster and much swifter, with a lot more magnitude of fiat printing than what you would get in a non-election year," Pysh said. "They're just going to really break something catastrophically because of so much manipulation that's taken place."
'U.S. markets are heavily manipulated'
The recession has been trying to manifest itself since the banking crisis in March, Pysh pointed out. However, the Federal Reserve has kicked the can down the road by setting up programs like the Bank Term Funding Program (BTFP) to provide liquidity to banks.
"We're not dealing with free and open markets. We're dealing with heavily manipulated markets. The result over a very long period of time is that the system only gets more fragile," he said.
Pysh sees a massive deflationary wave, followed by COVID-level type stimulus and double-digit inflation. To get his full take on what it means for markets, watch the video above.
A critical point just a few months away
The Fed is running out of runway and might have to start easing in the first quarter of next year, with a critical point approaching in just a few months.
"They're going to be at a critical point with the reverse repo facility come January-February. During the first quarter of 2024, things will get really spicy, and they will have to have some type of response," he said. "It's looking very ugly for whatever that response is. And that's probably going to be Q.E. squared with yield curve control. They will have to match it with UBI [universal basic income] to funnel liquidity down into the lowest levels of the economy."
Bitcoin price outlook
As the Fed reacts to a slowing economy with massive rate cuts, Bitcoin will see strong demand, Pysh described.
The price of Bitcoin by the end of 2024 is likely to climb over $100,000, he noted. "I would be surprised if you weren't over $100,000 by the end of 2024."
Another driver will be a meltdown of fixed-income markets in the U.S., Europe, and Japan. "The G7 countries' Treasury markets are going to be the avalanche that pours buying power into Bitcoin because there's going to be nowhere else to go," Pysh stated.
Pysh also compared Central Bank Digital Currencies (CBDCs) to a government coupon network. To hear his thoughts on the dangers of CBDCs, watch the video above.
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