Billionaire venture capitalist Peter Thiel, who is known to be pro-bitcoin, said he’s worried that China may be using bitcoin as a financial weapon against the U.S. He said China wants two global reserve currencies, rather than the dollar being the default. Thiel added that when the euro failed to fill that role, China began to focus on bitcoin. And now, after JPMorgan Chase CEO Jamie Dimon said we could see a “Goldilocks” economy (fast and sustained growth), economists are questioning what will derail the growth. Tobias Levkovich, Citigroup’s chief U.S. equity strategist, fears that investors are overlooking some risk with the Fed.

 

MarketWatch/Mike Murphy
China may be using bitcoin as ‘financial weapon’ against U.S., says Peter Thiel

Billionaire venture capitalist Peter Thiel is worried that China is using bitcoin to undermine the U.S., Market Watch reports.

In comments Tuesday during a virtual event for the Richard Nixon Foundation, and first reported by Bloomberg News, the co-founder of PayPal PYPL, +0.95%, Palantir Technologies PLTR, -1.59% and Founders Fund said bitcoin “threatens fiat money, but it especially threatens the U.S. dollar.”

“Even though I’m a pro-crypto, pro-bitcoin maximalist person, I do wonder whether, at this point, bitcoin should also be thought [of] in part as a Chinese financial weapon against the U.S.”— Peter Thiel

Thiel said China would like to see two global reserve currencies, rather than the dollar being the default reserve currency. But China doesn’t want its renminbi to fill that role, and in the past has used the euro “in part” as a weapon against the dollar. That hasn’t worked, so now China is trying to elevate bitcoin, Thiel argued.

“[If] China’s long bitcoin, perhaps from a geopolitical perspective, the U.S. should be asking some tougher questions about exactly how that works,” he said.

China recently launched a blockchain-enabled, digital version of its currency, the yuan, but Thiel dismissed that move. “That’s not a real cryptocurrency, that’s just some sort of totalitarian measuring device,” he said.

Bitcoin BTCUSD, 2.21% on Wednesday was above $56,000 and again approaching its record high price of $60,738, according to Coindesk. The price of bitcoin is up 95% year to date, and up a whopping 674% over the past 12 months.

 

CNN Business/Julia Horowitz
Can anything derail the ‘Goldilocks’ economy?

America’s economy could be heading for a golden era of growth. But higher prices and the coronavirus pandemic still present risks.

What’s happening: “It is possible that we will have a Goldilocks moment — fast and sustained growth, inflation that moves up gently (but not too much) and interest rates that rise (but not too much),” JPMorgan Chase CEO Jamie Dimon said in his widely-read annual letter to shareholders this week.

Dimon’s optimism comes after the International Monetary Fund said that President Joe Biden’s $1.9 trillion stimulus package will boost the US economy to 6.4% growth this year. That would be the fastest annual growth rate in the United States since 1984 under President Ronald Reagan.

Economic data continues to support rosy predictions.

This week, the Institute for Supply Management published its monthly report on the US services sector, which accounts for 88% of America’s gross domestic product. The group’s services index for March jumped to 63.7, the highest level ever recorded.

“There is clearly a big surge in activity underway,” said Paul Ashworth, chief US economist at Capital Economics.

This data has helped keep US stocks near record highs. But an undercurrent of anxiety remains. CNN Business’ Fear & Greed Index shows that market sentiment is in “greedy” territory, up from a neutral reading one week ago. But investors aren’t throwing caution to the wind.

In a recent note to clients, Tobias Levkovich, Citigroup’s chief U.S. equity strategist, warned that the fear of missing out appears to be dominating.

“There’s a 1999 perspective being noted with pressure for fund managers to participate in rising share prices even if there’s also a recognition that it could end badly,” Levkovich wrote, referring to the dot-com bubble that popped at the turn of the millennium.

He worries that investors are overlooking the risk that the Federal Reserve could change course and take some stimulus measures off the table, as well as the impact of “plausible tax increases being proposed by the Biden administration.”

Read the full story, here.

 

Reuters via CNBC/Diptendu Lahiri
Gold gains as dollar, yields fall after U.S. Fed maintains stance

Gold prices rose on Thursday, as yields on longer-term U.S. Treasuries dropped along with the dollar after the Federal Reserve in its latest policy meeting minutes reinforced expectations that interest rates would remain low for some time.

Spot gold gained 0.3% at $1,741.85 per ounce. U.S. gold futures rose 0.1% to $1,742.90 per ounce.

“Gold is gaining at the moment as it is tracing the path of the U.S. Treasuries, which is also putting some pressure on the dollar,” said Yingtao Jin, an analyst at StoneX Group.

“As the Fed mentioned, they see the economy strong at the beginning of 2022, but that is at a cost of rising inflation rate, which can go out of hand and that is the time when we will see some solid gains in gold.”

Non-yielding gold is widely considered as a hedge against increasing inflation.

Fed officials are committed to supporting the economy until its recovery is more secure, minutes of the U.S. central bank’s most recent policy meeting released on Wednesday showed.

Several policymakers also indicated they thought interest rates might need to increase sooner than anticipated, although there was little sense of urgency around that issue in the minutes.

“The Fed was very assuring about its stand on interest rates, although investors are not convinced,” said Michael McCarthy, chief market strategist at CMC Markets.

Read more, here.

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