#MarketSentimentToday
The reason why there is so much liquidity in crypto, and stock market, while interest rates are kept at high levels for 4 years, is due to government spending.
Theoratically, lower interest rates encourage more investments as cost of borrowing is cheaper and therefore higher liquidity.
The core concept of investing is debt. You borrow money from an investor, you make something more out of it, everyone is happy. So debt isn't always bad.
But for the last 4 years, the US government has continually increased their national debt despite the immediate emergency spendings from COVID no longer present. The debt is for immediate consumption. Not future value.
Government debt, like any other debt, is good if used correctly. Debt isn't always bad, for example during wartime, it's more efficient and less damaging to the average citizen to just issue war bonds rather than increasing tax rates. Same goes for covid.
But covid's economic impact has dramatically reduced years ago, everyone is back to work and growth is accelerating yet the spending is even more. Why? Biden administration has no concerns over debt. They think they can just print money, becausea they are the US. But no, even the US can't just print dollars infinitely if the debt is over their GDP.
It also explains why inflation just won't be suppressed after years of high interest rate. It's because the main cause of inflation, governement debt, won't end. National debt is essentially how much new money is distributed.
This has created a massive bubble to the economy, even household debts are at peak level despite high interest rates. Speculative investments, such as crypto or tech related stocks like NVIDIA has soared to unimaginable levels. Yet the earnings report for most companies that sell commodities are not performing well.
Remember, rate cuts are not a good thing in the short term. Almost every market crashes were preceded with a rate cut. Rate cuts indicate the printer that inflated the bubble is stopped. Then the bubble collapses.