U.S. Interest Rates Set to Rise as Goldman Predicts Dollar Euro Parity and Bitcoin Approaches Historical Highs
The Federal Reserve has only managed to raise interest rates once at the end of 2016, yet they are already threatening to raise them three more times in 2017. Whether or not they succeed in this, JPMorgan CEO Jamie Dimon is predicting that the U.S. interest rates are heading higher regardless. For this and other reasons, Goldman Sachs is forecasting the U.S. dollar and single currency euro to reach parity this year. A search for alternative assets has even caused crypto-currency bitcoin to recently top a thousand dollars, nearing its all time high. All this is happening against the backdrop of 2017 being the most politically dangerous year for the countries of Europe since the conclusion of the Second World War. Your gold is what will protect the value of your threatened mainstream assets amidst it all.
JPMorgan’s Jamie Dimon Predicts Higher U.S. Interest Rates Based On Faster Growth
JPMorgan Chase & Co. CEO Jamie Dimon is one of those unique Wall Street titans who is nearly universally respected and admired for his sagacious comments and recommendations. He has just predicted that interest rates will be going up alongside the expanding U.S. economy. This is the case regardless of what the American Federal Reserve Open Market Committee actually does with their benchmark interest rates.
“I believe America is doing better than people think and therefore interest rates are probably going to be stronger than people think,” said Jamie Dimon as he spoke to health care executives and investors attending the J.P. Morgan Healthcare Conference held in San Francisco. He believes this will happen whether or not the Fed manages to get in its hoped for three interest rate increases during the 2017 year.
Goldman Sachs Predicts Euro-Dollar Parity in 2017
Meanwhile, Goldman Sachs has also predicted that such U.S. based stronger and divergent interest rates from those in the European Union will drive the dollar significantly higher on up to parity against the euro this very year in 2017. The Goldman Sachs’ Chief Economist Jan Hatzius said at their Goldman Sachs Strategy Conference in London Monday, “The primary driver here is not valuation but really interest rate differentials. If we are right that the Fed moves the funds rate up more than what the markets currently pricing… that’s generally a relatively good indicator to watch.”
The base case from Goldman revolves around the Federal Reserve managing to get in three rate increases happening in the months of June, September, and December of 2017. The markets are currently pricing in only two hikes for the year. Hatzius admits that there will be large swaths of the economy which are challenged because they are sensitive to interest rates, such as housing. He still believes the Fed will be able to defend the actions based on a continually improving U.S. economy.
Bitcoin Briefly Tops $1,000 Before Missing All Time High
Speaking of rising interest rates and climbing asset values, alternative investment and cryptocurrency king Bitcoin came within dollars of its historical high this past Thursday as it blew away $1,000. With nearly $17.5 billion in market capitalization, this largest of digital currencies (by market cap) reached $1,153, near the all-time high of $1,165.89 that had been set back on November 30, 2013, per CoinDesk statistics. Bitcoin had collapsed several years ago in the wake of the fall of the once-largest Bitcoin exchange Mt. Gox. “A lot has happened in the time between the all-time high in 2013 and now. The industry has grown a lot and become stronger, through innovation, and endurance. Additionally, the adoption and popularity of Bitcoin are much higher than they were back then. More and more people are beginning to recognize the benefits and value of the currency,” CEO of Genesis Mining Marco Streng opined. His company is a bitcoin mining operation which focuses on harvesting new bitcoins.
Factors that have impacted the 2016 130 percent rally in bitcoin are several. The Chinese have utilized it as a safe haven outlet when their country began instituting currency controls and devaluing the Yuan. In this time span, China has become the world’s largest market for bitcoin. The widespread geopolitical uncertainty for the year helped to boost the crypto-currency as well. Professional investors have also shown a markedly greater interest in the alternative asset class than ever before, which has only increased the popularity of and demand for bitcoin. Besides this, the rules for bitcoin mining were changed according to what is known as “halving.” The procedure has dramatically decreased the available supplies of bitcoins.
Bitcoin is not the world’s only cryptocurrency, though it is by far and away the largest one. Ether, the second biggest by market cap, has also benefited from 55 percent price increases between December 28th and January 5th. Competing digital currency Monero is similarly up over 27 percent during this same time frame. More or less all of the so-called “alt coins” are benefitting from the rising investor confidence that bitcoin’s success has engendered in the overall cryptocurrency industry. “The bitcoin price surge is enabling traders in this space, who tend to be bitcoin heavy, to diversify their blockchain asset portfolios, and allocate greater weight to other crypto-currencies such as ether, which until recently have been relatively undervalued,” stated Gatecoin CEO and founder Aurélien Menant.
2017 Biggest Year for Political Upset Risk Since End of World War II
The year 2017 also promises to be potentially the most dangerous year for European politics since the conclusion of the Second World War. While 2016 may have shaken the global halls of power dramatically with the Brexit referendum no vote, the surprising U.S. election of President Donald Trump, and the Italian referendum no result, 2017 promises to be still more geopolitically earth shaking still. “I think that this year is probably the biggest year for political risk since the end of the World War II. I think because there are so many moving parts at once, that it’s going to be very difficult to control them,” stated Comparative Politics at London School of Economics Fellow Brian Klaas last Wednesday.
This starts with unrest in the U.S. and around the world from dramatically shifting U.S. policies the new Trump administration is planning to pursue aggressively both domestically and globally from day one in office. “You’re going to have probably unrest in the U.S. – people are not just going to roll over and accept some of the changes that are occurring. You’re having a president who is extremely willing and I would say reckless at poking a sleeping dragon in China on the global stage,” Klaas added. He is also concerned about the associated worldwide rebalancing of power that will naturally occur as the U.S. and Russia become much friendlier. Ironically, Klaas feels this will likely lead to”so much volatility and change in the rest of the world, that it would actually potentially become extremely disruptive and create risks elsewhere that were not anticipated.” Do not allow the skeptical pundits and analysts to talk you out of your gold protection.
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