How Central Banks Will Be Forced to Print Money Again: Arthur Hayes

Arthur Hayes – co-founder of the crypto trading platform BitMex – published a lengthy blog post on Thursday arguing that central banks will be forced back into “money printing” due to various economic pressures.

That money printing, he argued, will create inflation that drives up the price of alternative forms of money, like crypto and gold. 

Inevitable Inflation

In Hayes’s post titled “Contagion,” the former CEO began by highlighting the immediate difficulties of the global economy following the decision of major central banks to tighten monetary policy. 

“The worst hit markets were sovereign debt markets, with a bond market rout that has been nearly the worst in recorded human, financial history,” he explained. 

With quantitative tightening in effect, bond yields have soared to an unsustainable extent in some markets. Last month, the Bank of England was forced to return to quantitative easing to suppress fast-rising yields on its 10 and 30-year gilts, which almost caused multiple pension funds in the U.K to go insolvent. 

Hayes claimed that other central banks will ultimately “succumb” to similar measures to address similar problems. The European Central Bank (ECB), for instance, is already purchasing bonds for some of its weaker member states.

In particular, the EU is suffering from a lack of affordable energy due to Germany’s current energy policy. According to Hayes, this may harm Germany’s economic output and position as an exporter, causing the countries with which it conducts trade to cease buying its products with euros, which are already growing weaker against the dollar. 

“Without cheap energy, Germany will have to attempt to print their way out of their problems,” said Hayes. “And just like every other nation, they will issue more bonds to cover fiscal transfers.”

As Germany issues more bonds, the co-founder said its yields will skyrocket, much like in the U.K already. Thus, the EU will expand its policy of quantitative easing to Germany and all other bond markets in the union. 

Crypto and Gold

Given his thesis that most major central banks are “on their way” toward yield curve control, Hayes added that “fungible global risky assets,” like gold and crypto, will benefit. 

“Given the gold and crypto markets are much smaller in size than the trillions in fiat money that will be printed, in non-USD currency terms these assets will appreciate,” he said. 

Even in the face of a stubbornly hawkish Federal Reserve, Hayes maintains that Bitcoin will rise from the combined efforts of other central banks. This is due to an arbitrage opportunity that will emerge across foreign exchange markets for both Bitcoin and gold, which will ultimately drive up the USD value of each. 

“This process will not be immediate,” he concluded. “Once the politicians set in motion the policies necessary to placate their electorate, the bond markets will have none of it.”