Written by: Web3Mario
Abstract : This week, the market officially entered the cool-off period before the Jackson Hole meeting. Everyone is waiting for Powell to make an official interpretation of the latest employment and inflation data and give clear guidance on future monetary policy, which will undoubtedly become a key reference for the interest rate decision in September. However, there was a very interesting piece of information last Friday that did not attract much attention in the crypto world. That is, Democratic presidential candidate Harris officially announced his first clear economic policy framework, the "Opportunity Economy" framework. Because I was sorting out the analysis article about Usual Money last Friday, the author did not notice it. I carefully studied the relevant details over the weekend and found some interesting insights. I hope to share them with you. In general, Harris's "Opportunity Economy" framework is an extreme left economic plan, which specifically refers to reducing the cost of living of the American people from four aspects, including housing, medical care, food and daily necessities, and childcare, through the power of government policies. If this plan is implemented, it is likely to push the cryptocurrency market back to the 2021 trend, but it will be accompanied by the resurgence of inflation in the United States.
Harris' first economic policy document, "Agenda for Lowering Costs for American Families," is a $1.7 trillion subsidy plan
Recently, with Harris's official nomination as a presidential candidate, her momentum has been significantly improved under the active publicity of major investors and media. The poll data also surpassed Trump at one point, and she was expected to win. Of course, friends who are familiar with the democratic election system may know that polls are highly subjective and unofficial activities. Organizers can cleverly obtain the results they want to see through survey methods, questionnaire design, and selection of survey subjects. It is not surprising that the Democratic Party, which has mastered the mainstream media, can easily create such dazzling data. Therefore, it is mainly a wait-and-see perspective to look at this matter. However, this also reflects to a certain extent that after integrating internal forces, the Harris campaign team, whose propaganda machine has been fully launched, is still very powerful. This is why Trump is eager to return to Twitter and actively interact with Musk. Therefore, we also need to actively observe and analyze Harris' possible policy route.
One of the core points that Harris has been questioned about is that she has not shown a clear preference for economic policies since she entered politics. This is mainly related to her work experience. Of course, considering the political issues she has dealt with in the past, including immigration and security issues, Harris has shown a left-wing populist attitude. The market has predicted to a certain extent that her economic policies may be left-leaning if she takes office. However, on August 16, Harris's election team officially released its first clear economic policy document, "Agenda for Reducing the Cost of American Families", which surprised many people and caused considerable controversy. Here is a brief explanation of why the proposal is called "opportunity economy" because Harris' team believes that by reducing the cost of American families, many middle-class people will get more employment and entrepreneurship opportunities, thereby stimulating overall economic vitality and regaining the American dream. The main reason for the controversy is that this is an extreme left economic policy, which reduces the cost of living of the American people in four aspects through government intervention, including housing, medical care, food and daily necessities, and childcare.
There are three specific areas in terms of housing:
1. Harris called for the construction of 3 million new homes to end the housing shortage in the next four years. The plan will be stimulated in three ways, including providing tax incentives for the construction of entry-level homes and affordable rental housing; establishing a $40 billion federal innovation fund to incentivize innovative housing construction programs; reducing government review and approval processes and reducing related costs;
2. Lower rents by hitting corporations and major landlords, including stopping Wall Street investors from buying and selling homes in bulk at a markup, eliminating tax incentives for buying single-family rental homes, and stopping large corporations from manipulating rent prices through private equity-backed pricing tools;
3. Provide a $25,000 down payment subsidy for first-time homebuyers. This policy has been significantly expanded from 400,000 subsidy quotas to 4 million under the Biden administration, and the review standards have been relaxed.
The medical field mainly includes three directions:
1. Cap insulin costs at $35 and out-of-pocket prescription drug costs at $2,000;
2. Speed up Medicare negotiations for prescription drugs.
3. Increase competition and demand more transparency in the health care industry, starting with cracking down on abusive practices by drug companies that hinder competition and by pharmaceutical middlemen that squeeze small pharmacies’ profits and increase costs for consumers.
Food and daily necessities mainly include:
1. Advancing the first federal ban on food and grocery price gouging;
2. Establish clear rules that make it clear that big companies cannot unfairly exploit consumers and make excessive profits from food and groceries.
3. Ensure that the Federal Trade Commission and state attorneys general have new powers to investigate companies that violate the rules and impose tough new penalties.
Childcare mainly includes:
1. Reduce taxes for middle-class families with children, with a maximum credit of $3,600 per child;
2. Provide a $6,000 tax credit to families with newborn children in the first year;
3. A $1,500 tax cut for dual-income families;
4. Tax deduction for health insurance purchases;
Harris's team promised to implement these proposals within 100 days of taking office to reduce the cost of living for ordinary Americans. The most controversial ones are mainly concentrated on its housing and food and daily necessities policies, as well as the overall budget of the entire policy. First of all, most opponents believe that its radical housing subsidies and construction policies will greatly increase the government's fiscal pressure and cause a more serious debt crisis. Secondly, the food and daily necessities policies also violate the laws of the market. It blames the cause of inflation on the improper profits of related companies. This is obviously a lack of understanding of the market and a unclear understanding of the different characteristics of oligopoly markets and fully competitive markets. In fact, the retail industry belongs to a fully competitive market. Most retailers' profit margins in retail business are usually in the single digits. If the government intervenes, it will lead to an imbalance in market supply and demand, thereby triggering a new round of inflation and causing a large number of related companies to go bankrupt.
Finally, regarding the total budget of the plan, the nonprofit Committee for a Responsible Federal Budget estimates that the plan will increase the government deficit by between 1.7 trillion and 2 trillion over the next 10 years , which may cause three problems. First, the current debt crisis in the United States will become more serious. Disorderly government spending will continue to consume the credit of the United States and trigger a potential dollar crisis. Second, the stimulus plan will further push up domestic inflation in the United States. Finally, as Harris' team pointed out that the budget will be borne by the wealthy in the tax structure, this is undoubtedly contrary to Trump's policy of reducing corporate taxes to benefit the rich, which will further intensify social contradictions in the United States. It can be seen that after the bill was made public, the US dollar index and gold, as a safe-haven asset for inflation, both showed a more dramatic reaction.
Impact on the crypto world — short-term bullish and long-term bearish
Next, let's analyze the impact of the bill on the crypto market. The American society has always been proud of its spindle-shaped social class structure. Although the proportion of the middle class is on a downward trend, it is still more than 50% overall. The impact of this bill mainly benefits this part of the population. We know that there is a diminishing effect on the effectiveness of government policies for economic intervention, because it will significantly affect the expectations of all parties in the market, but usually the impact of government intervention in the short term is still strong. Therefore, if the above plan can be implemented, the effect in the short term is undoubted. By then, the cost of living of most middle-class families in the United States will be significantly reduced, which will increase the disposable income of residents in the short term. This has created soil for the rise of risky assets, especially high EPS technology assets. The reason is also simple. Only when leeks become rich can big capital make money. When big capital makes money, it will actively sell new narratives, and the market will become active.
This story has already been played out once in 2021. The $1.9 trillion COVID-19 relief bill implemented by the Biden administration at the beginning of 2021 has caused a surge in the disposable income of most American families in the short term, which has completely detonated the rising frenzy of the crypto market dominated by Bitcoin. Of course, with the accumulation of the wealth effect, the inflationary pressure in American society has become increasing day by day. Everyone knows the story behind it. In order to fight stubborn inflation, the Federal Reserve had to carry out a monetary tightening cycle for more than two years. This also triggered a substantial retracement of risky assets. Therefore, I believe that if an economic policy of the same scale can be implemented, it will be beneficial to crypto assets in the short term, but in the medium and long term, we need to be vigilant about the monetary policy risks brought about by the return of inflation caused by this. Of course, this requires Harris to win the election and ensure that the policy can be effectively implemented. I will continue to pay attention to it in the future.
