With the passage of the $1.9 trillion stimulus plan by Congress, a large portion of Americans will receive a $1,400 check. About 10% of it, $380 billion, will be invested in Bitcoin, or so a survey conducted by the firm Mizuho Financial Group indicates.
The survey was conducted by Mizuho Financial Group’s subsidiary, Mizuho Securities. In its survey of 235 individuals living in households with incomes of less than $150,000, it found that 2 out of 5 people who will receive a paycheck expect to use that money to invest primarily in the stock market or Bitcoin.
Mizuho Securities predicts that Bitcoin purchases could account for as much as 60% of Americans’ new investment spending. The firm expects the stimulus plan checks to increase the cryptocurrency’s market capitalization growth by 2% to 3%.
Fifteen percent of people surveyed plan to invest more than 20 percent of their stimulus check money in Bitcoin or stocks, and as many as 36 percent of people responded that they plan to invest at least 1 percent of their chuque in stocks or cryptos.
The purpose of the inclusion of the $1,400 checks within the pandemic assistance package is intended to stimulate consumption and thus boost productive activity. However, many analysts expect the growth impact of these checks to be limited.
As many as 37% of Americans saved checks from the previous two stimulus plans, indicating that the massive transfers did not transform into spending, as the Biden administration expects with this third round of stimulus.
Are the checks accelerating a bubble burst?
Bitcoin currently has a market capitalization of more than $1 trillion and recently surpassed $60,000 in price. While many investors have viewed the cryptocurrency as a haven from the devaluation of fiat currency, others think Bitcoin is showing signs of a bubble.
Despite Bitcoin’s sudden growth, the cryptocurrency is not the only asset that has skyrocketed in value due to the pandemic. The share prices of companies such as Tesla, Netflix or Amazon have risen steadily, also boosting the value of financial indices such as the S&P500 and the Dow Jones Industrial Average.
The Dow Jones index is particularly unique in that although industrial production has not fully recovered — and in fact fell in February — the index is at record highs. This means that financial markets are overestimating the recovery of U.S. industry.
Some economists are alarmed by the high level of corporate indebtedness facing the U.S. economy, which now exceeds $10 trillion. In order to survive the pandemic, many companies had to issue debt bonds to provide liquidity during the lockdown period, and these bonds were purchased by the Federal Reserve (FED) -which today is the largest holder of private debt in the United States-, which means that the payment of this debt is subject to the interest rate imposed by the FED.
Many of these companies find themselves with little income to cover the interest on the debt acquired by the entrepreneurs to survive the lockdowns and, in a context where the FED anticipates higher inflation, it may be extremely risky for these companies, since in the event that the Central Bank does not manage to control the excess liquidity in the market and inflation overflows, it will have to raise interest rates, which would also increase the interest on the debt bonds of these companies.
Although the environment is uncertain, there are also voices that believe that the stimulus plan will boost economic growth, as is the case of Goldman Sachs, which raised growth forecasts for the U.S. economy for 2022 from 3.8% to 4.5%.