Mike Novogratz, CEO of Galaxy Digital, warns of a “US and global credit crunch.” He stresses that we are “headed for a recession” and expects the Federal Reserve to cut interest rates “sooner than we think.
Novogratz on the global credit crunch and recession
Mike Novogratz, CEO of Galaxy Digital, discussed his outlook for the U.S. economy in an interview with CNBC on Wednesday. Comparing current market conditions to those of December 2018, he said:” This reminds me a lot of 2018, December, when the Fed had the idea of the last (interest rate) hike and, of course, it wreaked havoc on the market and had to reverse it immediately.”
Noting that “information has changed dramatically” in a short period of time, he explained that.
The commodity markets are telling you, the oil markets are telling you, that we are heading into a recession. There will be a credit crunch in the U.S. and around the world.
Novogratz stressed that Federal Reserve Chairman Jerome Powell “should pause and will cut rates sooner than we think.” He added, “That’s a big change in psychology. It is driving Bitcoin (BTC) and Ethereum (ETH).”
The executive continued.” If there is a time to get into Bitcoin and crypto – in terms of governments printing too much money every time the pain gets too great, this is why it was created and we are seeing it.”
When asked if he sees a “potential for contagion” in the U.S. banking system and globally, Novogratz affirmed.” There is contagion.” He added that people will learn their lessons and eventually rely on only four or five depository institutions.
“I think Congress and the Fed have to do something more dramatic… Otherwise, there will be constant pressure on these regional banks and the system as a whole,” Novogratz opined, concluding.
Now that the market is in a credit crunch, how will banks rebuild capital? How do banks rebuild capital? It is by reducing their lending. We have a credit crunch in the U.S., and it is starting to factor into the markets in a dramatic way.
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