Typically, as CoinTelegraph's Vince Quill reports, the Federal Reserve typically eases interest rates when economic activity is stagnating or declining, asset prices are falling, unemployment is high and credit dries up, as seen during the Great Depression of the 1930s or the 2008 financial crisis,

However, as Dalio wrote in an article posted to X this week, the Fed is now easing monetary policy at a time of low unemployment, economic growth and rising asset markets, Dalio wrote, which is typical of late-stage economies saddled with too much debt. 

This "dangerous" combination is more inflationary, Dalio wrote, warning investors to keep an eye on upcoming fiscal and monetary decisions.

"Because the fiscal side of government policy is now highly stimulative, due to huge existing debt outstanding and huge deficits financed with huge Treasury issuance - especially in relatively short maturities - quantitative easing would effectively monetize government debt rather than simply re-liquify the private system."

The continued inflationary pressure and currency debasement are positive catalysts for Bitcoin, gold and other store-of-value assets, which are seen as hedges against macroeconomic and geopolitical risks, including a reset of the global monetary order.  

This Time is Different Because the Fed Will be Easing into a Bubble.

While I would expect the mechanics to work as I described, the conditions in which this QE would take place are very different from those that existed when they took place before because this time the easing will be into a bubble rather than into a bust.

More specifically, in the past QE was deployed when:

Asset valuations were falling and inexpensive or not overvalued.

The economy was contracting or very weak.

Inflation was low or falling.

Debt and liquidity problems were large and credit spreads were wide.

So, QE was a "stimulus into a depression."

Today, the opposite is true:

Asset valuations are at highs and rising. For example, the S&P 500 earnings yield is 4.4% while the 10-year Treasury bond nominal yield is 4% and real yields are about 1.8%, so equity risk premiums are low at about 0.3%.

The economy is relatively strong (real growth has averaged 2% over the last year, and the unemployment rate is only 4.3%).

Inflation is above target at a relatively moderate rate (a bit over 3%) while inefficiencies due to deglobalization and tariff costs are exerting upward pressures on prices.

Credit and liquidity is abundant and credit spreads are near record lows.