Reviewing 2020’s Central Bank Policies – Bitcoin Magazine

2020 was unforgettable, especially for Bitcoin. To help memorialize this year for our readers, we asked our network of contributors to reflect on Bitcoin’s price action, technological development, community growth and more in 2020, and to reflect on what all of this might mean for 2021. These writers responded with a collection of thoughtful and thought-provoking articles. Click here to read all of the stories from our End Of Year 2020 Series.

A “biblical flood of liquidity” was released onto the world this year by its largest central banks, raising fears for the longevity of several of the world’s currencies. In reviewing the major monetary policy changes from the Federal Reserve, the European Central Bank and the Bank of Japan, it’s clear that 2020 was an unprecedented year for the legacy economy and that there is strong need for an alternative that is free of inflation and middlemen.

The Federal Reserve

  • Decreased its funds target rate by 150 basis points (bps) to 0 percent
  • Started open-ended quantitative easing (QE) of $80 billion per month
  • Provided a potential $1.95 trillion in lending in many different programs
  • Extended $400 billion at the peak in currency swap lines with foreign central banks

While the Federal Reserve’s monetary response was the largest in absolute terms and most comprehensive of the major central banks, it was not the largest in relative terms.

Cracks started appearing in the global financial system in 2018 with a slowdown in China, and the slowdown came to a head in September 2019 when repo rates spiked from near zero to 10 percent in the matter of one morning. This series of events set the Fed on a path toward “easier” monetary policy in 2019, with its balance sheet bottoming in Q3 and rising when entering 2020.

When the COVID-19 virus made the leap to Europe and then the U.S. in March 2020, it took the PhD economists by surprise. All major central banks responded between Sunday, March 15…

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