Arthur Hayes: Fed will cut rates if US-Iran war drags on

BitMEX co-founder Arthur Hayes argued on his blog that a prolonged U.S. military conflict with Iran would increase war-related costs, such as reconstruction, making it more likely the Federal Reserve will lower interest rates and expand the money supply to cover the expenses. He pointed to historical precedents, noting that the Fed consecutively cut rates after the Gulf War began in 1990. Similarly, after the 9/11 attacks in 2001, when the U.S. declared a "Global War on Terrorism" and entered conflicts in the Middle East, the Fed immediately resorted to rate cuts amid spreading financial market instability. Hayes asserted that President Donald Trump's political fate and the November midterm elections depend on financial market trends and oil prices. Since regime change in Iran has been a common goal for both Republicans and Democrats, he believes the Fed has the political justification to ease monetary policy. This would involve supplying liquidity to finance the process of bringing Iran into the U.S. sphere of influence. While acknowledging uncertainty about how much funding Trump will commit to an intervention, Hayes concluded that the right time to buy cryptocurrency is "immediately after the Fed cuts rates or prints money."