Opportunity Economy: The Potential Impact of the New Economic Policy Framework on the crypto market

This week, the market has entered a wait-and-see period ahead of the Jackson Hole meeting, with various parties focusing on Powell's interpretation of the latest employment and inflation data, as well as guidance on future monetary policy, which will undoubtedly become an important reference for the September interest rate decision. It is worth noting that last Friday, a piece of information did not attract much attention in the crypto market - a presidential candidate officially announced the first clear economic policy framework "Opportunity Economy". This extremely left-leaning economic plan aims to reduce the living costs of the American people in four areas: housing, healthcare, food and daily necessities, and childcare, through government policies. If this plan is implemented, it could again drive the cryptocurrency market to see a rise similar to the trend of 2021, but it may also trigger a renewed rise in inflation in the United States.

1.7 trillion scale subsidy plan

With the official nomination as a presidential candidate and active promotion from various parties, the momentum of a certain candidate has significantly increased, with poll data at one point surpassing that of their opponent. Although poll results often have subjectivity, they do reflect, to a certain extent, the strength of the candidate's campaign team, which should not be underestimated. Therefore, it is necessary to actively pay attention to and analyze their possible governance path.

For a long time, the candidate has faced scrutiny for lacking clear economic policy preferences. However, on August 16, their team officially released the first clear economic policy document titled "Agenda for Reducing Costs for American Families," which sparked widespread controversy. This proposal is referred to as the "Opportunity Economy," arguing that by alleviating costs for American families, more middle-class individuals will gain access to employment and entrepreneurial opportunities, thereby stimulating overall economic vitality and reviving the American Dream.

Specific policies include:

1. Housing aspects:

• Call for the construction of 3 million new homes
• Crack down on corporations and large landlords to reduce rent
• Provide a $25,000 down payment subsidy for first-time homebuyers.

2. Medical aspects:

• Set a cap on insulin and prescription drug costs
• Accelerate the negotiation of prescription drugs by the medical insurance.
• Enhance competition, improve transparency in the healthcare industry

3. In terms of food and daily necessities:

• Promote the ban on price fraud in food and grocery items
• Establish rules to limit large companies from obtaining excessive profits
• Grant regulatory authorities new powers to investigate and penalize non-compliant companies

4. Parenting aspects:

• Tax reductions for middle-class families with children
• Provide tax credits for newborn families
• Tax deductions for dual-income families and health insurance purchases

The plan promises to start implementation within the first 100 days of taking office. However, it has also sparked much controversy, mainly focusing on housing and food daily necessities policies, as well as the overall budget. Opponents argue that the radical housing subsidy policy will exacerbate the government's debt crisis. The food daily necessities policy is accused of violating market rules, which may trigger a new round of inflation and corporate bankruptcies.

According to estimates, this plan will increase the government's deficit by $1.7-2 trillion over the next 10 years, potentially exacerbating the debt crisis, pushing up inflation, and intensifying social conflicts due to adjustments in the tax structure. After the announcement of the bill, both the dollar index and gold experienced significant fluctuations.

Impact on the crypto market

Analyzing the impact of this bill on the crypto market, it can be found:

In the short term, if the plan is implemented, it will significantly reduce the cost of living for middle-class families in the United States and increase disposable income. This creates conditions for the rise of risk assets, especially technology-related assets. The reasoning is simple: with ample funds, ordinary investors can profit, allowing large capital to actively sell new narratives and invigorate the market.

This scenario played out in early 2021. At that time, the Biden administration implemented a $1.9 trillion COVID-19 relief package, significantly increasing the short-term disposable income of American households, which triggered a surge in the crypto market led by Bitcoin. However, inflationary pressures then surged, and the Federal Reserve had to engage in more than two years of monetary tightening, leading to a substantial correction in risk assets.

Therefore, if economic policies of a similar scale can be implemented, it will benefit crypto assets in the short term, but in the medium to long term, one must be vigilant about the monetary policy risks brought about by the potential return of inflation. Of course, all of this hinges on whether the candidate can win the election and effectively implement the relevant policies. It is necessary to continue monitoring the developments in the future.