Mike Novogratz Warns of Credit Crunch in US and Globally — Expects Fed to Cut Rates 'Sooner Than We Think'

Galaxy Digital CEO Mike Novogratz has warned of a credit crunch in the U.S. and globally. Emphasizing that “we are heading into a recession,” he expects the Federal Reserve to cut interest rates “sooner than we think.”

Novogratz on Global Credit Crunch and Recession

Galaxy Digital CEO Mike Novogratz shared his outlook for the U.S. economy in an interview with CNBC Wednesday. Comparing the current market condition to one in December 2018, he said: “This reminds me a lot of 2018, December, when the Fed had this idea of one last [interest rate] hike and, of course, it sent the market into a tailspin, and they had to reverse it soon after.”

Noting that “information has changed dramatically” in a short period of time, he explained:

The commodity market is telling you, the oil market is telling you that we are heading into a recession. We are going to have a credit crunch in the U.S. and globally.

Novogratz stressed that Federal Reserve Chairman Jerome Powell “should pause and will be cutting rates sooner than we think.” He added: “That’s a huge shift in psychology. It’s got bitcoin (BTC) and ethereum (ETH) on the move.”

The executive continued: “If there was ever a time to be in bitcoin and crypto — this is why it was created, in that governments print too much money whenever the pain gets too great, and we are seeing that.”

Responding to a question about whether he sees “the possibility of a contagion” in the U.S. banking system and globally, Novogratz affirmed: “There is contagion.” He added that people learn their lessons and eventually, they will be relying on just four or five depository institutions.

“I think Congress and the Fed are going to have to do something more dramatic … or we’re going to see constant pressure on these regional banks and the whole system,” Novogratz opined, concluding:

Now we’ve got a market that’s going to go into a credit crunch, how do banks rebuild capital? They lend less. You’re going to see a credit crunch happening in the United States and that’s starting to get priced into the market in a dramatic way.

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