The Federal Reserve has reduced interest rates again while simultaneously announcing a new round of Treasury bill purchases. These actions indicate that the financial system is becoming dependent on continuous liquidity support. When the underlying economy weakens and inflation remains above target, central banks face conflicting incentives. Lowering rates risks further inflation. Maintaining high rates risks liquidity stress. The response is usually a partial adjustment in both directions, which is what we are seeing now.

Purchasing forty billion dollars of Treasury bills is a form of balance-sheet expansion. It increases demand for government debt and helps stabilise funding markets. At the same time, the cut in policy rates lowers borrowing costs across the economy. This combination typically appears when growth is slowing, inflation is persistent and the government requires reliable financing. The description of the labour market “cooling” with inflation “somewhat elevated” is a straightforward definition of stagflation.

These interventions reflect the design of the system. When money is created elastically, economic stability depends on adjusting interest rates and expanding the central bank balance sheet. Over time, each cycle requires larger interventions to offset the effects of previous ones. The result is an economy increasingly driven by policy signals rather than genuine productivity.

Bitcoin was created to avoid this dynamic. Its supply cannot be expanded to support government borrowing or to manage short-term fluctuations. Verification is decentralised, and issuance is predictable. The unit of account does not change as policymakers respond to the constraints of the debt cycle. This removes the need for stimulus and the distortions that follow.

In fiat systems, interest rates and asset purchases are tools used to maintain liquidity and preserve confidence. In Bitcoin, no such tools exist. The rules are fixed, and participants adjust to them rather than the other way around. This difference becomes clearer each time central banks attempt to manage outcomes produced by a flexible monetary base.

One bitcoin remains one bitcoin. Its value does not depend on policy announcements, balance-sheet adjustments or electoral cycles. It is a monetary system designed to operate without the interventions that characterise the present environment.