INFLATION!.18 Months after COVID-19 surfaced, the world's economy is on its knees. We are looking at inflation close to the levels we had seen in the 2008/09 crisis. It must be made clear that some of the projected inflation shows we are not in too much trouble - Inflation in the US has shown the highest reading since 2008 - other indexes like the CPI ( Consumer price Index ) have shown the largest yearly increase since 2008. A recipe for disaster. Stocks struggled earlier this year which could be seen as a reaction to the struggling vaccine rollouts, however, since then they have performed better with people regaining trust in the economy. Sadly I believe this trust is misplaced and those who have made the mistake are in grave danger of losing money.
Let's talk a bit about why inflation is so high. Uncle Sam down at the FED has decided to print 21% of all circulating dollars in history in a mere 12 months. Yes you heard that, Since the dollars creation 21% of the dollar that exists was printed due to covid. The excuse? ''Quantitative easing'' a measure which is barely tested well. Many will say that in 2008 it helped us fight the recession, but even that is unclear. Many different approaches were taken in 2008 and it's almost impossible to pinpoint what helped the recovery, maybe it was natural? If not it's definitely not conclusive that QE saved us. Yet you'd expect such a wild decision to be backed by Solid Evidence.
The natural question which follows is if so much is being printed, where is the money going? Everyone is still broke, right? People have less, well i can say for sure the poor(us) are definitely poorer and the rich well some may be unaffected or some even richer. Large companies received bailouts and cover of wages, while even some smaller business' had access to the scheme set up by countries. The UK had a bounce back loan system which helped a lot of companies while America has been borrowing companies money with 0% interest for ages now and promises to continue it. Yet those left jobless or on cut wages have and will carry on struggling.
Covid was a beautiful beautiful scam. Not in the sense of it not existing instead we know for sure countries and governments monetized this tragedy. From small things such as PCR tests required for travel, yet free PCR tests provided are not to be used instead you must pay. We've seen here in the UK members of parliament's family/friends given contracts for masks or other gear/products needed in this fight against covid. Of course we've seen the dark pharmaceutical industry prosper from such struggles, but i'll cut them some slack.
Regardless, it's becoming clearer that we are in a recession and inflation will hurt.US bond yields which have normally been correlated to Inflation figures have taken a different route. Against expectations the yields have begun to drop. Essentially meaning if inflation levels continue to increase, you will be making less and less on the US yields. We have also seen NASDAQ jump an insane 1.7%. Which in stock terms is unfathomable. S&P 500 has recently set an ATH ( All Time High ). This is due to the Fed promising to keep lending with an interest rate of zero. Essentially the US market which leads the world, sadly, (like the way BTC is leading crypto again sadly) is surviving on printing more. The government or the FED to be more accurate print money and buy stocks. While also lending more money to business' and charges nothing in return. It leaves us in a place where the market no longer makes sense. P/E ratios are broken, Debt/Earning Ratios barely make sense and borrowing money seems better then having money on the books right now.
All in All most may have got here and thought what is this young man waffling about. Well look, The US market is showing strength when it really shouldn't. I don't believe this quantitative easing will work and if it does it's a matter of delaying the explosion of the bubble which is the American stock market. Also the terrible USD, our so-called reserve currency of the world, will continue to lose value. So what is the solution you may ask? Well the truth is there may not be one. The new normal may just be extreme debt and overspending by governments, currencies no longer needing backing and Proof-of-trust is what we may rely on to keep the world economy working. History tells us that Trust especially in the hands of those with power, is almost always misplaced, and will sooner than later be broken. So until then we must diversify our portfolios and hedge against the risk of this likely scenario. What are the hedges you ask????
B T C. Love it or hate it. It is digital gold . Many will stop listening here out of pure hardheadedness. BTC is, like it or not, similar to gold in all aspects of Money storage or hedging against inflation. BTC unlike gold has a set supply which makes it deflationary in the sense that every year some is lost and some is burnt. Alongside this we are seeing more and more BTC be put away as a long term store. This will further increase its value long term as supply will continue to dry up. Some BTC is also being locked up in DEFI, whether that is to stake it or as insurance against a loan. All in all drying the supply of BTC. There is also the most important factor behind BTC's recent push. The Bitcoin halving. To explain this we must first understand how BTC is mined and what a block is.
We will quickly describe what a block is and how BTC itself works. In the BTC network a block is a digital book. It stores information about transactions which are made. Each transaction is stored on one block only. This information is stored permanently. As the block is online, no-one can alter the information, not even the coders behind BTC. Also, all information is public. Now let's talk about mining.
Like gold, In order to own BTC you must either buy it or mine it. Of course you may steal it but that's not nice. Now we will look at how to " Digitally Mine BTC". In order to Mine BTC you need to set up a mining rig which in layman's terms is a strong computer. Then it's a competition of who can solve the complex hashing problem associated with each 'block'. Whoever solves this first is the one who is rewarded with the btc.
Now we know what a block is, and how to mine one we will briefly discuss the supply of BTC. Satoshi the creator decided on having 21,000,000 BTC's. Each block which is mined the miner is rewarded with BTC. The prize for each block started at 50 BTC a block. Every 210,000 blocks the prize is halved. It takes approximately 10minutes to mine every block. This leads to the ''BTC HALVING''. This halving occurs every 3-4years. Current price stands at 6.3BTC. It's worth noting in terms of US value the price has increased at a dramatic rate. This is a result of BTC doing more than x2 every 4 years. Significantly more. This halving causes a sudden supply shock to the BTC economy. It then puts BTC in what us market nerds call a BULL market. Where essentially we expect BTC to increase in value. Similar to the US stock market which has been bullish for as long as I can remember. Sadly the BULL market doesn't run for as long as the US Stock markets one, However the gains are substantially better. With BTC doing x10 in a year becoming the normal. While other coins like ETH which is the second largest crypto by market cap doing as much as 40x. Smaller coins have seen x100 in some and x1000 in others. We will avoid discussing such coins.
Regardless, this has made BTC a very good investment for some. It's made a lot of people rich and it will continue to do so. Yes it may be extremely volatile, with drops of 40-60% to be expected. You cannot ignore its long term value. It will rise. A lot. The S&P 500 which was the old hedge will go to shit and if it doesn't 5-10% a year isn't that appealing is it? Long term BTC has proven to be the best hedge and In my opinion is better valued than the bubble which is the US stock market. I also believe in buying gold as a hedge. All in all we MAY see somewhat of a super cycle with this terrible US mess of a market which is slowly unravelling. 2020-2021 will have movies about it. How so many profited from Covid crash and the market crash which is approaching. Meme stocks and crypto will feature. Be a part of it or forever regret it. Anyways enjoy the read. I hope i didn't go too off topic.
