Central banks, interest rates, devaluating Fiat currencies and hedging against it for Gold and Bitcoin

Central banks, interest rates, devaluating Fiat currencies and hedging against it for Gold and Bitcoin

By Djordi | DJCrypto | 2 Feb 2020


Central banks around the world (FED, ECB, etc.) are lowering their interest rates lately and Bitcoin could be a good hedge against this (Gold and Silver for example can be a good hedge as well and these two are rising in value). The narrative “store of value” seems to be gaining ground and people are showing more interest in things like Bitcoin, Gold and Silver. Even central banks are buying a lot of gold and that should say something to you. They are losing confidence in the US dollar, Fiat currencies and the stock market. They are starting to hedge against it by buying gold. Maybe they are buying Bitcoin as well ? Here is a graph showing that central banks are buying gold and this could well continue in 2020 !

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More and more countries are starting to hedge away from the US dollar, because the FED policy of printing money and lowering interest rates is not for the benefit of the economy in the long run. Europe is also having problems and they keep on printing new money out of thin air as well. Their interest rates are even negative. This means that banks have to pay the central bank for the excess reserves they keep at the central bank. They try to stimulate banks to lend out more money to consumers and businesses. In turn this could well lead to banks asking you for a fee whenever you want to deposit your money, so that they balance out the losses they make by keeping excess money stored at the central bank. By lowering interest rates the Fiat currencies are getting cheaper. It is kind of becoming a war of currencies, because if your currency is cheap, it will be more interesting for foreign countries to buy your products (export should rise normally). At the same time import will become more expensive and this would lead to inflation, because prices have to rise to meet the extra costs of importing goods. We see with the US, China and Europe that this devaluation is taking place and this might continue in the near future.

What the FED and ECB are doing (other central banks do it as well) is trying to boost the economy. But what about Trump screaming on TV and Twitter that the US is doing so great in terms of economy, jobs, purchasing power ? Who is lying in this case ? Why do you think all over the world central banks are desperately printing money and lowering the rates ? This is to try make money flow around which is better for the economy. This means that economy is actually not doing so well ? Either way since the crisis of 2008 things have been going for the worse and stock markets have been artificially pumped for years and years (still going on by the way). All this is going to collapse one day and it will be smart to hedge yourself against this by going into Bitcoin, Gold and other assets.

The FED is printing quite some money lately. They do this to buy government bonds and securities to try to give the economy a boost. Apparently on Wednesday the 18th of September 2019 they printed 75 billion for the banks, because there was a liquidity problem. After this they have printed more money out of thin air, so something is going on behind the scenes.

As a consumer this is not looking good. You will see prices rise for buying food, drinks, etc. Furthermore banks might well ask for more fees and charges. You might think that borrowing money will be interesting, because rates are so cheap, but an excess of loans will hurt the economy in the longer run. What if the central banks decide to higher the interest rates again ? Looking at the debts that countries have, it is unbelievable that they can continue like this and not be punished. Can you imagine that if you have a loan of let us say 5000$ and you do no pay this back, they will keep on hunting you for the rest of your life. Governments have a free pass to get loans of billions and billions and they cannot afford to pay it back ! No one cares about that !! Is that normal ?? No of course this is not normal and one day we will see this collapse.

Banks and governments are now thinking about creating digital currencies, but do we really want to trust these organizations after what they have been doing for a long time ? Is it not better to have a decentralized currency like Bitcoin that has a fixed supply and is showing promising signs that it can be trusted ?

This is not financial advise and I am not a financial adviser. Do your own research and make your own decisions !


Djordi
Djordi

I am Djordi van Kampen and I live in France. 2017 was the year I learned for the first time about cryptocurrencies and I am intrigued by what it can accomplish in this world, for the better of course !


DJCrypto
DJCrypto

Crypto enthusiast that would like to share his experience in the market in terms of investing and trading. Also travels a lot and likes photography and minerals.

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