When the April jobs report came out, the results shocked many economists as the number of added jobs fell far below expectations. On top of that, economists underestimated the inflation rate. Unfortunately, it did not stop there. The economists underestimated the inflation rate in May and for a third consecutive time in June, where it jumped by 5.4% which is the sharpest rise since 2008.
As a result, prices of goods have increased, leaving Americans worried about the long term future. On the flip side, the mainstream media and the government thought it would be a good idea to gaslight the worrying signs with headlines like "The upside to inflation: rising wages" and "The cost of a 4th of July cookout is down $0.16 from last year". This is what Joe Biden had to say about the concerns of how much inflation a bunch $1+ trillion "stimulus" bills may cause:
Biden's statement has two notable flaws. Firstly, while wages will indeed rise, on the flipside, your savings will be worth less than they were before. In other words, inflation is a tax on savings.
Secondly, Biden doesn't really quantify by how much the inflation and prices will go down once we see the benefits of the spending bills. Inflation will rise no matter what if the federal government spends/prints out trillions of dollars willy-nilly. I assume Biden was arguing that when we finally see the benefits of the spending bills take place, will prices go down overall, not just after the initial inflation. However, Biden didn't really provide an thorough explanation on how that will happen and that does not instill confidence.
The federal spending bills in a nutshell.
We can see how historically, hyperinflation fell empires and put nation states into disarray. The Roman Empire collapsed due to a variety of factors such as excessive expansionism, political corruption, and yes, hyperinflation. The Roman denarius used to comprise of about 95% silver. However, over time, the silver composition of the denarius fell, devaluing the currency. By 270 AD, the denarius only comprised of 5% silver. The Roman Empire tried to put a cap on prices with the "Edict on Maximum Prices", but it was ultimately counterproductive. The empire continued to mass mint coins, exacerbating the inflation. Merchants largely ignored the edict via illegal sales or bartering.
Weimar Germany, Venezuela, and Zimbabwe also suffered from hyperinflation albeit under different circumstances. For Weimar Germany, it was due to the debt it accrued over World War I and the subsequent reparations it had to pay to the Allied Nations after that. The central planning of resources in Venezuela was inefficient and whimsical, leaving the government with little money left. Zimbabwe suffered from major declines of economic output, export earnings, and political corruption such as the redistribution of land from white farmers to inexperienced black farmers. While each nation had its own circumstances, ultimately the mass printing of currency was the cause for the severe reduction the purchasing power.
Regardless if it's the first millennium A.D. or the 21st century, mass printing money never ends well. With the Biden administration intending to spend trillions of dollars on "infrastructure" and social programs, I fear that history may be repeating itself. For crying out loud, the US senate voted to advance the "infrastructure" bill even though the physical bill has not even been drafted yet. On top of the lack of transparency, how much of that federal money will actually go to the everyday American? Or will much of that money be handed to the elites?
Debt-to-GDP ratio from MacroTrends.
While I initially got into crypto out of curiosity, I have grown a bigger appreciation for its benefits FIAT currency cannot provide such as fast transactions, DeFi, and for certain cryptocurrencies, privacy. There are other things I can invest in such as rare metals and they may be better investment hedges than crypto. However, I find the benefits of crypto more appealing. Transactions are quick and I can stake my crypto to earn some more. CeFi wallets offer pretty attractive interest rates. By owning my private keys on my Metamask and Guarda wallets, I am effectively my own bank and not at the mercy of a third party.
The value of crypto is very speculative, but unlike FIAT, certain cryptocurrencies like Bitcoin have a limited supply and will not fall victim to inflation. While the crypto market is extremely volatile like what happened after China cracked down on crypto mining, it seems that the overall confidence is rising. Currently, the Fear & Greed Index is neutral after it was strongly in the "Fear" range. As of me posting this, Bitcoin has risen to $41K. Overall, I'll continue to HODL and hope that my crypto holdings continue to appreciate.
