2022 - The Year of Global Inflation
Due to the massive Quantitative Easing (QE) activities of governments, the fiat money has been losing its trustworthiness and purchasing power. With the increase in the Covid-19 cases around the globe, the countries closed their borders and the whole world economy went through the side effects of the halt in the world trade.
The primary solution being implemented by the governments was to print more money to distribute the people. Though it was one of the most effective ways to cover the side effects of Covid as well as corrupted / unsustainable monetary system, the printed money gave birth to rise in prices.
From Developing Countries to Developed ones
The wave of inflation does not seem to be a local trouble to be fought. Starting in the "developing" countries, today we are witnessing a similar cases in the well-developed countries. The Butterfly effect of the inflation is likely to be more visible and bothering in 2022 due to the rising prices of manufacturing and the increase in the price of fuel.
Basically, the production price + expenses on transportation + profit = the price for any commodity. While the luxury ones were always beyond the reasonable threshold, the increase in the price of life-sustaining food (sugar, salt, flour etc.) and the increase in the price of rent will trigger an expectation from people to get paid in more money. However, this is the point that the ungovernable inflation monster ruins the balance of local economies. Followingly, the domino effect is enough to let global economy collapse...
In this chart, the inflation rates in G20 countries are compared in terms of the rates with the previous term. What I can see from the chart is the upcoming double digit era for the whole fiat currencies.
Can Interest Rates Cover the Inflation?
I do not think the governments would like to raise interest rates that may end up with slowing down the economy due to the money being kept in the bank accounts. Even though there will be a pressure from people to save, at least, their purchasing power against inflation, the interest rates do not seem to be compatible with the inflation rates.
If people see that their money is becoming useless, where will they put their money to get higher interest rates and hard cap assets?
Crypto, commodities, houses, lands and cars. However, there is no way for money to be stored in the bank account for ridiculous number of interest rates against the growing inflation all around the world.
All eyes on FED
Even if they choose to make it symbolic, I expect an increase in the interest rates for USD by FED. Since the raise in interest rate will bring up less dollar in circulation, a stronger DXY and weaker Crypto make a lot sense for me.
Though this is an "effective" way to deal with the inflation in the short term, there is no way to cease the flowing money into crypto because of the unsustainable nature of the interest - inflation relationship.
Note: Contrary to what we know/ believe about the QE by FED, the facts are mind-blowing. Please check the truth about the money printed by FED the post by taskmaster4450le. Thanks @deepresearch for the insight.
Commodities and Crypto will be the shining stars of 2022 with the massive increase in the prices. The governments will be in search of ways to cope with the inflation in the globe but it already became an unstoppable fact in our lives. The effects of pandemic and money-printing will be more visible in the next year.
- Will crypto be secure investment?
Obviously not impossible in a global inflation case.
Posted Using LeoFinance Beta