The US Federal Reserve met yesterday, Wednesday 27th January, for the first time this year.
High on the Financial Reserve agenda; How to keep inflation from spiralling out of control once the economy re-opens.
2020 was a very challenging year for all economies with the American economy alone pumping trillions of dollars into their financial system to keep the people somewhat afloat.
With more than a million people a week filing for first-time unemployment claims, the government keeping businesses closed in order to keep the virus under minimal control, and a recently signed $900 billion relief bill that was passed as one of Trumps final acts, the Federal Reserve has already stated that it could be years before interest rates are raised.
Top economists are predicting a very challenging time ahead for the US economy, more challenging than we have seen in the US central banks 108 year history. This will be a crucial time for Bitcoin (BTC), the world’s top performing asset of the decade, as a possible inflation hedge.
Lawrence White, economics professor at George Mason University has stated,
“It’s not just the US inflation that people move into Bitcoin to avoid. There are bullish markets for bitcoin in Venezuela and Lebanon and Argentina – places with really high inflation. I don’t think the market for bitcoin shows any close relationship to month-to-month US inflation figures. So people who are holding it as an inflation hedge are thinking longer-term than that.”
It has been suggested that due to so many Americans now on the unemployment list, essentially inequality will rise. With low interest rates, investors are looking for high yielding and safe assets that produce high returns.
“It drives up art, it drives up cryptocurrencies, it drives up gold, it drives up everything. Whether or not you this it’s a bubble goes around how likely you think real interest rates will go up.” – Beckworth.
The Federal Reserve stated at the meeting that they saw economic activity moderating in the US:
“With weakness concentrated in the sectors most adversely affected by the pandemic. The ongoing public health crisis continues to weigh on economic activity, employment, and inflation, and poses considerable risks to the economic outlook.”
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