Saad Ullah
Alarming Situation
The alarming situation was pointed out by social media crypto activist Dennis Parker. Crypto enthusiasts have, for years, pointed out that printing fiat money is a fundamental issue where the central bank can print and float money that has no backing. The value of the currency they hold is manipulative and subject to the whim of the government. On the other hand, cryptocurrencies work in a different manner. The digital tokens’ value is determined purely by supply and demand in the market. With limited tokens that will ever be produced, cryptocurrencies also form a hedge against inflation.
According to Parker, the move by the United States government shows that it is the perfect time to invest in cryptos as with the high amount of money injected in the market, the value of the US Dollar is sure to be affected. Globally, financial advisers and technical indicators are all pointing towards a looming financial crisis that cannot be averted. Former Bank of England Governor, Mervyn King himself pointed out in an International Monitory Fund meeting last weekin which he said that the world was “sleepwalking” into a recession that would be far more worse than the world witnessed in 2008,
By sticking to the new orthodoxy of monetary policy and pretending that we have made the banking system safe, we are sleepwalking towards that crisis,
Quantitative Easing
The Federal Reserve has started an initiative, known as Quantitative Easing. Under this plan, the government is buying up bonds in order to promote spending by the people. For this, the government needs money in its reserves. The fiat based finance system simply allows the Federal Reserve to print more money and buy the bonds. This has resulted in the printing of more than USD 210 billion in a month. At USD 148 billion, the total market capitalization of Bitcoin (BTC) is dwarfed by the newly minted US dollars.
This has affected the balance sheet of the U.S. government also. Prior to this event, the balance sheet stood at USD 3.77 trillion. Now, it is hovering around USD 3.97 trillion. The U.S. government itself estimates that the balance sheet will bloat to USD 4.7 trillion by 2025.
With a higher level of inflation and business facing uncertainties during recession, people tend to save their wealth in assets and commodities. Precious metals such as gold and cryptocurrencies are a perfect tool to save money as their supply do not inflate like fiat.
Saad Ullah
