Inflation continues to break distant records. L’collapse of purchasing power on both sides of the Atlantic bodes very well for bitcoin.
US inflation at 40-year high
Annual price growth is at its highest in 40 years. It was posted at 7.5% in January.
It seems relatively little said like that, but this inflation comes on top of that of previous years… It’s very simple, since the creation of the American central bank (FED) in 1913, the dollar has lost nearly 97% of his value.
In other words, a 1913 dollar had the same purchasing power as 26 dollars today. The prices have been multiplied by 26! Of course, salaries have also increased, but not as quickly. The average salary has increased by a factor of between 3 and 4:
Incidentally, this inflation has been partly compensated by the work of women and the fact that households are in debt for two to three times longer than at the time.
Anyway, let’s go back to 2021. Americans have seen prices increase by 7.5% inflation over one year. At this rate, the purchasing power of Americans will be halved within nine years. That is to say, prices will have doubled (+100%) by then.
We might even say within four years since inflation is closer to 20%. The average price of American houses, for example, has increased by 25% over one year. S&P stock prices also rose 26% in 2021.
In just one year, the purchasing power of an American has melted by a quarter for anyone planning to buy a house or a Microsoft share.
On the other hand, those who had all their savings in BTC (+66% in 2021), saw their purchasing power increase substantially, despite inflation.
Inflation at its highest for 24 years on the old continent
Europe is no exception. According to the latest figures from Eurostat, annual inflation was 5.1% over the past year. We are at the highest since 1997:
This inflation is largely explained by the rise in the price of energy, and in particular of gas, without forgetting oil, which is dangerously close to $100 a barrel.
Energy prices soared 28.6% once morest a backdrop of geopolitical tensions with Russia. Hence the drastic reduction in gas flows this winter, leading to inflation of 200%… Bearing in mind that 21% of electricity production in Europe is gas-fired, and that 40 % of these 20% come from Russia.
And this, even though Vladimir Putin offers Europe to pay for its gas in euros rather than dollars:
« The euro is quite acceptable as payment for our gas. It can be done, of course, and probably should be done. Mr. Putin said at the St. Petersburg International Economic Forum in June last year.
Even better, Moscow and Beijing signed a contract last week for 10 billion cubic meters of gas per year that China will pay for in euros rather than dollars. And yet, despite this exorbitant privilege served on a silver platter, the EU prefers to remain the vassal of the United States which would like to pass on to it the overflow of gas resulting from the production of shale oil.
It’s hard to say how long Russia will be able to turn off the tap. It is all the same a big shortfall which cannot be absorbed overnight by China. Anna Galtsovadirector of Russia and Caspian Energy at IHS Markit, thinks that ” the second pipeline ‘Power of Siberia II’ will not be completed until 2031« .
Inflation is rising but bitcoin is not?
Bitcoin has behaved in a very weird way this week. It fell sharply when the US inflation figures were published, which, moreover, turned out to be worse than expected.
US inflation came out at 7.5% versus 7.3% expected and 7% the previous month. And yet:
We observed exactly the same thing on February 2, when inflation in the Euro Zone stood at 5.1% once morest 4.4% expected and 5% the previous month. BTC/USD then dropped above $2000 in the followingnoon, only to bounce back two days later.
Even gold has unscrewed, which is paradoxical since the yellow metal and Bitcoin are supposed to be stores of value precisely offering protection once morest inflation. The explanation is probably that some think that this inflation will force the FED to raise its rates even faster than expected.
Serious mistake. Raising rates (to a level capable of lowering inflation) would cause the gargantuan debt to explode. The result would be a devastating recession…
There is no miracle. The debt can only swell, more or less quickly, which inevitably exacerbates inflation, like a snake cutting its tail. In other words, the Fed’s posturing is just a show.
Bitcoin is more than ever the asset that will shine as the masses realize that inflation is here to stay. The Bundesbank already predicts that it will be above 4% in 2022…
Bitcoin is no longer a “risky” asset. The giant fund Fidelity promises exponential growth comparable to that of Apple for this currency which has just been legalized by India and the Russia…
Journalist / Bitcoin, geopolitics, economy, energy, climate
