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📺 Useful Vids 📺
– TIMESTAMPS –
2:01 Current Conditions
4:32 Global Debt
10:38 GDP Growth?
17:28 How to Invest?
⛓️ 🔗 Useful Links 🔗 ⛓️
Nouriel Roubinin Opinion: https://www.theguardian.com/business/2021/jul/02/1970s-stagflation-2008-debt-crisis-global-economy
Mohamed El-Erian Interview: https://www.youtube.com/watch?v=ZcnSPDKvPeA
Steve Hanke Interview: https://www.kitco.com/news/2021-07-17/Record-inflation-levels-are-coming-with-no-growth-the-worst-of-all-worlds-Steve-Hanke.html
Wiemar Republic: https://www.history.com/topics/germany/weimar-republic
Food Inflation: https://www.wsj.com/articles/youre-paying-more-for-foodand-you-might-not-know-it-11626267671
Container Shipping Prices: https://www.wsj.com/articles/container-ship-prices-skyrocket-as-rush-to-move-goods-picks-up-11625482800
🤔 How Are Things Currently? 🤔
Fiscal spending skyrocketed in order to make up for lost production and the increasing unemployment. This took the form of stimulus cheques, income support and business grants.
Central Banks also flooded the system with money. Thankfully though, things began to turn earlier this year. While these measures were able to avert a dreaded depression. The real game changer was vaccines
This meant that we started to see increased economic growth which has buoyed the markets and lifted spirits.
💰 Massive Debt 💰
According to estimates from Moodys, Pandemic spending added *$32 Trillion* to global debt which currently stands at over $290 trillion. The highest level of debt since the end of World War 2! And, it’s likely to get even worse.
It’s also very cheap to borrow which means that governments are likely to want to take on more debt. Of course, this is risky because it will have to be paid back
📈 Inflation 📈
We just recently had the US CPI data for June come out and it came in at 5.4% – the highest level in 15 years.
Moreover, if we were to strip out food and energy and just look at that “core” number, the price increase has been the largest we have seen since 1991.
This inflation is mostly being driven by supply side factors. Given that Covid has crushed global supply lines, it means that there has been a massive increase in the costs of nearly all goods. This inflation is also not something that the Fed can effectively fight with monetary policy tools.
📊 GDP Growth 📊
GDP growth has been strong. This has also helped to fuel an increase in employment in the US and other countries.
However, despite this there are signs that Q2 GDP numbers are likely to be slower than Q1. There are already some indicators. Firstly, you had a surprising fall in consumer sentiment in July.
Then, you also have a survey that was conducted by the Wall Street Journal that polled a number of banks to ask them about their growth projections for the coming few quarters.
This is all because of the fact that the Delta variant is causing a great deal of trouble
😱 Stagflation 😱
The combination of low growth, high unemployment and high inflation is stagflation. This is an economic condition that blighted the 70s and made it a really tough time to live in them
There are many that think we could be heading to a new period of stagflation. A few of those include Nouriel Roubini, Mohammed El-Erian and Steve Hanke
This stagflation will also come at a time when we have some of the highest levels of government debt. We also have a situation where Fed policy is almost moot because rates are also near 0
🤔 How to Protect 🤔
There are very few asset classes that performed well during the 70s stagflation. One of the best known ones was of course the likes of Gold which is still seen as an inflation hedge even today.
Another really strong inflation hedge is Bitcoin. This is because it has a protocol defined supply limit which makes it scarce.
📜 Disclaimer 📜
The information contained herein is for informational purposes only. Nothing herein shall be construed to be financial legal or tax advice. The content of this video is solely the opinions of the speaker who is not a licensed financial advisor or registered investment advisor. Trading Forex, cryptocurrencies and CFDs poses considerable risk of loss. The speaker does not guarantee any particular outcome.
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