The monetary policy of states and central banks is beginning to resemble madness. It is supported by the Modern Monetary Theory – the new religion of print and inflation fans. How will the crypts find themselves in all this?
USA: a giant on clay legs?
US President Donald Trump can brag about how strong the stock market is today, but he doesn’t mention the weakening strength of the dollar and the steroids with which the currency is constantly pumped.
The FED injected another 41 billion dollars into the markets last week alone. Since September 2019, the central bank has been taking measures to maintain high liquidity and allow banks to lend more, which however increases overall debt. TD Securities analysts believe that FED’s involvement in the repo market is not yet over. Today, the US public debt is as high as $23.1 trillion and is growing. It has increased by USD 4.7 trillion since 2017.
Economists see what is happening. Last month, the World Bank issued a severe warning, stating that the wave of debt in emerging and developing countries is growing faster than in any period of the last five decades and could end in another crisis. The IMF also reported that total global debt rose to $188 trillion in 2018, almost 230 percent of the world economy.
China: a rival making the same mistakes
To make matters worse, a similar approach to fiat currency also applies in China, where the government artificially pumps markets. The trade war that broke out between the Middle Kingdom and the US last year added spice to the whole process.
The United States won the Cold War because its economy was more efficient than the USSR. Will the rivalry with China end the same? Or will the two powers destroy each other, mainly by printing currency? Maybe the situation will ultimately resemble the Peloponnese war, when the two dominant Greek city-states (Athens and Sparta) fought against each other only to strengthen the third country (Macedonia) in the long run?
What kind of country will be Macedonia of the 21st century? Maybe the European Union? Doubtful, because it is struggling with its problems and is also printing the euro, taking part in this suicidal race. Or maybe Alexander the Great should be sought elsewhere?
The cryptocurrencies enter the stage
Bitcoin solves the problem of the modern economy by being the only form of currency with a truly finite supply that cannot be manipulated by any power. Blockchain itself does not need financial institutions and gives power back to the individual.
As Satoshi Nakamoto wrote more than ten years ago after the last financial crisis:
“The central bank must be trusted not to weaken the currency, but the history of currencies is full of violations of that trust.”
The strength of the cryptocurrencies combined with the invariability of the blockchain book meant that Bitcoin was actually the first independent currency in the world that was and is completely transparent and indestructible. So, will the new crisis lead to currencies going from the hands of politicians to the hands of citizens? Let us know if you think this is real.