Know more about the largest print of money in History | American central bank has printed over $3 trillion in 3 ½ months to fight the crisis
Introduction
Amidst the pandemic stands a financial crisis fought by the world today. A letter to the investor noted that a huge amount of money was printed by The United States to fight this crisis in June. Is this the time to let go of all the paperwork and enter the realm of Bitcoin & cryptocurrency?
Dan Morehead, CEO of Pantera Capital states that “The United States printed more money in June than in the first two centuries after it was founded.” According to him, Pantera Capital understands that Bitcoin is our way out of the current situation.
From the year 1776 to the end of 1979 was not all, the U.S. budget deficit of $864 billion was larger than the total debt incurred, in May 2020.
UNDERSTANDING INFLATION -
when a country’s government starts printing money to pay for its payouts starts the journey of inflation. The two main causes for inflation is either an increase in demand-pull inflation or the money supply.
According to many experts, this has been the largest inflation period for The United States in world history. In face of the fear of inflation, there are predictions for consumer prices to deflate. A week before the incident at hand, Australia saw a dip where ABC News reported that 1.9% of consumer prices in the country dropped.
Many have wondered what would happen if the US printed more and the answer is inflation. Over time we have seen countries that have printed money leading to a period of raised prices. This, in turn, affect ordinary citizens, as their wages become worthless, daily goods would become expensive
COULD CRYPTO BE THE FUTURE?
The transacting costs are kept low in the case of bitcoins. This is because these transactions do not have any government involvement. Cryptocurrency is quick , economic & secure. It has global acceptance.
The main advantages here would be:
- Anonymity.
- The removal of a middleman.
- Transparent transactions.
- An easier trace of your audits.
- Giving the power to the common man.
A bitcoin is a constant fraction of the total 21 million coins out there. Last month the U.S. budget deficit — $864 billion — was larger than the total debt incurred from 1776 through the end of 1979.
BACK ON TRACK — The Pandemic and the US Economy.
Coming back to the topic at hand, the US Federal Reserve, the American central bank, has printed a little over $3 trillion in 3 ½ months. The impact of the pandemic on the economic results has been drastic.
Between the time frame of February 26th, 2020, and 10th of June 2020, the size of the Federal Reserve’s balance sheet went from $4.16 trillion to $7.17 trillion. Bonds were bought from financial institutions to flow this money into the economy.
The assets of the Fed went up by 12.6% and 10.6% during the weeks ending 25 March and 1 April 2020, this was when the highest increase in the money printed was seen.
THE CANTILLON EFFECT -
The 18th-century Irish-French economist, Richard Cantillon observed that if the money supply was increased in the form of silver & gold, the mining industry and people associated with it would bear its benefits first.
Similarly, stock prices drove up when the Federal Reserve printed $3 trillion and the Fed seems to have benefited first as well.
According to Jerome Powell, Chairman of the Federal Reserve, “The extent of the downturn and the pace of recovery remain extraordinarily uncertain… A full recovery is unlikely to occur until people are absolutely confident that it is safe to re-engage in a broad range of activities. The severity of the downturn will also depend on the policy actions taken at various levels of the government to provide relief and to support the economic recovery.”
With the conditions at hand, there isn’t much a central bank could do considering the damage done to demand.
Conclusion:
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