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Experts from the United States and Australia predict deflation

April 24, 2020

Many Bitcoiners believe that “unlimited printing of money” will lead to hyperinflation and a significant increase in BTC prices this year Experts from the United States and Australia predict that deflation is more likely.

The Reserve Bank of Australia, ING Bank, the New York Times and UBS are only a handful of organizations They believe that deflation could be a result of the drop in oil prices and a product surplus due to the drop in demand caused by the closings.

This is in contrast to the amount of “Money Printers Roaring” who believe that this year’s “Unlimited Quantitative Easing” will inevitably lead to hyperinflation and increased demand for Bitcoin with a fixed supply of only $ 21 million.

Experts from the United States and Australia predict deflationExperts from the United States and Australia predict deflation

A new Paxful survey of 500 cryptocurrency users found this Over half of Bitcoin holders in the U.S. They see cryptocurrency as a hedge against inflation.

Money printer goes brrrr

Cryptanalyst Plan B argues that money printing benefits BitcoinThe stock-to-flow pricing model is based on halving the block reward in May, lowering Bitcoin’s supply rate and increasing the price. Bitcoin’s annual inflation rate after halving will be 1.8%, while gold will be 2.5%.

“A deflationary moment”

It is interesting to note that US inflation even fell 0.4% to 1.5% in March, and many believe that inflation will only go down from there. Neil Irwin, business correspondent for the New York Times, wrote that this week The negative oil price is a sign that the world is in a “deflationary moment”.

“”The Covid 19 crisis is an extraordinary deflationary shock to the economy, causing the inactivity of a large part of the world’s productive resources.“he wrote.

In the case of oil, this is because demand has dropped off a cliff, resulting in product surpluses and negative prices. He argues that similar supply and demand effects will be seen across the economy. Demand has dropped everywhere, from restaurants to airlines, sports stadiums are empty and 22 million workers have become unemployed.

“All of this points to a deflationary collapse – an oversupply of goods and services and thus a drop in prices – that surpasses everything that has been seen in most people’s lives.

ING is also going negative

ING Bank international economist James Knightley has made a similar comment, arguing that the collapse in energy prices and rising unemployment will soon produce a “negative CPI” (consumer price index).

In his article, “USA: Deflation is on the way,” he noted that expectations that quantitative easing (QE) would lead to inflation “after the Federal Reserve’s QE1, QE2, and QE3 programs” have not been confirmed became the global financial crisis. Suggested that The money of the money printer would probably be used to support financial assets instead of going into the pockets of consumers.

Knightley cited the March Federal Reserve meeting minutes, suggesting that despite the pressure of money and the reopening of the economy, “inflation is likely to slow”.

The Reserve Bank of Australia announces deflation

The Governor of the Reserve Bank of Australia, Philip Lowe said in a speech this week that the country is facing the biggest blow since the Great Depression and deflation is likely to be expected in the June quarter..

“The sharp drop in oil prices combined with the introduction of free childcare and the postponement or reduction of some price increases means that headline inflation is likely to become negative at the end of June. If so, it would be the first time since the early 1960s that price levels have been falling for a full year. “

The RBA turned on the money printer for the first time in its history, but recently announced this to the national ABC network The incredibly low inflation rate in the decade after the GFC was a good indication that inflation was an unlikely outcome.

It is supported by UBS chief economist George Tharenou, who said that oil prices, falling rents and desperate retail discounts will drop the Australian consumer price index due to low consumer demand. 1.5% in the next three months.

Bitcoin is still a good hedge against inflation

Plan B might be right that Bitcoin is a good hedge against inflation. After all, Bitcoin is already used for this purpose in countries such as Venezuela and Zimbabwe, where hyperinflation occurs. Arcane Research has also released research that indicates that demand for LocalBitcoins in Argentina has just hit an all-time high, partly due to rising inflation. And it’s hard to argue with those who point out that the purchasing power of USD 1 has decreased by 99% in the last century.

However Although bitcoin can be a good hedge against inflation, experts believe it is unlikely that there will be strong inflation, at least in the near future..

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