Wherever I look, warnings keep popping up about the imminent danger of massive inflation. Central banks and governments around the world keep quiet about it, but economists, analytical experts and independent financial media do regularly report on this imminent danger. Here's the latest news from my home country, The Netherlands, on that issue.
Image by Paul - source: Flickr
First let's briefly talk about money. Money is never really "real", it doesn't really matter if a currency's value is backed by something real, or even if it's made from something real, like gold and silver coins. Money is more like an agreement, traditionally based on trust; the value of my ten dollar bill is only backed by trust, by the belief that I can get ten dollars worth of goods from a merchant, who also beliefs he or she can get ten dollars worth of goods for that same bill. In our current financial system, that's been around for hundreds of years, that trust is created and maintained by the government, mainly through taxation. Government can keep up demand for their "legal tender" (government approved money) through the mandate that taxes are payed with that legal tender. Taxes, my anarcho-capitalist friends, are the main reason why your dollars, euros, yuan and yen are worth anything at all...
Anyone who hasn't been hiding under a rock lately knows that the international markets have been flooded with new money. And you should also know by now that new money is created through new debts; the Federal Reserve, the European Central Bank and others have kept interest rates close to 0 percent to stimulate the markets. Almost all that new money has gone to the stock markets, which is why the stock market indexes have reached all-time highs, while real economies aren't doing too well. The rising stock markets have been an excuse for governments to keep saying that everything is just fine, that the economy is doing great, while citizens everywhere feel the rising costs of living; the bill presented at the registers in grocery stores have grown steadily, and faster in the period after the 2008 world financial crash. Well, everything is not fine; nothing has fundamentally changed since that last crash and the next one will be much more severe.
Governments, banks and corporations know all this, and are preparing for that next crisis. It will again be a "credit" crisis, just like the last one, and "credit" is based on the Latin word for "belief" or "trust"; just to repeat that all this amounts to a crisis in trust. The news that's shared in the below linked video, is that a large Dutch pension fund has sold 10 percent of their bonds, and invested 5 percent of their portfolio in gold. Recently an Australian pension fund has done the same, but invested part of their portfolio in bitcoin, which is seen as digital gold. Now, why is this so remarkable and important? That's because since 1971, when the U.S. Dollar abandoned the gold-standard, gold has become the enemy of central banks around the world. Gold wasn't the world reserve currency anymore, the dollar took that role. That's why the Federal Reserve can print so much dollars, why public and private debts in America have been able to rise to the ridiculous levels we see now. Here in The Netherlands much of the collective debt is in private debts as well; we have a record number of mortgages here, one of which is my own.
In the video Dutch investor, writer and reporter Willem Middelkoop, shares the story of another small Dutch pension fund that tried to allocate a percentage of their portfolio to gold years ago, and how that fund had been ordered by the Dutch Central Bank to not do that. If you've ever wondered why governments are so fiercely anti bitcoin, you now know; it's the same reason why they're so against you owning any real gold. Gold prices have spiked recently, which is yet another sign that the effects of the insane money printing are just around the corner. If you ask me which is a better hedge against inflation, bitcoin or gold, I honestly don't know. In the long term I'd say bitcoin, but in the short term I really don't know. What I do know is that bitcoin is still very young and that up until now it has followed the regular stock markets closely; when they crash, bitcoin will likely crash with them. But since 2020 and 2021 have been the years that big institutions really started to see bitcoin as a valid asset, maybe the next one will be different... We'll just have to wait and see..
Massive Inflation, Currency Debasement Cannot Be Ignored Any Longer | Willem Middelkoop
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