It brings uncertainty, sometimes chaos, and many flee forward by investing in cryptocurrencies.
Hello leofinance friends, I hope you are all very well. And are having a happy return to work. Today I want to talk to you a little bit about a fact that I have mentioned before in several posts, I am referring to inflation, and the current spate of global inflation, but since we already talked about the possible causes [poorly planned welfare policies during the pandemic and the unsupported injection of capital into the economy] and why many governments are actually taking advantage of it, I want to show you how it is already starting to be felt around the world and what it is causing.
Of course there is no better place to start than with the case of inflation in the United States, where inflation is causing the cost of food to rise at a rate not seen in over 40 years. https://www.bbc.com/news/business-59969864 and this is just one of the problems facing the U.S. economy this year, as shortages of basic goods are also forecast to continue. https://www.usatoday.com/story/money/shopping/2022/01/12/shortage-grocery-store-empty-shelves/9178100002/
Consequences.
The home nation of the free is facing a difficult time where divisions over a myriad of issues have led many to believe that what was once a conspiracy theory is now a possible reality, namely a new civil war within the American nation. Already many media and influential people have played with such a theory. https://www.nytimes.com/2022/01/06/opinion/america-civil-war.html
https://www.washingtonpost.com/opinions/2021/12/17/eaton-taguba-anderson-generals-military/
Of course I don't think this is going to be the case yet, as the American identity remains strong... but if the economic situation keeps getting worse, and governments keep pushing their power on a population used to freedom, then maybe it will. It could happen.
Inflation in Japan.
Although the overall inflation rate is only 0.5%, this is something new and even worrying in the Japanese nation, considered a model of economic development and economic stability, not for nothing is it the 3rd largest economy in the world, despite having a national territory of a fraction of the first two. This is so because in fact, in recent years Japan had experienced the opposite of inflation, Deflation.
Of course in this case it is not due to wrong economic policies, but to external factors, such as the global shipping crisis, which has made fuel and raw materials more expensive. Although the general population is not yet feeling the full weight of these increases, many are preparing for them. https://www.channelnewsasia.com/business/japan-households-inflation-expectations-hit-more-2-year-high-boj-2427391 while companies are already discussing how to pass on these increased operating costs to consumers in the interest of their business profitability https://www.reuters.com/world/asia-pacific/around-half-japan-firms-looking-pass-rising-commodity-costs-customers-2021-11-10/.
And already certain politicians are planning to capitalize on the situation to promote their agendas by proposing stimulus packages, which could very well increase inflation. It would certainly be an unfortunate setback for the Japanese economy, a global example of how to do things. https://www.reuters.com/world/asia-pacific/japan-pm-kishida-outline-policy-plans-after-strong-election-win-2021-11-10/
Inflation in the Middle East.
A proverbially unstable region for decades, centuries... and even some with a taste for history would say millennia, now faces a new challenge, inflation in many nations, recently I told you about the unrest in Kazakhstan due to social inequality and government repression, well today in Lebanon protests broke out with road closures and burning of public property due to the great discontent of the population, since only in 2021 the country experienced an inflation of 144%. This has undoubtedly deteriorated the living conditions of a population that has been tired of its ruling class for years.
http://www.xinhuanet.com/english/20220113/44d5c152400f4bc795a7fc1884fe3964/c.html
But it is not only Lebanon, Turkey, one of the most promising economies in the region, and a member of NATO and the European Union, has seen its inflation rise by 36% at the end of last year. In sum, the increase in food prices was almost 48% last year, something that will undoubtedly hurt Erdogan's authoritarian government in the next election cycle, and may cause a new wave of protests in the nation like those of 2016.
https://www.usnews.com/news/business/articles/2022-01-03/turkeys-inflation-hits-a-19-year-high-of-36
These are just two specific examples, but the figures for the entire Middle East are an average of 14% annual inflation https://www.eiu.com/n/threat-from-inflation-in-the-mena/, i.e., every year, people lose 14 of their purchasing power, no doubt worrying in the midst of the shortages that climate change and the global transportation crisis will bring. In a region historically plagued by violence, hunger and want are likely to bring only more violence and we are seeing the example.
Russia is trying to navigate between sanctions, and inflation.
Russia has been dealing with a worrying inflationary cycle for a couple of years now, and the recent global inflation epidemic has not left it unscathed, although the figures are not as catastrophic as some of the countries I have already mentioned, even so the government is mobilizing to take measures, although the usefulness of these measures remains to be seen. https://www.reuters.com/article/russia-economy-inflation-idUSL1N2R80E9
All this is happening at a time when Russia is trying to regain its status as a world power and gain political advantage on the world stage by threatening the world with a new cold war, taming troops on the border with Ukraine, a country with which it has been fighting a low intensity turf war for several years now, and now opening the possibility of placing missile bases in Venezuela and Cuba. https://actualidad.rt.com/actualidad/416781-riabkov-desplegar-infraestructura-rusia-cuba-venezuela
How they plan to do all this in the middle of an economic crisis, I really don't know, missiles, planes and tanks are expensive... extremely expensive. But it's Russia, you never know what they might do, as the great Winston Churchill said. I cannot predict Russia's actions, it is a riddle wrapped in a mystery inside an enigma'.
And finally Latin America, which has an average for last year of 10% inflation across the region, but an average indicates that some have more than that, and some less, an example is Colombia, which had 5.5% general inflation, but where food prices increased by 16% overall, and up to 30% in specific items.
There are also the obscene cases of the failed states of Venezuela and Argentina, but that is a topic for another post. With all this, we foresee a very busy 2022 in the region, especially with the left gaining ground again, which will surely capitalize on the mistakes of the current governments to promote their agendas.
And in all this, what do cryptocurrencies have to do with it?
Well, among all this chaos, we can see many companies and even governments betting on the future of cryptocurrencies, more than for the love of decentralization and economic freedom, they do it to protect themselves from the inflationary wave.
One example is Turkey, which aims to properly regulate the cryptocurrency market in its country, the 5th largest in the world, although many people were worried about the rumor that they would impose a 40% tax on profits from cryptocurrency business, the central government denied this, although it did admit that with the regulations, quite possibly, taxes will come. https://www.hurriyetdailynews.com/turkey-aims-at-safe-financial-base-for-cryptocurrency-market-170636 no doubt in the hope of capitalizing on an ever expanding market.
TCS, owner of Russia's largest online bank and the country's most popular broker, recently bought cryptocurrency-related services firm Aximetria. No doubt a sign that in politics there is confusion about what to do with cryptocurrencies, capital knows where to go to be safe. https://www.reuters.com/technology/russian-lender-tcs-buys-swiss-crypto-exchange-aximetria-2022-01-12/
A study conducted by VISA shows that confidence in cryptocurrencies as a means of payment has increased in several countries. Certainly the image of cryptocurrencies has improved a lot, but I believe that the explanation for the rise of cryptocurrencies in recent years is not only due to the advance of these, but to the evident failure of banks and traditional economic systems, which destroy the wealth of the people.
Recommended Bibliographic Reference
[1] quarter small businesses across nine countries plan offer crypto payments visa 2022-01-12
[2]Russian lender tcs buys swiss crypto exchange aximetria 2022-01-12
Its kind of hilarious when countries try to impose ridiculous taxes on crypto like your Turkey example.
Don't they know that any crypto company can go anywhere in the world? Just look at Binance. They are incorporated in Cyprus and doesn't have any headquarter office. Everyone works remotely. I think this is the way of the future.
You are right and I share your opinion.
thanks for commenting.