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Since “President” Biden “won” the last “election”, the economy has had some difficulties. Inflation is running rampant. It’s listed at around 8.5%, but the real cost of living for most people has gone up quite a bit more than that. With cash losing its value, you might expect people to invest their money in the stock market, hoping to keep up with inflation. This injection of cash would presumably inflate the value of the stock market. But the stock market has been dropping quickly, with the NASDAQ losing around 30% of its value so far this year. This has led many Democrats to criticize “President” Biden’s handling of the economy. And to demand more government spending. Simultaneously. Mysterious are the thoughts of Democrats…
I’ve never quite understood cryptocurrency, and have not invested in it. But one aspect of it that made sense to me was to protect oneself from the vagrancies of the fiscal policies of misguided politicians. The value of the dollar is at least partially dependent on the fiscal responsibility of whoever is in power in the American government at the time. If all your money is in dollars, and then Democrats are elected to office, your dollars will lose value.
But crypto is free from such concerns. It doesn’t matter how much money the government prints – the value of cryptocurrency is not affected by political winds the way national currencies are. And as more and more people become concerned about our economy, they would run to invest in crypto, which would then continue its remarkable increase in value over the past 10 years. Except that crypto has suddenly lost around 70% of its value so far this year. Which seems counter-intuitive.
So inflation is reducing the value of the dollar (at this rate, the value of your dollars will be cut in half in about 8 years – possibly much faster if the real inflation rate is higher than the reported inflation rate). As the dollar falls, people invest to try to keep up with inflation. But the stock market is falling. So people flee conventional markets and invest in crypto. But crypto is falling even faster. All at the same time.
I don’t understand.
I’m not a financial guy, and my understanding of all this is obviously extremely rudimentary. Although I suspect I may have a better understanding of finance (and perhaps a few other things) than some “Presidents”.
But still, I feel like I’m missing something big, here. I just don’t understand how these trends fit together.
Can any of our financial gurus here explain this to a novice like myself?Published in