40% of United states dollars in existence were printed in the last 12 months: Is America repeating the same error of 1921 Weimar Germany?
On January 1, 2020, bitcoin was trading at $seven,160. The Dow Jones was too trading at 28,634 on January three, 2020, before crashing to 19,173 on March twenty, 2020, after the coronavirus pandemic broke out in the United States. States and the Federal governments immediately close downward the economy and millions of people lost their jobs.
Every bit part of its attempt to stimulate the economy, the U.Southward. government issued stimulus checks to millions of employed Americans. Where did the money come from? The authorities had to borrow by selling its debt in the form of U.South. Treasury bonds and other types of securities. The afterward the bonds are sold, the Federal Reserve gets to work and starts printing coin.
But money printing is not new. The Federal Reserve has been press money to pay for almost $29 trillion in U.S. debt. However, what’s new is that the 40% of Us dollars in existence were printed in the last 12 months solitary.
What is so ironic well-nigh this number is that just 2 years ago, Federal Reserve reported that forty% of Americans don’t have $400 in the banking concern for emergency expenses, according to a written report from ABC News. The 2019 Federal Reserve survey finds that almost 40% of American adults wouldn’t be able to cover a $400 emergency with cash, savings, or a credit card accuse that they could quickly pay off.
The United states of america regime has been press massive amounts of new money. On January half-dozen, 2020, the Usa Federal Reserve had around $4 trillion dollars. On January iv, 2021, the number increased to $half dozen.vii trillion dollars. Coin is usually a medium of modify to facilitate the sale, buy, or merchandise of goods between buyers and sellers. Even so, since there is no productivity (good and services) to back up the trillions of dollars currently in circulation, printing more money doesn’t necessarily increase the economic output (productivity), information technology only increases the amount of money circulating in the economy.
Who cares? You may ask. Information technology leads to aggrandizement and devaluation. Too much money in circulation chasing the same amount of appurtenances leads to aggrandizement. For case, inflation rose 0.8% in Apr and 4.2% on an annual footing, the highest spike since 2008 driven in part by a huge increase in food prices and others. The touch of inflation can also exist seen in stocks and cryptocurrencies.
Retrieve the iii stimulus checks issued to millions of struggling Americans? Instead of spending the money on food, savings, or paying off debts, some people invested their stimulus checks in stocks (GameStop, etc.), and cryptocurrencies similar bitcoins further driving upward their prices.
The other problem with the Fed printing besides much money is that it leads to the debasement and the devaluation of the dollars. What the Fed is doing at present has been tried throughout history. The outcome is always the same. Take, for example, Germany. Between June 1921 and Nov 1923 in Weimar Frg, the highest monthly inflation rate rose past over 30,000%. Zimbabwe is another country with hyperinflation.
In the video beneath, Jake Tran takes us on a journey through the history of countries that have tried to impress their way out of the economic crisis only to notice themselves in deeper economic woes. Jake also added that the reason why we haven’t seen inflation is considering the amount of money beingness printed is only one of the factors that contribute to inflation.
To get inflation, Jake explains, we need:
Industrial Output: How much “stuff” an economy makes
Employment: Also much employment leads to employers fighting over workers, which leads to higher wages, which leads to higher prices
The Money Supply: More than coin when an economic system is producing the same amount or less stuff equals higher prices
Velocity of Money: If money is exchanging hands, and if then, how fast is it exchanging hands.
Hats off to Jake for putting this video together. Savour!
1921 Weimar Frg
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