Inflation Hits its Highest Point Since 1981

The CPI report that came out this morning put inflation at an 8.5% increase from this time last year. Neither this post nor any other on cryptofal.com should be taken as financial advice. It is not.

The numbers are in for March and it would seem that inflation is almost as bad as we thought. The CPI for march indicates that inflation has hit 8.5% or the highest inflation rate since 1981. We have seen its effects in grocery stores and especially at the pump where the average price per gallon in the US jumped to $4.33 a gallon. This is not great news for the average American but they are saying that it could start to come down a bit in the coming months.

This can be attributed to the fact that gas prices are starting to come down a bit at the moment and the fact that interest rates are expected to continue to increase. This will also combat the rise of inflation because it will disincentivize people to spend more over the coming months.

The last time the fed raised interest rates hikes were in 2018. Lower interest rates encourage people to spend more so when they have raised it has the opposite effect. This will bring the demand for goods down as well as the prices.

This will also lead people to look for hedges against inflation for the time being as well. The stock market has rebounded from yesterday’s sell-off as well as Bitcoin has made a bounce back as well. People have always made the comparison of BTC to gold as an inflation hedge. This is because, like gold, BTC has a fixed supply. The benefit that it has over gold in terms of a hedge is its ease of transferability and the ability for investors to buy portions of shares instead of shelling out the entire amount a share costs.

The White House is also in damage control mode and trying to blame the high inflation numbers on Russia for starting the war in Ukraine. While there is some basis for the rise in oil prices it is not the full story of course. Trillions of dollars were printed for covid relief and the Fed chose not to raise interest rates on consumers in those challenging times. This is what really led to what we are seeing now as everything is coming together all at once. There are many macroeconomic factors that attribute to this so to blame just one thing does not do citizens justice.

Inflation is always made out to be something scary but it is also a sign of a strong economy. A healthy economy generally sees inflation of around 2% per year. While these numbers are the highest in the last 40 years the Fed will do what it can to slowly bring these numbers down as it did with the stock market in 2008. To combat the current rise we can look to alternatives like Bitcoin that are still in their infancy but are gaining a lot of traction as a treasury asset. As all of the tokens have not yet been mined and it is the best performing asset of the last ten years it is poised to be a great hedge. The only drawback is volatility but we should also remember that prices will stabilize as more are put into circulation and the market cap continues to grow.