Hyperinflation and rent control: the telltale signs of 2020 economic hardship haunt many nations

If history serves us well, 2020 is likely a harbinger of a long and terrible economic depression in a myriad of countries around the world. Over the past year, economists and analysts have been discussing how the US economy and the US dollar are losing global dominance fairly quickly. While some analysts believe the old adage “could never happen here,” many economists expect increased rent controls and hyperinflation to devastate the United States and many other powerful countries.

Countries that allow massive stimulus injections will face severe economic implications

The coronavirus outbreak was a great excuse for the global banking cartel to mint more bills of exchange than any other period in history. In the United States, Americans saw $ 9 trillion in stimulus injections, but the Federal Reserve’s 2020 pump barely stirred the masses. It is estimated that in 2020 alone, the United States created 22% of all dollars issued since the nation’s inception.

Furthermore, the United States is not the only country to see huge amounts of stimulus packages related to Covid-19, as countries like Japan, China and the European Union have also injected trillions into the hands of the private sector. This massive amount of money creation has led economists to believe that a combined effort of rent controls and unruly hyperinflation will cause significant stress to countries like the United States, as well as fuel a fiat collapse.

A seekalpha.com analyst recently said that he wholeheartedly believes the US is going into hyperinflation. “The deficit-to-disbursement ratio exceeds 60%, above the hyperinflation threshold of 40%,” the analyst wrote three weeks ago. “Q2 2020 GDP fell 31.7%, but will improve in Q3 2020. Delinquencies are rising for corporate debt to record levels. [And] the US dollar will lose value due to extremely low interest rates and QE, ”he added. The author also believes that gold in precious metal is “the only safe haven”.

Balance contributor Kimberly Amadeo ran an editorial on a possible dollar crash and “what to do if it happens.” Amadeo insists that if the dollar’s value plummets significantly, “anyone who holds dollar-denominated assets will sell them at any cost.”

“This includes foreign governments that own US Treasuries. It also affects foreign currency futures traders. Last but not least, it will affect individual investors, ”Amadeo further stressed. Balance writer continued:

There must be two conditions before the dollar can collapse. There must be an underlying weakness in the value of the US dollar and there must be a viable alternative. In other words, there must be a reason people are fleeing the dollar and there must be somewhere to go. Otherwise, the dollar will remain the global currency of the world. Most international contracts require a payment in dollars, which also increases its stability.

History repeats itself for those who don’t learn from mistakes

A number of people believe that the United States is specifically following a similar path to that of the Roman Empire centuries ago. During the third century BC, up to the imperial era, Roman officials discovered how to decrease the purity of the minted coin. By making the coins much lower in value, the Roman government could spend more. Modern central banks and the US Federal Reserve have created a process that makes the purity devaluation less obvious to the ordinary citizen. However, many other countries throughout history show that the scheme will not last forever and eventually the fiat shell game will end badly.

There are already many modern examples of inflation crushing a country’s legal tender to the point of being nearly useless. Steve Hanke, a professor of applied economics at Johns Hopkins University, noted that the definition of hyperinflation is essentially an inflation rate above 50% over a period of a month or more. Furthermore, thanks to the Covid-19 epidemic, politicians in various countries have issued controls on rent and evictions. This means that if you live in a region with rent controls, landlords cannot raise the rent on tenants and, in some cases, governments like the United States have imposed eviction bans this year.

Early examples in history show that a combination of rent controls and hyperinflation has been disastrous for many economies around the world. For example, in Weimar Germany in the early 1920s, rent control and hyperinflation devastated the German papiermark, the currency of the Weimar Republic. The Weimar crisis caused significant civil and political instability in the country. From August 1945 to July 1946, Hungary also suffered from hyperinflation, as the pengő inflation rate rose to 207%. During the month of August 1946, the new Hungarian currency, the forint kept the monetary infrastructure stable.

During 1992 and up to 1994, Yugoslavia saw inflation levels rise and purchasing power destroyed. The country saw the highest inflation rate ever, climbing to 313,000,000% over a 30-day period. Fast forward to the spring months of 2007 in Zimbabwe until November 2008 when the Zimbabwe dollar underwent hyperinflation. The country has never been the same since, as the Zimbabwe dollar was abandoned in April 2009 and demonetized in 2015. Currently, hyperinflation is wreaking havoc in Venezuela as well, as the sovereign bolivar’s monetary devaluation has ruined the currency.

Hyperinflation began in Venezuela in 2016 and surpassed 1,000,000 percent by 2018. The following year, the bolivar was weighed on a scale rather than counted, and inflation reached 10 million percent. Data from the Central Bank of Venezuela (BCV) reveals that between 2016 and 2019, the bolivar inflation rate was 53,798,500%. Of course, many other South American countries are also suffering from the economic recession of 2020. In addition to Venezuela, countries such as Brazil, Nicaragua, Peru, Argentina and Bolivia also face dire economic consequences this year.

In addition to gold, many people think digital currencies such as bitcoin (BTC) will thrive during possible economic fallout. This week, the market valuation of the crypto asset surpassed the market capitalization of the world’s largest banking giants. Globally, the market capitalization of bitcoin (BTC) has surpassed the $ 350 billion range, making it larger than banks like JPMorgan Chase USA, ICBC China, BAC USA, and CCB China.

Hyperbitcoinization

While Balance author Kimberly Amadeo said there must be a viable alternative, cryptocurrency advocates think the alternative could be bitcoin. Indeed, while dominant currencies like the USD and others suffer from rampant inflation, advocates of cryptocurrencies believe the world may experience hyperbitcoinization.

“Hyperbitcoinization is a voluntary transition from a lower to a higher currency and its adoption is a series of single acts of entrepreneurship rather than a single monopolist playing with the system,” explained the creator of the term ‘hyperbitcoinization’ Daniel Krawisz. in March 2014.

No one can be certain that an event like hyperbitcoinization will happen, but bitcoin (BTC) has been the best performing asset over the past decade, outperforming every stock, equity and commodity under the sun. Even in 2020, as the global economy shook, BTC and a number of alternative crypto assets again performed better than anything the world has to offer in terms of investment performance.

BTC gained 154% against the USD over the past 12 months, and Ethereum (ETH) gained 356% over that time period. In the past 30 days alone, BTC jumped over 40% while ETH jumped 44%. With well over 7,000 cryptocurrencies in existence and worth over $ 536 billion today, it is quite evident that compared to fiat currencies, cryptocurrencies have been a viable alternative.

Despite these facts, Balance editors and Kimberly Amadeo warn that bitcoin is “unlikely to replace the dollar as the new world currency.” Amadeo’s editorial discusses notions such as investing in foreign equity and mutual bonds, having cash and buying gold and precious metals if the US dollar shows signs of collapse.

What do you think about the possibility that countries like the US will suffer from hyperinflation in the future? Do you think cryptocurrencies are superior in a world of collapsing fiat currencies? Let us know what you think in the comments section below.

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