Although I would love to change the title of this article, it brings to light an important potential use for a global digital currency. How will the price of digital currency be affected by a recession?
TRADITIONAL ECONOMISTS FEARING THE WORST, BUY BITCOIN NOWThe chief economist at HSBC, Stephen King, told clients that the global economy “is like an ocean liner without lifeboats.” He fears that another recession might be incredibly difficult, if not impossible, to recover from. He cited factors that many don’t consider when assessing whether a recession is likely, such as a collapse of the Chinese economy, which has seen a steady decline in recent quarters.
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If you bought now, and the recession hit, you might see a chain reaction of the price increasing. You would then be able to dump your Bitcoin holdings onto wealthier hands and better survive the recession. Or, for many of the things you need to do, you could simply spend your Bitcoin directly, it having increased buying power as people look to get away from a weakening dollar.
There are many ways to prepare for hard economic times. Unfortunately, in this day and age, saving in a bank is one of the least effective of them. Giving Bitcoin a try might just prove to be a strategy worth your time.
https://www.cryptocoinsnews.com/traditional-economists-fearing-worst-buy-bitcoin-now/I too wish the title were different. I still pay careful attention to world markets - a great indicator of impending trouble will be when the US increases it's bond rates, at that point (if... it happens), it will already be too late to exit the USD. Thankfully, I don't expect that to happen for a while. This would occur in an instance when nobody is prepared to lend to a Governments heavily in debt, the Government raises it's bond rate to attract more lenders to pay the nations outgoing expenditure. This may work in the short term; Government pays it's immediate debt, but bonds and deficits mean guaranteed increased taxes for it's citizens - which stifles productivity. The national debt is also larger, and the Government bond interest rate higher; The Government then pays a higher interest rate to repay an even larger debt! It's terrible finance policy, I'm sure nobody thinks it's sustainable long-term, and everybody is looking the other way. The best indicator economic performance, is to watch what the financial players, investors, and bankers are doing - they give away many tells when expert confidence is low, that are inconsistent with media narrative. These people will always want to get their own money out of the system before they tell the press to let everybody else know they should too! This has already been happening with Japanese banks, who are purchasing US assets and selling yen backed ones. Japan is in economic turmoil, possibly beyond the point of no return for the reasons described above - It's very tragic. I think the US can get it's act together, but not without short term hardship for welfare recipients and those on Government pay-checks (military included).
"When we broke the link between money and gold forty years ago, this removed all the constraints on credit creation. And afterwards, credit absolutely exploded. In the U.S., it grew from one trillion to fifty trillion... fifty-fold increase in forty-three years. And this explosion of credit created the world we live in. It created very rapid economic growth. It ushered in the age of globalization. But it now seems that credit cannot expand any further because the private sector is incapable of repaying the debt that it has already. And if credit now begins to contract, there is a very real danger that we will collapse into a new Great Depression." -Richard Duncan
Knowing that many people are not receptive to views of caution, I’ve decided instead to slowly condition people to be more open to such thoughts by gradually discussing ideas as the corresponding world events occur, but this may not be the most effective strategy to insulate as many people as possible. I think Digital Currency could be the vehicle that not only protects it's holders from external volatilities, but could work to stabilize world markets long-term.
I think that if a recession scenario like the one Mr Stephen King mentioned in the link occurs, that there would be a worldwide period of hyperdeflation for paper assets (such as stocks and bonds), as well as hyperdeflation for debt based assets (such as housing and automobiles). This environment of hyperdeflation will be mixed with an environment of hyperinflation for precious metals (gold and silver), as well as hyperinflation for basic commodities necessary for survival (such as food and energy). Shorting paper assets and going long on physical assets has been a popular, and very successful investment strategy for investors. Friends of mine who frequent ZeroHedge.com have also had much success with this strategy the last three years. I am not a trading expert whatsoever, but I think trading on news is far more reliable than 'technical' charts (fancy guesswork). I would make an fair guess that dominant crypto's would appreciate significantly at times when the USD is less favourable to hold. I also wouldn't put it beyond many Governments to introduce price freezes or fixed exchange rates as emergency measures (they don't work).
The awkward thing about it all, is that if such a scenario occurs, it will all happen very quickly. The positive thing, is that people have the ability to do amazing things, and if they can't get change at the ballot box to prevent another captain sinking the Titanic, they can solve problems themselves. Digital Currency is one such answer.
