In recent months, inflation has soared all over the world, effecting almost every currency, as the US dollar is the world pegged currency and has soared to inflation rates of over 20%. In recent months, Europe and Australia have also noted dangerous levels of inflation near 14%.
Unfortunately, the answer to inflation is to raise interest rates, which will lead to stagflation, and then a possible recession. But is a recession really on the way for the United States?
It’s possible. But before you panic, read on to learn more about what is going on in the world and the possibility of a coming recession.
Supply Chain Issues
Before discussing the possibility of a coming recession it’s important to discuss the supply chain issues that are plaguing the world—only they aren’t actually plaguing the world. This may come as a surprise to you, but currently, only the US, Australia, and Europe are experiencing supply chain issues.
Why is this? Well, it has resulted as a combination of factors, the main one is the fact that these countries rely heavily on foreign goods rather than producing their own. It is always best, from an economic standpoint, to produce and sell goods locally—it’s best for the economy, health of the citizens, and for foreign policy. But in recent years developed countries have begun to rely on the cheap labor to produce food in other countries.
Not only is this terrible for capitalism (and the middle class) but it is horrible in times like these where relationships with foreign countries are strained. For example, much of the grain used by Europe is usually shipped in from Russia and Ukraine. Well, Ukraine is a bit busy with a war to plant grain, and Russia has sanctions…so where is this grain supposed to come from? The US grows plenty of grain, but uses most of it for itself.
Which brings up another problem, much of the worlds gas and oil comes from Russia, meaning it is now more expensive to transport the goods that there are less of in the first place—thus driving up prices even further for consumers.
It isn’t just the Russia problem, as the US has sanctions on goods imported from many other countries. For example Iran and Iraq actually produce large quantities of grain, but the US refuses to import grains from these countries. And this isn’t the only good that the US snubs it’s nose up at in the Middle East.
Although this may sound crazy, if you take a look, China, and other Asian countries aren’t currently having supply chain issues. Why? Because they produce all the goods they need locally. They also take imports from the Middle Eastern countries without a problem. And anything they do import; it is something they can do without.
So as much as the next few months may be rough as you head to the store and find your favorite products out of stock or double the price, societies in Europe and the US have brought this on themselves as they increasingly demanded cheaper products rather than taking the time and effort to make enough for their own societies.
The Coming Recession
Now, back to the recession. While the rising costs of goods and services are partially due to the supply chain issues, they are also due to the falling value of the dollar due to 25% of the currency currently in circulation being printed in the last year. This has caused massive, unparalleled inflation.
Basically, the government has no choice but to raise interest rates and they are doing so aggressively. Although they hope this won’t cause a recession, the reality is, it might. The only positive aspect they are banking on is that unemployment is down around the globe. Everywhere you go, a company is looking to hire people for all sorts of employment. Hopefully this will continue as people continue to have less to spend.
As of the writing of this article, despite the rising interest rates, the housing market is still on the rise. Much of this can be attributed to the fact that people were waiting months and months to find a place they could afford. Prices are finally stabilizing (but not lowering) giving middle class families the opportunity to buy, although it comes at a steep cost to borrow that money. Families are so desperate they don’t seem to care.
How to Prepare for a Recession
As of May 31st, 2022, there is no recession in sight.
The best way to prepare for a recession will depend on who you ask. Relators will tell you to buy a home, investment bankers will tell you to invest. But the reality is, you must take advice from someone who does not benefit financially from your choice.
Remember, a relator benefits from you buying property, and a banker benefits from your investment. You must put your money somewhere that is right for you where only you will benefits. Historically, gold and bonds have been a great way to hedge against a recession.
The last big recession (not COVID related) the US had was in 2008 after the housing market crashed. At that time, Bitcoin had not yet been invented, but the price of gold stayed relatively stable. Then, if you look at the COVID mini-recession in 2020, you can see gold and Bitcoin fared positively despite the falling prices of everything else.
Buying Bitcoin doesn’t benefit anyone but yourself, therefore it is possibly one of the best ways to hedge against a coming recession alongside bonds and precious metals. Purchasing Bitcoin is a risk however, so you shouldn’t invest blindly, and only invest money you intend to lose. There is no way to tell if Bitcoin will survive this coming recession, but if it does, it will likely soar to new heights just as it did before.
If you do decide to place a Bitcoin investment, you may be overwhelmed by all the options available to you. Do not invest in anything other than Bitcoin or Ethereum. Although the other projects, called altcoins, are cheaper than these big two, most of them are unproven technology and some are outright scams. Just look at our articles on Squid Game Token and Terra Luna and you will see what we mean.
Overall, an investment in Bitcoin is truly your choice, and no one benefits off of your investment. But invest with caution, as, like any investment, or a recession, the future is uncertain at this point in time and no one knows what will come next.