Printing money in the United States would have a “boomerang” effect on the dollar

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Important facts:
  • The country is facing a deflationary process and low prices due to the expansion of the corona virus.

  • The consequences of the gigantic inflow of funds would lead to uncontrolled inflation in 2021.

The economic effects of the coronavirus pandemic in the US paint a dark picture for 2020 and possibly 2021. The government of Donald Trump and financial institutions such as the Federal Reserve (FED) have already announced measures to “bail out” the economy, according to the recent one International Monetary Fund (IMF) report this year will see a decrease of around 6%.

One of these decisions is the historic supply of liquidity by the FED as the central bank to finance hundreds of companies and millions of Americans in times of paralysis and rising unemployment. Trillions of dollars have already been distributed to temporarily improve the situation with special payment terms while the economy is reactivated.

Apart from how the management of COVID-19 was in this country, the main focus of global distribution, it remains for the analysis how The US dollar will react in the midst of all this turmoil, which could take several months, still without a vaccine to counteract the disease.

The United States is the global focus of the pandemic, with nearly 1 million registered cases and more than 55,000 deaths. Source: rtve.es

The situation can be divided into two phases: the current, shock international deflationary or falling prices and what could happen next year with an uncontrolled inflation scenario. For the market analyst and Dealer Venezuelan Alberto Cárdenas, the main economies on the planet, is not currently suffering from an inflation problem, on the contrary.

“The world lives a shock deflationary, despite the indiscriminate impression of money from central banks. What is there is a decline in economic growth, an impact of the oversupply of products and services. If you look at the commodity prices, which are the main inflation indicator on the planet, it’s at a minimum level, the cycle is bearish, commodities are dropping, except for a few things like gold and rice, “said Cárdenas. Consulted by CryptoNews this Monday.

The inflation that Cárdenas sees today is what happens to financial products such as stocks or bonds which in his opinion have captured this enormous liquidity and which have not yet been implemented in the real economy.

You tried to keep the economies alive, but inflation is actually not there. There is an impression of unpublished money from central banks, but this is only the first stage. After the demand problem has returned a bit, we will likely return to an inflationary environment quickly, and all this money pressure will result in a depreciation in fiat currencies, especially in the United States

Alberto Cárdenas, market analyst and Dealer.

For this year, the analyst expects the dollar to see an upward trend against other local currencies, as there are still emerging markets that need liquidity. That said, despite the pressure of dollars on an industrial scale, there would be a latent shortage.

The point highlighted by Dealer is that in deflationary situations like the current one, the dollar gains in value because people take refuge in bonds, for example. However, what happens could turn 180 degrees as the cycle begins to change. These include raw materials that reach the bottom, the reopening of economies and a balance of stocks. What would mark the beginning of the second phase, in which printing money would “strain” the dollar?.

The situation would trigger a downward cycle for the US currency, which may include uncontrolled inflation due to budget deficits and current distortions. Under these conditions, the price of Bitcoin (BTC) and other cryptocurrencies, according to Cárdenas, could perform better in an inflationary environment.

Inflation until 2021

Inflation prospects may appear in the United States next year after the presidential election. At least this is the Mexican economist and Dealer Cryptocurrency @ CRYPTOHISPANO01, who said that the bailout arranged by the central bank would not be enough and that the companies would exhaust their reserves and savings.

Businesses have to float with new loans, which means more dollars, which means lower interest rates, more debtors and more bankruptcies over the months if the economy doesn’t reactivate globally. The main question is, can these loans be repaid? Otherwise we’ll see: inflation, more gaps between the upper and lower classes, public debt and many bankruptcies.

@ CRYPTOHISPANO01, economist and cryptocurrency trader.

The Aztec analyst is one of those who think so America is feeding a bubble Wall Street and in the personal debts of citizensthat could have consequences in the medium term.

Regarding a possible economic recovery given the new capital injection, @ CRYPTOHISPANO01 knew that companies with government loans would stay afloat, but without growth, “there won’t be much job creation,” he said.

The Federal Reserve announced unlimited allocations to minimize the impact of the economic downturn. Source: QuinceCreative / Pixabay.com

The United States has the possible measures that Trump is taking to ensure that its possibility of reelection due to the worsening of the crisis is not impaired Dealer He stressed that the government would try to make the situation of the dollar and the economic recovery as good as possible until the presidential election. The The situation would worsen next year and only improve in three years.

“In my opinion, the serious consequences of lending $ 2.5 trillion in 2021 will come from inflation, government debt and money in circulation. The dollar never loses, the strong comes to Latin America because what hits the United States once hits Latin America three times more, “he told CriptoNoticias of major devaluations in the region’s countries.

Contradictory messages

During the International Monetary Fund, economists and analysts forecast terrible economic prospects for the United States in 2020 with potential weaknesses for the dollar next year. Treasury Secretary Steven Mnuchin said on Sunday that the country’s economy would recover in July, August, and September after a gradual reopening in May and June.

“We’re bringing unprecedented tax relief to the economy … they’re seeing trillions of dollars in the economy and I think this will have a significant impact,” said the official.

Although the message may offer hope to Americans, the truth is that the country has the highest number of deaths and COVID-19 infections, which does not tend to decrease. The situation could worsen as there are states like Georgia that have started to relax isolation measures.

What Mnuchin said is contrary to what the White House economic advisor Kevin Hassett said on Sunday that unemployment in the country could reach a level that had not been reached since the Great Depression after 1928. Corona virus paralysis is the “largest shock negative that our economy has never seen.

The problem is that Trump would step up his strategies to minimize the economic impact of the pandemic and the possible loss of ground for the dollar. According to the analysts surveyed, the currency is currently maintaining its strength, but this is the case could be compromised if the coronavirus situation and decisions fail, because what is happening in the country has been accepted as a health problem and not as a complex situation with multiple social and economic impacts.



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