Despite the stock market having three days of record highs, investor enthusiasm has once again waned. Blame is being placed on the Federal Reserve following its press conference hosted by Fed Chairman Jerome Powell.
Although stocks touched highs shortly after the Fed’s statement, the central bank found reasons to quibble with the current growth of the economy.
“On a 12-month basis, overall inflation and inflation for items other than food and energy have declined and are running below 2 percent,” the statement reads. The lack of inflation is apparently a problem for the Federal Reserve.
Investors Uneasy Over Fed Statements
Although the Fed dispelled rumors that it would be cutting rates again, investors remain unsure. Chairman Powell reiterated that he expects inflation to return to 2 percent over time and that the economy is still in line with long-term objectives.
As a result of the statements, the S&P retreated and ended yesterday being down 0.075 percent.
However, the question remains: Why is the Fed trying to temper expectations of economic growth? For everyday consumers, less inflation is welcomed. However, for the Fed, it is seen as a problem for capital investment and growth.
Bitcoin as a Hedge Against Inflation
Part of the problem lies in the fact that we need to trust the Fed to set interest rates and the levels of inflation. That amount of power alone oftentimes makes investors uneasy, since they need to always be aware of the whims of the Fed’s always-changing policies.
With no real limit on money being printed, the entire economy lies in the hands of the Fed.
As many cryptocurrency analysts have pointed out, it would be much more sound to adopt a global standard which had set limits. For example, Bitcoin’s (BTC) total circulating supply will never go above 21M. That’s the stability that you can never expect from fiat currency or even gold (which is still constantly being discovered).
Therefore, Bitcoin shows us a new way of understanding monetary policy. Rather than letting the Fed dictate the inflation rate and tinker with the economy at will, Bitcoin’s supply is fixed. Being a global, borderless currency, it exists as the perfect hedge against the arbitrary impulses of centralized banking.
Whether or not existing states will allow such a groundbreaking idea like Bitcoin to take root as a global reserve currency is yet to be seen. There’s every indication, however, that they won’t do so without first putting up a fight.
Do you believe the Fed can be trusted to set inflation rates? Is Bitcoin a better alternative to centralized monetary policy? Let us know your thoughts in the comments below.