Economic money policies across the globe have been thrown into the spotlight of late with some major central banks, like the US Federal Reserve and the European Central bank, adopting policies to try and prop up a flagging economy, but Bitcoin could serve as yet another alternative.
The threat of recession looms, and concerns that it could spark an economic crisis worse than the one seen in 2008 are very real. This has led to the Fed, and others, to adopt money-printing policies which border on the absurd. To put it in perspective, the Fed happily printed $162 billion in October last year, and China printed the entire Bitcoin market cap in a single day this week, as BeInCrypto has previously reported.
These money printing policies are aimed at helping the flagging economy and are being paired with low to negative interest rates to try and encourage spending. However, the growing concern is this policy could obliterate the economy, especially considering the Fed has doubled the US money supply in less than 12 years, while money velocity has hit near economic depression levels.
The State of the Nation
As pointed out by Bitcoin commentator FilbFilb (@filbfilb), the M2 money supply – which is a measure of the money supply that includes cash, checking deposits, and easily convertible near money – has doubled since 2008.
This on slipped under the radar.
M2 money supply has doubled since 2008.
— f i l ₿ f i l ₿ (@filbfilb) February 4, 2020
The greater economic implications of this are that the Fed is literally throwing money at the problem. Still, this solution can easily slip into hyperinflation and have other negative knock on effects.
One suggestion as to why the US dollar debasement from Fed policies has not hit hyperinflation is down to the M2 money velocity having tanked in the same period. Money velocity refers to the frequency at which one unit of currency is used to purchase domestically-produced goods and services within a given time.
Good observation. Keep in mind that velocity has declined, however. pic.twitter.com/MmLE38Eord
— Bitcoin Lawyer.hodl
(UASF) (@Bitcoin_Lobby) February 4, 2020
Having low money velocity indicates low levels of spending, which is something the Fed is well aware of and part of the reason they have lowered interest rates with a threat of negative interest rates.
The policies implemented by the Fed in the last 10 to 12 years are seemingly on a collision cause for a crisis, and this ticking time bomb does not look to have a viable solution, except perhaps, Bitcoin.
Bitcoin as a New Alternative
One of the more economic differences between Bitcoin and the US dollar is the anti-inflationary properties of the digital currency, and its decentralized nature of the coin. This means that it is not only immune to the issues the Fed is having with the economy, but it is also designed to be different.
This makes sense considering Bitcoin was created in response to the 2008 financial crisis, and now, as the Federal Reserve teeters on crisis again, it could be that Bitcoin emerges as the only solution to a crashing global economy.