With Bitcoin’s annual inflation rate dropping to 1.77%, May BEA data shows inflation fears in the US are justified – Economy Bitcoin News

The US economy is stagnating, according to data from the Bureau of Economic Analysis, as core consumer spending (PCE) rose 3.4% year over year in May. The recent rise in the PCE is the highest year-on-year change in baseline since 1992 and the statistics are fueling inflation concerns.

In the midst of “never-ending” market rallies, the core inflation indicator jumps to its highest level in nearly three decades

After more than a year of lockdowns and closings, and the massive expansion of the Federal Reserve’s money supply, economists are concerned about rising inflation. Last week the Fed announced its possible future rate decisions and global markets shook for a few days and then rallied.

Sven Henrich, founder, technical analyst and macroeconomic commentator of Northmantrader.com, jokingly wrote about the rigged markets in a blog post titled “The Never Ending Rally”. Henrich commented on how Minneapolis Federal Reserve Bank President Neel Kashkari made markets feel better on Friday.

“The Fed’s trial balloon last week, if that was the intention, once again made it clear that this market is not only based on easy money, but also on the continued expectation of easy money,” wrote Henrich. “So the Fed followed its long-accepted monetary policy approach: Get in, get in quickly, and leave painfully slow for fear of the consequences of market dislocations.”

Fernando Martin, Research Officer and Economist at the St. Louis Fed stated: “Estimates predict annual inflation above 2% for three months (March, April and May) and a convergence back to the pre-pandemic average towards the end of the Year. ”

As Wall Street benefits from the Fed, Americans returning to work are facing an attack on their purchasing power. Even retirees are plagued by inflation problems, Barron’s award-winning finance columnist Gail MarksJarvis explained on Saturday.

“As the pandemic fades and the country reopens,” said MarksJarvis, “retirees will be exposed to the worrying breath of inflation. Gas prices are up more than 50% year over year. Food prices rose by a total of 2.2%. Airfares have risen by almost 25%. “

Amid the never-ending market rally for the privileged few, the Bureau of Economic Analysis (BEA) released core personal consumption expenditure (PCE) data on Friday. The data was worrying as the PCE rose 3.4% higher than in May 2020, the largest year-on-year increase in nearly three decades.

The BEA is a US government agency that provides economic and market statistics. Every month the BEA publishes data on the total value of American consumer spending. The PCE Price Index, included in the BEA’s Personal Income and Outlays report, shows changes in inflation related to everyday goods and services purchased by US consumers. All kinds of raw materials and for-profit solutions get mixed up in the PCE equation, such as services, consumer goods, and durable goods.

Yield jump on government bonds and temporary inflation

Despite the drab PCE data, the 10-year Treasury benchmark’s return rose nearly four basis points, and gold markets rose too. Like Henrich, the economist and gold bugger Peter Schiff also commented on the Fed’s monetary theatrics and even published a radio show entitled “Everything is great because the Fed says it is”.

“The high inflation is driving the oil price up further,” tweeted Schiff on Friday. “So far it has hit $ 73.40, its highest price since October 2018. But investors are not buying gold because instead of seeing what actually happens to the oil, they believe the Fed is only temporarily doing so. “Schiff added:

New definition of ephemeral: A detrimental permanent change in conditions which, if fully recognized by the public or investors, would accelerate the impact on an economy or financial markets as well as the reputations of established governments or central banks.

The Coinshares report says that Bitcoin’s relationship to inflation is changing statistically significantly

As concerns about rate hikes and recent PCE data rocked the markets, Coinshares’ James Butterfill released a report on how data suggests Bitcoin is starting to act as an inflation hedge. “Observing the changes in the price of Bitcoin in relation to changes in inflation shows that this relationship becomes statistically significant,” emphasizes Butterfill’s research.

The researcher’s report shows that it is difficult to tell if inflation is coming our way and how long it could last. The Coinshares study also notes that data since the inception of the Bitcoin network shows that “the relationship between Bitcoin and inflation is currently better than that between inflation and gold”.

“There is growing evidence that Bitcoin is maturing as an asset,” concludes Butterfill’s research. “According to the latest FOMC statement (June 16), in which an unexpectedly restrictive tone was expressed, prices moved very similarly to gold. This underscores that Bitcoin is behaving as investors would expect a real asset to do, appreciating when the US dollar falls and vice versa. “

Satoshi’s design is meant to be predictable

As the Butterfill report points out, it is difficult to know or predict what the world economy will do. What makes it much worse is how unpredictable the Fed’s monetary system – with its never-ending rallies and bust – can be. While bankers and bureaucrats keep claiming that inflation is only 2% to 2.24%, the rising value of goods and services underscores the fact that 2% inflation is a myth.

In contrast to unpredictable monetary expansion, tightening, and mythical inflation rates, Bitcoin’s annual inflation rate is only 1.77%. Central banks and politicians have always used a target reference of 2%, but data from web portals like shadowstats.com and equipmentradar.com clearly shows that the general price increase for goods and services is well above 2%. In contrast to the Fed’s system, Bitcoin’s annual inflation rate shrinks every four years during the reward halving.

Satoshi’s idea of ​​active supply combined with demand and a decline in the reward rate every four years developed a predictable economic system with an inflation rate that no one can control. We can actually use rough estimates to predict how much lower Bitcoin’s inflation rate will be each year in the future. Bitcoin’s inflation is estimated to be below 1% through 2025 and the network’s inflation rate will be 0.4% per year through 2028.

What do you think of recent inflation concerns and the surge in PCE data? Do you think assets like gold or bitcoin are a better hedge against inflation? Let us know what you think on this matter in the comments below.

Tags in this story

BEA, Bitcoin, Bitcoin (BTC), Coinshares, Data, Economists, Economy, Federal Reserve, Fernando Martin, Gold, Hedging, Inflation, Inflation Risk, PCE, Peter Schiff, Purchasing Power, St. Louis Fed, Statistics, Supply and Demand, Sven Henrich, Fed, US Federal Reserve

Photo credit: Shutterstock, Pixabay, Wiki Commons, St. Louis Fed, BEA, Coinshares, Market Watch, Fernando Martin,

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