The U.S. is facing a pivotal moment as the White House pressures the Federal Reserve to cut interest rates to boost a lagging economy – a move that will inevitably increase inflation. Since 2008, $12 trillion has been injected into the U.S. economy through quantitative easing. It’s a staggering amount of money in such a short period of time. Inflation is a slow and quiet killer; much like a frog that’s slowly boiled to death, people adapt to inflation – until they can’t.
But the table is set much differently now than it was in 2008. The increase in cryptocurrency of all kinds, including the recent launch of Facebook’s Libra and a 200% rise in Bitcoin this year alone, supports the weight of cryptocurrency’s role in the global economy, especially as it affects inflation. As the founder of an international alternative assets firm, I believe that more corporate giants will follow Facebook with their own exclusive coin offerings; in 10 to 20 years, a company without its own token may be analogous to a company without a website today.
Whenever the market is artificially propped up with a large influx of currency, there inevitably comes a breaking point when enough of that currency begins to circulate in the environment. We saw the beginning of this process during the “Crypto Boom” of 2017 when the initiation of an entirely new kind of currency made many people millionaires overnight. This is a form of inflation.
When banks insert $10 trillion into the economy, inflation has to surface eventually. As more of the Crypto Boom billions circulate in the environment, and as less of the $10 trillion influx is hidden in banks and on Wall Street, cryptocurrency has the potential to rapidly accelerate the consequences of inflation by forcing new currency into existence.
However, past this initial inflation, cryptocurrency offers an opportunity to stabilize the global economy because, much like gold, there is a finite amount of it to be mined. Furthermore, it’s the first investment that anyone in the world can purchase at any time, as long as they have access to the internet. For example, if you’re living in Argentina, you can’t just buy U.S. dollars whenever you want. You need a broker. And while the New York Stock Exchange closes, cryptocurrency never does. It’s a 24/7 investment.
Ultimately, the consequences of inflation won’t be nearly as devastating as the alternative – deflation. Inflation, at least, gives us a leg to stand on to stay in the game long enough to devise a better strategy. Much like one person can acquire a credit card and continue to live despite mounting debt, the global economy can utilize inflation as a way to extend the time frame we have to figure out a better solution.
I believe that solution is cryptocurrency. Within the next 10 to 20 years, our monetary system will likely reach a point of inflation that’s so massive it will mandate some type of monetary reform. The potential collapse of the Euro or the U.S. dollar may even necessitate the development of national cryptocurrencies, the prelude to which we may be currently witnessing, with the introduction of corporate cryptocurrencies like Libra.
Coupled with blockchain technology, national cryptocurrencies could increase transparency around government spending and make it difficult for dark money to infiltrate political campaign financing, illegal drug trade, and criminal activity. A cryptocurrency-based monetary shift would also be aligned with the exponential growth of technology and the cultural impetus to digitize as many facets of day-to-day life as possible. It’s not hard to imagine a day in the near future when people move through the world without carrying wallets or even mobile phones – at least not in their current iteration. I’m optimistic that cryptocurrency would naturally fall into that space.