Former Republican congressman Ron Paul says that inflation is high on his lists of concerns. The Federal Reserve's recent observation is that prices are really low but Paul believes that inflation is a dangerous distortion that could spark a pullback as deep at 50 percent. He says that Bonds are representing inflation and that the super high stock prices represent inflation. These companies are super over valued and wont generate returns like stock holders expect and their stock prices continue to rise. Eventually stock holders are going to realize this and withdrawal their investments and once people start doing this it will spark even more people to pull their money out and the market will fall drastically.
Paul also points to the meteoric rise of cryptocurrencies, particularly bitcoin, could also signal that there is more inflation than people realize. He also points to the fact that in the 1920's the CPI wasn't going up so no one was worried but the stock market went up a lot until it eventually crashed. The Fed currently isn't worried because the CPI isn't rising and they are keeping interest rates low. He believes there is a huge bubble but can't pin point what or when it will actually burst. Its interesting to see that people are noticing some things that are potentially wrong and are ignoring it so they can soak up the last remains of this economic growth. These potential gray rhinos could be catastrophic and many people will be blindsided by these effects.
Do you believe the further implementation of cryptocurrencies in 2018 will create more inflation?
ReplyDeleteI do believe that the further implementation of bitcoin and other crypotcurrencies will lead to more inflation. The inflation due to these new currencies are currently not realized and hidden. Its hard to even determine the real value of bitcoin so guessing the impact of its inflation is very hard to predict as well. However, bitcoin is predicted to keep rising in value and becoming more prevalent will also increase the impact of this hidden inflation.
ReplyDeleteAs much as I may want to believe the founder of the modern liberty movement his logic just doesnt make sense here. If the stock market were to be overvalued, which it very well may be, people pulling their money out of the market would cause deflation not inflation. The congressman is correct though in noting the similarity to the rapid growth of the stock market without an accompanying rapid growth in the CPI but that is unlikely to caause inflation either. It would probably the bubble bursting and only lead to deflation.
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