Bitcoin (BTC) is at risk of soaring inflation due to massive ‘money printing,’ according to Bloomberg
Bloomberg contributor Jared Dillian has taken aim at the U.S. Federal Reserve and other major central banks for printing tons of money during the COVID-19 pandemic.
Dillian writes the dollar has ‘no real intrinsic value,’ and money is gradually losing its meaning because of multi-trillion stimulus packages.
‘It’s not crazy to think government spending may reach $10 trillion – for just one year! And the numbers will go up from there,’ Dillian writes.
Is the Fed really printing money?
You might have already seen the ‘money printer’ meme that highlights the Fed’s massive effort to mitigate the economic blow from the coronavirus.
On March 23, the most powerful central bank in the world unveiled its unlimited QE plan. PlanB, the anonymous Dutch economist who created Bitcoin’s S2F model, commented that the Fed ‘went full Zimbabwe’ with the unprecedented move.
American banker Neel Kashkari also went viral after mentioning that the Fed has ‘an infinite amount of cash’ during his 60 Minutes interview.
However, it is important to understand that the Fed doesn’t create spending power out of thin air. It lends cash in exchange for other assets (like Treasury bonds).
Inflation is still possible
According to Dillian, it’s hard to predict the economic impact of trillions of greenbacks spent on coronavirus aid.
Since the dollar is used as a reserve currency, it is unlikely to cause hyperinflation like in Zimbabwe and Venezuela. However, it’s reasonable to expect inflation rates to soar.
Another scenario described by Dillian is the Japanification of the U.S. economy, but it’s important to understand that Japan was able to keep its inflation at bay because of its aging population.