An inorganic emission of money causes greater devaluation of the currency.
This excess liquidity could be transferred to assets such as bitcoin in search of protecting capital.
Alarms are raised about a possible new wave of inflation after data is released on the growth of money in circulation in the US economy, which has reached levels not seen since the beginning of 2023.
According to the financial newsletter ‘The Kobeissi Letter’, The money supply reached 21.17 trillion dollars in Augustthe highest level recorded since January 2023, as seen in the chart below.
This increase is part of a sustained trend, marking the fifth consecutive monthly increase, as indicates the report.
In just 10 months, The amount of dollars in circulation has grown by $484 billionapproaching a new historical record, since the current supply is only 548,000 million below that maximum.
After a brief reduction, the money available in the US financial system has increased again, opening the door to the possible arrival of inflation.
Is an inflationary period coming?
An inorganic emission of money generates inflationary pressures and, therefore, causes greater devaluation of the currency.
When there is more money circulating and the production of goods and services does not increase at the same speed, prices rise, and consumers feel it in their pockets.
This cycle is well known: more money chasing the same products and services ends up making them more expensive.
In October, inflation expectations for the next 5 to 10 years among US consumers reached 7.1%, the highest level in more than four decades, as CriptoNoticias reported.
This increase is notable, since in a few months the figure has doubled, reflecting a sharp contrast with the average of 3% that has been maintained in the last three yearsaccording to the University of Michigan Consumer Survey.
The JP Morgan bank has pointed out on several occasions that maintaining savings in dollars has never been the best option to preserve value. In fact, although it is not mentioned directly, assets like bitcoin offer greater profitability despite their volatility, attracting those seeking better returns.
Position of the authorities
In the midst of this panorama, the president of the Federal Reserve Bank of Atlanta, Raphael Bostic, commented to Bloomberg that the Federal Reserve will need to carefully weigh competing risks when deciding on the speed of future interest rate cuts.
bostic He asserted that the risks for inflation have decreasedAlthough threats to the labor market have increased, the economy nevertheless remains strong, he added.
Last September, the Federal Reserve began a cycle of monetary easing with a reduction in interest rates by 0.5 percentage points, bringing them to 5%.
This move marked the first cut in four years, a significant turn after a period of more restrictive policies. Historicallythe reduction of rates has sought to stimulate economic growth in times of uncertaintyby making loans cheaper, encouraging both consumption and business investment.
This easing has had a notable impact on several assets, including gold, which has seen an appreciation close to 30% in the last 12 months.
Bitcoin has also shown signs of recovery, starting the week of October 14 above $64,600reflecting an upward trend due to movements in the money market, as seen in the graph of TradingView. October has historically been a bullish month for the digital currency.
In inflation scenarios, Investors are looking for alternatives to protect their capital, and assets like bitcoin They could be attractive due to their decentralized nature and limited supply, characteristics that distinguish them from gold in a context of erosion of the value of traditional currencies.
As US monetary authorities navigate between controlling inflation and strengthening employment, investors are preparing for a possible rebound in safe-haven assets such as gold and bitcoin. The economy faces a key moment where the balance between money supply, interest rates and economic growth will be crucial.
