According to the Bureau of Economic Analysis, the US economy looks stagnant, as core personal consumption expenditures (PCE) increased by 3.4% year-on-year in May. The recent PCE surge is the highest year-on-year basis change since 1992, and this statistic is heightening concerns about inflation.
In the “never-ending” market rebound, core inflation indicators jumped to their highest level in nearly three years
After more than a year of lockdowns and business closures, as well as the massive monetary expansion launched by the Federal Reserve, economists are worried about rising inflation. Last week the Fed announced its possible future interest rate decision. The global market fluctuated for a few days and then recovered.
Northmantrader.com founder, technical analyst and macroeconomic commentator Sven Henrich jokingly wrote about the manipulated market in a blog post titled “The Never Ending Rally”. Henrich commented on how Neel Kashkari, Governor of the Federal Reserve Bank of Minneapolis, made the market feel better on Friday.
“The Fed’s test balloon last week, if this is the intention, once again demonstrated that this market relies not only on loose money, but also on continued expectations of loose money,” Henrich wrote. “Therefore, the Fed has followed its long-term monetary policy policy: big in and big out, and very slowly out because of concerns about the consequences of disrupting the market.”
While Wall Street is benefiting from the Fed, the purchasing power of Americans returning to work is facing an impact. As Barron’s award-winning financial columnist Gail Marks Jarvis explained on Saturday, even retirees suffer from inflation.
“As the pandemic subsides and the country reopens,” Max Jarvis said, “retirees are beginning to feel the disturbing atmosphere of inflation. Natural gas prices have risen by more than 50% year-on-year. Grocery prices have risen by 2.2% overall. Airfare prices have risen. Nearly 25%.”
In the never-ending market rebound of a few privileged individuals, the Bureau of Economic Analysis (BEA) released the core personal consumption expenditure (PCE) index data on Friday. This data is worrying because PCE is up 3.4% from the May 2020 figure, which is the largest year-on-year increase in the past three decades.
BEA is a US government agency that provides economic and market statistics. Every month, BEA releases data on the total value of consumer spending in the United States. The PCE price index in BEA’s personal income and expenditure report shows changes in inflation related to the daily goods and services purchased by American consumers. Various commodities and profitable solutions are mixed into the PCE equation, such as services, non-durable goods, and durable goods.
Soaring Treasury yields and temporary inflation
Although the PCE data is lackluster, the benchmark 10-year US Treasury bond yield soared by nearly 4 basis points, and the gold market also jumped. Similar to Henrich, the economist and gold bug Peter Schiff has been commenting on the Fed’s monetary drama, and even published a radio show titled “Everything is great because the Fed says it.”
“High inflation keeps pushing up oil prices,” Schiff Tweet on Friday. “So far today, it has reached $73.40, which is the highest price since October 2018. However, investors did not buy gold because they did not pay attention to the actual situation of oil, but believed that the Fed was only temporary. “Schiff Add to:
Temporary new definition: Unfavorable permanent changes in conditions, if fully understood by the public or investors, will accelerate the impact on the economy or financial markets, as well as damage the reputation of the current government or central bank.
Coinshares reports that Bitcoin’s relationship with inflation has changed statistically
As the market is disturbed by concerns about interest rate hikes and recent PCE data, Coinshares’ James Butterfill released a report on how data shows that Bitcoin is beginning to play an inflation hedge. Butterfill’s research emphasizes: “Observing changes in Bitcoin prices relative to changes in inflation shows that this relationship is becoming more and more important statistically.”
The researchers’ report details that it is difficult to know whether inflation will move in our direction and how long it will last. Coinshares’ research also pointed out that since the birth of the Bitcoin network, data shows that “the relationship between Bitcoin and inflation is currently better than the relationship between inflation and gold.”
“There is increasing evidence that Bitcoin is maturing as an asset,” Butterfill’s research concluded. “After the recent FOMC statement (June 16) expressed an unexpectedly hawkish tone, the price movement is very similar to that of gold. This highlights the performance of Bitcoin as investors would expect from physical assets in the U.S. dollar. Appreciate when depreciated, and vice versa.”
Satoshi’s design is predictable
As the Butterfill report emphasizes, it is difficult to know or predict what will happen to the global economy. To make matters worse, the Fed’s monetary system—its never-ending rise and fall—is unpredictable. Although bankers and bureaucrats continue to boast that the inflation rate is only 2% to 2.24%, the soaring value of goods and services highlights the fact that an inflation rate of 2% is a myth.
Compared with the unpredictable monetary expansion, contraction and mythical inflation rate, Bitcoin’s annual inflation rate is only 1.77%. Central banks and politicians have been using the 2% target reference, but data from portals such as shadowstats.com and deviceradar.com clearly show that the overall increase in the prices of goods and services is much higher than 2%. Unlike the Fed’s system, Bitcoin’s annual inflation rate shrinks every four years during the reward halving period.
Satoshi Nakamoto’s idea of positive supply plus demand and a reward rate that declines every four years developed a predictable economic system with an inflation rate that no one can control. We can actually roughly predict how much the annual inflation rate of Bitcoin will decrease in the future. By 2025, Bitcoin’s inflation rate is expected to be less than 1%, and by 2028, the network’s annual inflation rate will reach 0.4%.
What do you think of the recent inflation concerns and the surge in PCE data? Do you think assets like gold or bitcoin are more effective for hedge against inflation? Please tell us your thoughts on this topic in the comments section below.
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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, Federal Reserve, U.S. Central Bank
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