Bitcoin Block 772,039
00000000000000000002796aeca66b6a04f61a024deee1f631673aa9024459b3
2022 was a tough year. The markets were crushed in various ways and consumer and corporate sentiments went to an all-time low. Confidence in the markets was dilapidated. Some industries benefitted as well like some emerging market stocks, the energy sector, and real estate bought before the mortgage rate frenzy. But you end up on the wrong side by loading up on the hot tech stocks and crypto and making money for anyone jumping in. Now, you regret the decision and look back and wish you had kept all the money in cash. The dollar index did achieve a milestone over which many are drooling over.
Are we all living in a house of cards delicately constructed by the nations in power? These nations have certain organizations that act on the backend to make sense of all the drama. The FED has been the main character and its actions surely do not give it the title of a protagonist.
Disparities across the world
The problem the world is facing now is energy shortage and deglobalization risks. The first one comes from a lack of long-sightedness and the latter is a result of an intertwined financial network. Political parties all over the world were now facing the consequences of a system that was inherently flawed i.e. reigning for a specific amount of time and winning the interests of the people through, an incentive lacking a long-term perspective. You can see that quite clearly in the US where Biden is bent on winning the bipolar support of the nation which has crumbled in regional disparities. The USA is not as united as it claims to be. So, all the president can do is shove billions of dollars in the mouths of the protestors and keep them happy. Short term: everyone is pleased to get the extra booze. Long-term: everyone suffers from careless fiscal policies. Why not redirect the money spent on the Inflation reduction act to projects aimed to decrease the country’s dependence on imports of fuel? A country can only be self-sovereign if it has its energy. The rest is just claims on that energy.
In the wake of recent times, many countries have realized that resilience has to be pursued alongside efficiency if they have to survive in the globalized world. What if China stops trading with America, although unlikely, the possibility is present. Russian blockage of natural gas to Europe is the epitome of atrocity in the globalized village we were to build for prosperity. The financial system in this matter plays a crucial role in global integration. When the US becomes the big daddy who can block anyone from accessing a claim on the Earth’s natural resources by its dominance on the dollar and its issuance, other nations will automatically feel deprived.
The FED won’t stop
The strings for all of this have now been taken over by none other but Jerome Powell who is committed to breaking something and causing turmoil, at least this is what he says in public. Since March 2022, the FED has been on its mission to make credit expensive by raising the Federal Funds Rate. This has been mainly to curb demand to match the supply and bring about a happy ending. Well, that is some fantasized goal. Not only has the FED made conditions in the US gruesome but it is also successful in making other developing countries access to capital to cope with the times ahead. What this eventually leads to is a stronger dollar that makes other countries scramble for safeguarding their assets for what is left of them. Consumer and corporate confidence are in the gutter and people are becoming the guinea pigs in all the drama. No one wants to highlight the government or the organizations that support it on their role in the turmoil.
The masses are what matter
Now let’s come to the people, the class that matters but gets least represented in important decisions. The FED is bent on you losing jobs. This is because of its dual mandate, keeping inflation below 2% and unemployment close to 4%. So it has some space when one of them goes crazy. The latest jobs report published by the BIS indicates the unemployment rate has been contained between 3.5% and 3.7%. A sigh of relief for the FED. However, it is important to note the mirage that this report crafts. We have been hearing about numerous companies, especially in the tech sector in which people lost their jobs because the company could not keep up. Well, this number represents the number of people actively looking for a job. If you quit or are not working, you are not unemployed unless you register. The rise of soft skills and remote work has also made this number doubtful.
The real fallacy rises when investors are happy when you lose your job. This means unemployment goes up and the FED has to lower the interest on debt to allow companies to prosper. It all boils down to something big breaking which is unable to service its debt. Malinvestments that reign supreme when the monetary environment is loose ultimately have to suffer. People have to suffer along with them who have already fallen prey to improper decisions.
Bitcoin has not been doing well since the FED started its hike. So yoloing in on the currency wasn’t a good idea. Well, understand the concept behind it. If the monetary system that the Bitcoin network provides would have been implemented from the start when we went off the gold standard, wouldn’t productivity have prevailed? Wouldn’t the masses have a sense of private ownership of their efforts? Wouldn’t people act more responsively…?
Till next time.
Azeem, signing off.