Salute to the Cryptians!
Today we'll look at how dollar printing affects the economy and what it means for your investments. When a central bank decides to "issue some more money," it's not just a technical process — the consequences are felt by everyone who keeps their savings in dollars 💵.
Examples from history: how dollars were printed
1. 2008-2009: Financial crisis and economic rescue
During the 2008 crisis, when banks failed and markets crashed, the Federal Reserve began printing trillions of dollars to prop up the economy. This was the moment the world learned about "quantitative easing" (QE). As a result, stock prices 📈 and real estate 🏡 went up and interest rates dropped to zero. But what does this mean for us?
2. 2010-2014: Second Wave of QE
The Fed continued printing money, adding another $2 trillion or so to the economy. This pushed the markets higher, with American stocks soaring. People who had money invested in these assets benefited. But the dollar began to slowly depreciate, and commodity prices began to rise.
3. 2020-2021: Pandemic and a new wave of printing
In response to the COVID-19 pandemic, the Federal Reserve pumped about $3 trillion back into the economy. The move supported millions of people who received checks from the government and were able to continue spending. Cryptocurrency markets 🪙 soared, and stocks were on the rise again. But money became “cheap,” and more people began to notice that the value of their savings was declining as prices rose.
What did this lead to?
1. Rising asset prices
Printing money increases the value of assets. This applies to stocks 📊, real estate 🏠, and even alternative assets like cryptocurrency. People want to protect their savings by investing in something that can increase in value. For example, a house bought in 2020 may be worth 20-30% more in 2023. But this same process makes home ownership unaffordable for many.
2. The growth of debt and its consequences
When money in the economy is cheap (low interest rates), companies and consumers start to borrow heavily. This creates a huge debt burden 📉. But as soon as interest rates start to rise (which is inevitable), it becomes difficult to pay off such debts. As a result, companies start to cut expenses, which can lead to market crises and reduced income.
3. Depreciation of the dollar
The more dollars there are in circulation, the less they are worth relative to goods and services. This means that each dollar loses its purchasing power. If you have been keeping your money "under your pillow", its value has diminished over time - this is one of the most noticeable consequences of excessive money printing.
Example: What happens to your money?
Let's say you have $1,000 and you decide to just put it aside for 5 years. If the Fed issued a few more trillion dollars during that time, your $1,000 is now worth less - you can buy less goods with it than you could 5 years ago. Money that doesn't work and isn't invested gradually loses its value while the economy is inflated with new money 💰.
Printing dollars is a powerful tool that can revive the economy in times of crisis. But it also leads to an increase in asset prices, an increase in debt, and a depreciation of the currency itself. Watch how central banks manage money and try to invest your savings in assets that can protect them from inflation and depreciation!
