Updated: Nov 16, 2020
Constant Money Printing, And a slowing Economy... That is what's currently happening in the United states, so that leaves us with one question. What goes first?
We just experienced a very unique event in history. The Covid-19 virus struck the globe causing global stock markets to crash. The United States Federal Reserve stepped in and saved the country from what could have been the worst depression in history. By doing so, they created a "new normal"...
“They are facing two potential outcomes, both of which are difficult” - Adam Posen
22% of all the USD issued since the birth of the nation was created in 2020.
The obvious concern that comes with this unprecedented money printing is hyper inflation to the USD. The average Fiat currency life-span is 35 years. The USD has been around for more than 240 years. Since the introduction of the central bank in 1913 the USD has lost significant buying power. For instance, the cumulative rate of inflation since 1913 is around 2,525.4%. This means a product purchased for $1 in 1913 would cost $26.25 in October 2020.
With banks around the world conducting large scale asset purchases in an attempt to keep key financial markets functioning they have created an expectation for future situations. If the market drops, and the US Fed is forced to step in similarly to what we saw during the Covid-19 pandemic an inflationary scenario to the USD becomes inevitable. So the question we are left with is... Will the United States Federal Reserve risk the collapse of the dollar to support equity markets once again, or will they let equities crash to protect the USD from hyperinflation.