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Massive Distortion In Global Economy and Rise of Bitcoin Valuation: Signs of Impending Economic Disaster?

February 16th, 2021 Comments off

Sheldon Filger-blogger for GlobalEconomicCrisis.com

An unprecedented wave of policy measures has enabled distortions that  are wreaking havoc in the global economy, creating accelerating dangers of a cataclysmic event. This can be in the form of a market crash, contagion from imploding asset bubbles or rise in fears of inflation leading to irrational money flows. A combination of all these forces in synchronicity can be the single event leading to a global depression.

The major factor in the global economy at present is the unprecedented wave of liquidity being unleashed by policy makers. That fact alone is what has driven the sharp rise in equity prices since the initial collapse in the wake of Covid-induced economic shutdowns. There is no other explanation for the massive rise in equity prices, even while the real economy is stagnant after a sharp decline  in the wake of the coronavirus pandemic. The divide between Main Street and Wall Street alongside the sharp rise in equities has never been wider. It is only due to the money printing of central banks and record levels of public debt caused by the fiscal policies of sovereigns that has brought about this phenomenon.

Alongside the sharp rise in equity prices has been the explosive price rise in Bitcoin. The emergence of crypto or digital currencies in general, and Bitcoin in particular, has brought about the most expansive speculative bubble in the modern financial era. Bitcoin is completely opaque; nobody even knows the true identity of the person who created this cyber currency. Yet, even Tesla among other companies has begun to invest substantially in this digital currency as a means of mitigating risk factors.

Meanwhile, bond yields have begun to rise, an indication of growing fears of inflation. That, and the continuing deluge of liquidity from the policymakers, has created perhaps the most distorted and unstable financial environments since the  period that preceded the Great Depression of the 1930s.