BlackRock’s CEO Is Concerned About Record-High Inflation. You Should Too.
You must look for solutions to protect yourself from this inflation.
Inflation continues to rise month after month in America. After reaching 4.2% in April 2021, then 5% in May 2021, it reached 5.4% in June 2021.
This figure is 10% higher than the most pessimistic forecasts of American economists.
Economics is of course not an exact science, but to see a 10% difference in the expected level of inflation shows that the current situation is very worrying. After months of explaining that inflation was not a concern, the Fed has started to change its tune in front of the evidence of the numbers.
The Fed is slowly changing its tune in the face of bad inflation numbers
The Fed talks about temporary inflation and continues to try to reassure the financial markets that it will continue to apply the same monetary policy with zero interest rates and a massive financial asset purchase program that continues.
However, this approach seems unsustainable in the medium term.
When you remove food and energy sectors, core inflation reached 4.5% for June 2021. These are the highest numbers in the U.S. in 13 years for CPI and the highest since 1991 for core inflation. So these numbers are truly historic.
What is even more worrisome is the fact that 78% of American workers have been living paycheck-to-paycheck for several years now.
In an attempt to limit the significance of these numbers, some say that the increase in inflation is a side effect of the COVID-19 crisis. This observation could be true, but it would require every nation to experience the same increase in inflation.
BlackRock's CEO believes that this high level of inflation is due to a systemic problem
When you compare the evolution of inflation in the United States with that of the other major world economies, you will quickly see that the problem is very much present in America. U.S. core inflation is rising in the U.S. independently of what is happening in the rest of the world and the Eurozone in particular:
Rather than continuing to deny the obvious, it is now essential to acknowledge the fact that this inflation is becoming more systematic.
This is what BlackRock CEO Larry Fink thinks as he explained on CNBC recently:
“It is my view that inflation is going to be more systematical. I believe it is a fundamental, foundational change in how we navigate economic policy...now we are saying jobs are more important than consumerism.”
For Larry Fink, Jerome Powell is wrong when he says that this inflation is only temporary. He also explains that savers will be punished by the Fed's current monetary policy, while those who own assets will be rewarded in the months to come.
If you read me frequently, you may have already noticed that I repeat this constantly. In the current system, savers are the big losers.
The stock market, Gold, or even Bitcoin - You must look for solutions to protect yourself against this inflation
As an individual, you need to realize this fundamental truth more than ever. You must seek protection from this inflation that is expected to remain at high levels for a long time.
Some will go to the stock market looking for an industry that is more or less immune to inflation and potential changes in monetary policy from the Fed. Tech giants that have already experienced phenomenal growth in recent months should still be among the big winners in the months and years to come.
Seeing how the stocks of these Tech giants are exploding in the stock market, you should understand that many investors have already decided to follow this option.
Others will go to gold which has been the default safe haven for centuries. Nevertheless, you have to open your eyes and realize that gold is not as attractive as it used to be in a world where everything is becoming digital. Gold's performance over the last few months has been rather disappointing while the Fed has printed so much money out of thin air:
Meanwhile, Bitcoin is still performing exceptionally well despite the May 2021 crash. Indeed, over a year, its price is up +220% as I write this. And the best is probably yet to come for the king of cryptocurrency.
Solutions exist to protect yourself from this inflation and you should definitely look beyond Jerome Powell and the Fed's speech.
Besides, more and more voices are calling for the latter to react to normalize the situation in the face of this inflation at record levels. This is the case of Steve Mnuchin, former Secretary of the Treasury in the Trump administration, who has just stated that on CNBC:
“I respectfully disagree with him (Jerome Powell) on his not being concerned. It's important for the Fed to get ahead of the curve so that we don't end up with 4 or 5% interest rates ... the Fed has to normalize.”
Since that's not the way it's going, you're going to have to take control of your money future so you're not one of the big losers in the current situation. As always, you are in the best position to take care of your future. It's up to you to make the right decisions.
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