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  • Writer's pictureIshfaaq Peerally

Inflation is Good

💸 For the last 13 years, Central Banks have been printing money like crazy people and now they are telling us that we will see a little higher inflation. Should we be worried about it? Well, 𝙞𝙣𝙛𝙡𝙖𝙩𝙞𝙤𝙣 𝙞𝙨 𝙗𝙚𝙩𝙩𝙚𝙧 𝙩𝙝𝙖𝙣 𝙣𝙤 𝙞𝙣𝙛𝙡𝙖𝙩𝙞𝙤𝙣 𝙤𝙧 𝙬𝙤𝙧𝙨𝙚 𝙙𝙚𝙛𝙡𝙖𝙩𝙞𝙤𝙣. One of the problems of Bitcoin $BTC as a currency is that it is deflationary.

There are 4 𝙢𝙖𝙞𝙣 𝙩𝙮𝙥𝙚𝙨 𝙤𝙛 𝙞𝙣𝙛𝙡𝙖𝙩𝙞𝙤𝙣:

1. Monetary inflation - an increase in the money supply

2. Asset price inflation - increase in prices of investment assets, usually a result of monetary inflation

3. CPI inflation - increases in prices of goods and services

4. Core inflation - CPI inflation, ignoring changes in energy $OIL and other food futures prices.

🥇 Historically, 𝙜𝙤𝙡𝙙 $GOLD 𝙝𝙖𝙨 𝙗𝙚𝙚𝙣 𝙖𝙛𝙛𝙚𝙘𝙩𝙚𝙙 𝙗𝙮 𝙢𝙤𝙣𝙚𝙩𝙖𝙧𝙮 𝙞𝙣𝙛𝙡𝙖𝙩𝙞𝙤𝙣 (when it was used as a currency) since the more gold is mined, the more will be its supply. Of course, monetary inflation is bigger for fiat.

As for Bitcoin, if we look at it as an investment asset, it is gaining from asset price inflation, but if we look at it as a currency, it is deflationary and one of the main reasons why 𝘽𝙞𝙩𝙘𝙤𝙞𝙣 𝙘𝙖𝙣𝙣𝙤𝙩 𝙧𝙚𝙥𝙡𝙖𝙘𝙚 𝙛𝙞𝙖𝙩 𝙖𝙨 𝙖 𝙘𝙪𝙧𝙧𝙚𝙣𝙘𝙮.

🥺 If a currency is deflationary, people will save more rather than invest it or spend it. Everybody is investing in Bitcoin or gold because they want the price to go higher, not because they want to use it as a currency. 𝘿𝙚𝙛𝙡𝙖𝙩𝙞𝙤𝙣 𝙡𝙚𝙖𝙙𝙨 𝙩𝙤 𝙝𝙞𝙜𝙝𝙚𝙧 𝙪𝙣𝙚𝙢𝙥𝙡𝙤𝙮𝙢𝙚𝙣𝙩 𝙖𝙣𝙙 𝙡𝙤𝙬𝙚𝙧 𝙚𝙘𝙤𝙣𝙤𝙢𝙞𝙘 𝙜𝙧𝙤𝙬𝙩𝙝.

Normally, as the population and economy grows, the money supply should increase, therefore, 𝙖 𝙡𝙞𝙩𝙩𝙡𝙚 𝙞𝙣𝙛𝙡𝙖𝙩𝙞𝙤𝙣 𝙞𝙨 𝙜𝙤𝙤𝙙. Of course, High inflation or hyperinflation is bad.

🚀 As an investor, you should not be scared of inflation as you can always beat inflation by investing. If you're investing in a good business at the right price, it doesn't matter if the currency is seashells, Dollars, gold or Bitcoin, the business will grow if it is a good one and you will get the returns from the investments. Always focus on business fundamentals.

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