June 2021 was the month with the highest year-on-year inflation in the United States, federal government officials announced.
Inflation was 5.4% from June 2020 to June 2021, a percentage of inflation that occurred since August 2008 (5.4% also), during the financial crisis.
According to a bulletin of the United States Department of Labor, published this Tuesday, July 13, price inflation in different areas such as food (0.8%) and personal items, energy (1.5%), transportation and others such as hotels (7.9% per the holiday season). Annual inflation registered in June had an increase of 0.9 compared to May 2021.
The monthly inflation rate for 2021 significantly exceeds that of 2019 and 2020, and continues to trend upward for the coming months of this year. Source: inflationdata.com
In what could be considered the result of a reduction in supply over demand, used car prices have had an increase of 10.5 points in June, what The New York Times attributes in its report to the semiconductor shortage that could be delaying the manufacture of new cars.
The chips or semiconductors key hardware parts are sought after in the electronic systems industry. Although they are also highly demanded by the mining of Bitcoin and other cryptocurrencies, this industry has not experienced a price increase in its equipment or ASICs at this time, but on the contrary, they have fallen due to the exodus of miners from China.
Markets on alert for possible financial instability
The authorities’ report regarding the generalized increase in consumer prices during June has raised the alerts of economists and market analysts.
According to Lyn Alden, a macroeconomist and bitcoiner, this is an inflationary phenomenon strictly linked to the US economy and fiscal stimuli.
“Since the US gave more fiscal stimulus, we are growing and recovering fast, but we are also heading towards more inflation,” explained Alden.
This notion is also shared Robin brooks, Chief Economist of the Institute of International Finance (IFF). In addition, Brooks attributes the enormous inflation of the United States, relative to Europe and Japan, to the “massive fiscal stimuli” of the North American country, reason why does not consider inflation to be transitory, or that its impact may be dissipated by artificially reducing demand in some markets, as White House advisers pointed out earlier this year.
Inflation in the United States, the European Union and Japan, according to their annual percentage. Source: Robin Brooks / twitter.com
For their part, Alden and other analysts commented that while inflation increases in the United States, the so-called “base effect” could be occurring in commodity markets and value reserve assets. Where a reduced perspective shows that these markets have apparently stable indices and prices, when in reality they are highly variable in the short term. This can cause a misdiagnosis in the trading analysis, since they generate the expectation that they will constantly protect value, when in reality you can lose money in the short term.
Such may be the case with gold, that it has not had a major variation in its price before the inflation report of the authorities. During May, the price of gold fell from roughly $ 1,900 an ounce to $ 1,800 an ounce, according to Investing.com; but this same portal shows how the price of gold currently oscillates at the same levels of May and June of last year (2020).
Since June 2020, the price of gold futures has remained between $ 1,717 and $ 2017 per ounce. This could generate a base effect of doubtful stability and without calculated risk. Source: Investing.com
This leaves the certainty that gold has not increased its price in parallel with the rest of the world’s assets and products, it has not accompanied or protected the value, but the opposite could be thought as we move away or approach the graph.
Analyzing these markets from various perspectives is important for those who maintain investments in these commodities, since they tend to strengthen in the face of inflation episodes, but their recent behavior denotes certain variability that could also be considered as an indication of investment risks.
Fiscal stimulus brings inflation: Bitcoin and gold may get stronger
Like gold, fiscal stimulus and inflation could be the catalysts for bull cycles for Bitcoin.
As we have reported in CriptoNoticias, the stimulus packages of the Joe Biden presidential administration, as well as the possible increase in the federal budget for next year, and the country’s external debt, can create the perfect conditions for assets of safeguard of value such as bitcoin (BTC) increase in price.
This has been recognized even by Jerome Powell, Chairman of the US Federal Reserve, who claimed at the end of April 2021 that money printing policies coordinated by his body can benefit cryptocurrencies.
In an interview with CriptoNoticias, David battaglia, a financial analyst and investor, stated that this would be the main reason why bitcoin, gold and other commodities would appreciate as monetary policies of this type continue to be implemented.