Inflation Outpaces Fixed-Term Rates: Is Bitcoin The Solution?

Fixed-rate savings interest typically runs higher than rates offered for standard savings accounts. When interest rates are high, capital is more expensive, and when interest rates are low, bank customers will not receive a satisfactory return. Without adequate return, banks lose purchasing power as other investment opportunities are sought. As inflation outpaces fixed-term rates, is bitcoin the solution?

In a September 15, 2020, interview with Stansberry Research, Robert Kiyosaki, author of Rich Dad, Poor Dad, said gold, silver, and bitcoin are investments in disaster. According to the author, “If everything was perfect, you wouldn’t need gold, silver, and bitcoin. Zero-interest rate policy (ZERP) says we don’t want your cash or savings.”

According to Kiyosaki, this current financial situation forces investors into the equity, real estate, or bond markets. He believes investors need to be better informed—and trade-in information. “There is no correlation between the price of a stock and the underlying fundamentals,” he added, “information is the key to the future, and you have to be up to date.” Kiyosaki is of the opinion that when a vaccine is released bitcoin, silver and gold may take a short-term dump, if this happens, he considers this to be a buying opportunity.

Capital flows to regions where inflation exceeds the cost of borrowing. Investors earn more by speculating in appreciating stocks, commodities, and real estate if they can borrow at 4% and inflation is 6%.

In China, India, and other countries in Southeast Asia and Latin America, borrowing costs are less than the commonly accepted valid rate of inflation. With companies and industries growing in these regions, stocks become doubly attractive to investors.

For years, pundits have promoted bonds over stocks when a market crash is on the horizon. While some bonds and bond funds may appear more stable than stocks, today’s unique situation maximizes bonds’ weaknesses and minimizes their strengths. With weaker returns in cash and money markets, liquidity may offer more significant benefits in the current economic environment.

Others see investment in real estate as unstable too. Bankruptcy, loss of jobs, vacancies caused by international college students’ restrictions, and eviction prohibitions have greatly reduced income from property investors.

Around the world, central banks have been fueling the markets with liquidity. In an interview, Jeff Booth, CEO of BuildDirect and author of The Price of Tomorrow, he commented that the government’s irresponsible money printing is exacerbating the mounting debt challenge compared to technology, where prices decrease efficiency is increasing. Booth believes money printing has created a competition between the “deflationary technology and the inflationary forces that stem from central banks’ monetary policies.” Furthermore, Booth thinks technology will ultimately win against money printing—resulting in the attachment of beleaguered national fiat currencies to bitcoin.

The stability bitcoin’s cap provides is one reason the global cryptocurrency user base has jumped 189% since 2018, as noted in the Global Cryptoasset Benchmarking study published by the University of Cambridge and Centre for Alternative Finance. The study found 101 million unique users enrolled in bitcoin and crypto-asset usage with service providers in the third quarter of 2020, which bodes well for bitcoin.