The way it goes:
• A crisis starts (eg. Covid-19 in March 2020)
• The government prints money to stimulate continued economic growth
• Inflation and the circulating amount of money increases
• People get more money –> they now both invest and spend more money
1/6
• A crisis starts (eg. Covid-19 in March 2020)
• The government prints money to stimulate continued economic growth
• Inflation and the circulating amount of money increases
• People get more money –> they now both invest and spend more money
1/6
• Both asset prices and consumer good prices increases
• People get richer, so they increase their spending and take out loans to buy even more (houses, cars, luxury goods, stocks, crypto, bonds, etc.)
• Eventually, the government loses track of inflation
2/6
• People get richer, so they increase their spending and take out loans to buy even more (houses, cars, luxury goods, stocks, crypto, bonds, etc.)
• Eventually, the government loses track of inflation
2/6
• Money printing stops & government stops buying assets
• FED increases interest rates
• Now you have to spend more money on your loans = less money to buy assets and consumer goods
3/6
• FED increases interest rates
• Now you have to spend more money on your loans = less money to buy assets and consumer goods
3/6
• Both the government and you are not buying assets, in fact there’s a sell-off because people need to pay down their loans
• Your net worth decreases, your assets are tanking, you’re losing money & now you’re sitting with house & assets with loans that are more expensive
4/6
• Your net worth decreases, your assets are tanking, you’re losing money & now you’re sitting with house & assets with loans that are more expensive
4/6
to pay down (increased interest rates) + they’re worth less than before.
• You have to sell off assets with a loss to cover the loans
• You have less money to spend
• Companies goes bankrupt because people don’t buy their goods
• You are losing your job
5/6
• You have to sell off assets with a loss to cover the loans
• You have less money to spend
• Companies goes bankrupt because people don’t buy their goods
• You are losing your job
5/6
• People are forced to sell their houses
.....
For the long-term, I still believe massively in the crypto industry, in DeFi, and all the builders.
Maybe this is the bottom. Who knows?
Btw, this TLDR is very simplified...
6/6
.....
For the long-term, I still believe massively in the crypto industry, in DeFi, and all the builders.
Maybe this is the bottom. Who knows?
Btw, this TLDR is very simplified...
6/6
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