US inflation figures for June came in at a 40-year high at 9.1%, with the Federal Reserve being stuck between a rock and a hard place. As the numbers clocked in, Bitcoin witnessed a volatility spike, but ultimately traded at $20,000 once the market digested the ominous news.
The latest data from the US Bureau of Labour Statistics revealed that the official US Consumer Price Index for Urban Consumers increased by 1.3%, and 9.1% year-on-year.
The Consumer Price Index (CPI) is the most commonly used measure for inflation in the United States. It measures the average change of pricing for urban consumers for a basket of goods and services.
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The measure is widely disputed and regarded as non-representative of real inflation, however. Dan Morehead of PanteraCapital pointed out that real inflation is closer to 12.9% than 9.1%.
Actually, inflation is more like 12.9% versus 9.1%.
Using a real-time measurement for housing inflation, the Case-Shiller Index, in place of OER (owners’ equivalent rent) – a very slow-moving index introduced in 1982 – measures the real inflation people are experiencing. pic.twitter.com/JTFR7UBL43
— Dan Morehead (@dan_pantera) July 13, 2022
The discrepancy in figures brings into question whether the Federal Reserve, and by extension Central Bankers more broadly which are following Paul Krugman‘s modern monetary theory are fit for purpose. Commenting on the jaw-dropping data, the multi-millionaire economist said he “doesn’t think this matters much”.
Across the North Atlantic, Europe is not fairing any better, with most countries experiencing between 6%-18% inflation. Germany’s inflation figures hit 8.1% in May. That number came down slightly at 7.6% as of June 2022.
Inflation in Europe.
The countries located close to Ukraine got hit hard by the way, in particular the Baltic states which used to import a lot of natural resources such as wood and metals from Ukraine and Russia.
They’ve been building new supply chains since March. pic.twitter.com/hUNNorITA0
— Visegrád 24 (@visegrad24) July 10, 2022
A persistent 9.1% inflation rate means people’s US Dollar savings accounts will be halved in real terms within 6.5 years. Comparatively, since June 2015, Bitcoin has increased 8,560% against the Dollar.
According to former Bitmex CEO Arthur Hayes, hyperinflationary collapse is an inevitable consequence of global de-dollarisation accelerated by the mishandling of the Russia-Ukraine war. And with an official recession around the corner, US authorities may have to pick their poison – an economic depression, or persistently high inflation.
Bitcoin’s price fluctuated on the announcement, with price increasing to $20,400, only to plummet to $18,900 a few minutes later. Buyers then stepped in again, taking advantage of the flash sale, sending BTC back to $20,000. At the time of this writing, the total liquidations for the day came in at $257 million, $64 million of which happened during volatile session, according to data from Coinglass.
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