‘Hyperinflation’ and ‘Societal Collapse’ – Why the Fed and Inflation Could Make the Bitcoin Nightmare Come True
Inflation has soared to multi-decade highs in the US and around the world this year after an unprecedented economic shock and record stimulus measures by the Federal Reserve – giving stocks as well as bitcoin and cryptocurrencies a huge, artificial boost.
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Now one of the world’s largest hedge funds has warned that the global economy is heading for hyperinflation and risks societal collapse if rising prices are not reined in.
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Some fear that skyrocketing inflation could turn into hyperinflation and even societal collapse – potentially … [+]
The world is “on the path to hyperinflation,” which could potentially lead to “global societal collapse and civil or international strife,” Elliott Management, the $56 billion hedge fund founded by Wall Street legend Paul Singer, wrote in a note to clients this week. by Financial Times.
The “extraordinary” era of cheap money since the 2008 global financial crisis is coming to an end, producing “a set of outcomes that will be on or off limits for the entire post-World War II period,” Elliott analysts wrote, adding that even experienced ” investors should not assume they have “seen it all.”
After a massive multi-billion dollar asset price boom that catapulted high-growth stocks and cryptocurrencies into the stratosphere, Elliott has warned people to prepare for “a severe adverse decoupling[ing] of the alt-bubble,” pointing to a number of “frightening and seriously negative possibilities.”
This year, global stock markets have recorded losses of $28 trillion, according to data compiled by Bloomberg, while the bitcoin and crypto markets have seen $2 trillion of value wiped out. The S&P 500 has fallen 20% since its peak in 2022 with the Nasdaq down a third.
US inflation, which has recently soared into double-digit percentages, has been blamed on pandemic-induced supply chain disruptions rather than the Fed’s ultra-loose monetary policy, which Elliott analysts have labeled “dishonest”.
In the US, consumer prices are rising at a pace not seen since the early 1980s, with inflation rising to 10.1% in September, up from 9.9% in the year to August. Some other countries around the world have seen even steeper price increases.
Meanwhile, bitcoin supporters, who argue that the cryptocurrency is more akin to digital gold than a currency, have called for a return to sound money based on finite assets like bitcoin, which has a fixed supply of around 21 million coins.
Bitcoin buyers are betting that the bitcoin price will recover from a period of decline, with some pointing to bitcoin’s next so-called halving which will see the supply of bitcoin issued by the network of miners securing it cut by 50%. The next bitcoin halving, which will be the fourth, is tentatively expected to happen in March 2024.
“External macro forces will play a role,” Charlie Erith, chief executive of ByteTree Asset Management, wrote in an emailed comment. “In this current tightening cycle, risk assets in all denominations have come under pressure against the US dollar.”
“Depending on the duration of inflation and, or the government’s ability to tolerate lower growth, it is reasonable to suggest that we will see an adjustment in the rate of change at some point in the remainder of this halving era.”
