Inflation in the USA during the COVID-19 pandemic
Through demand and supply-side distortions, the COVID-19 pandemic is the primary factor driving excessive inflation and perpetuating the economic collapse.
The Consumer Price Index (CPI) in the United States of America is a strong indication of the current economic crisis. The CPI is used by economic experts to evaluate changes in the price level of a representative "basket" of consumer goods and services.
Having that said we can easily analyse the fact that the CPI in the United States increased by 7.9 percent annually reaching 284.18 points, the largest annual increase in four decades. Unfortunately this could very well mean that consumer price inflation is unlikely to lessen anytime soon.
Advertisement
The Inflation is mainly accelerated by the rising costs of energy and food. The overall energy index rose by 27% in the year prior to January, while the overall food index rose by 7%.
What are our options?
Without a doubt, investors and savers are anxious about what to do with their money in light of this development. This is not a straightforward matter, and there are numerous viewpoints on how to preserve money in the face of excessive inflation.
A clever diversified portfolio of inflation-safe investments, in my perspective, is critical for mitigating inflation's consequences. Assets such as real estate or commodities should be also considered. According to Zillow, The average price of a middle price tier home in the United States increased by 20.3 percent during the last year.
Advertisement
Property prices rise when inflation is high because investors seek assets that provide returns greater than inflation. Additionally, we can say that property is scarce in relation to fiat currency, while the price of constructing a home rises in tandem with inflation.
Utilising cryptocurrency potential as an inflation hedge
The latest tool in the struggle against inflation is Bitcoin. In more recent times, institutional investors seems to be gravitating towards Bitcoin, presumably because they perceive it to be a more effective inflation hedge than gold. If we look at the bigger perspective, I believe that cryptocurrencies will be an excellent long-term inflation hedge.
Conclusion
We are all hoping for good news in the next period. COVID-19-induced economic inefficiencies are quite expected to subside in the second half of 2022, providing some kind of a relief from the inflation. Until then, individuals should be cautious with their finances.
This article is solely Dr. Yaşam Ayavefe's personal viewpoint. It is not intended to be financial advice or an endorsement of any provider, product, or service.
Find out more about Dr. Ayavefe and his work here:
