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Sticky Inflation in 2023


Inflation is when the prices of the same goods rise, creating a devaluation of currency. It is something that can’t be predicted, changed, or determined by a single factor. Instead, it is a combination of various elements that actually influence inflation. These elements include increased money supply, currency devaluation, monetary and fiscal policy, demand pull inflation, and cost push inflation. Many people think that inflation is currently in a transitory state, something that Bill Blain, in his interview on MacroVoices, clearly refutes. He suggests that inflation is actually sticky, meaning it adjusts slowly to economic conditions. This is an issue for the government in that when they try to bring inflation down, they don’t actually know where it is in the first place. 

BRICS and De-Dollarization

One major concern for the devaluation of the American dollar is BRICS- a currency coined by Brazil, Russia, India, China, and South Africa. Foreign governments want to stop their reliance on the dollar, and this new currency is a perfect way to do that. BRICS seems like a good idea in theory as it would reduce reliance of the US dollar on a global stage, encourage countries to form alliances, and would be better suited in an uncertain economic state, but it also wouldn’t be freely exchangeable like the dollar, and it also doesn’t have a deep or liquid bond market. Other questions remain, like are India and Brazil developed enough to roll this currency out? Can they fix messes within their own country first? There are issues with BRICS, but it definitely is a threat to the devaluation of the dollar, something that Bill Blain says will probably happen soon anyway. Dedollarization is coming, the question is just when, and when it comes, what will the next step be? How will it affect the US economy? These are questions that need to be answered.

Innovation and Precious Metals

While inflation remains sticky, innovation is needed. Innovation is always needed, but especially in times like today. AI is booming. AI this AI that, it seems like it is everywhere these days. It is setting the stage for one of the biggest periods of innovation in our time. Entrepreneurs and investors must take advantage as every opportunity is gone as quick as it arrived. While innovation is key, investors must remain patient and not gamble. Uncertain markets should lead to defensive strategies. Investors should focus on preserving capital and getting a return. This is where alternative assets come into play. Assets like gold and copper should be looked at, but in different time lenses. If you feel that the economy will continue to be uncertain, gold is your best bet. As the economy gets more unstable, gold goes up as it is a stable physical form of currency. On the other hand, if you feel that the economy will return to its prior form, then copper is a good investment. As electricity levels go up, copper will go up in price. As you can see, there are many future investment opportunities, you just have to remain patient.

Patience is key

Overall, inflation isn’t just some trend, it is here to stay. This means that investors must be careful and patient. Investors should still invest, as money in an account sits there and loses value due to inflation. These investments should just be focused on garnering a return instead of hitting it big quickly. With inflation comes an uncertain economy, something that affects everyone everywhere. New currencies are coming to surface as de-dollarization begins and other countries want to reduce their reliance on the US dollar. With all of this uncertainty surrounding the global economy, it is no surprise that central banks and economists are scrambling. The only thing that investors can do is sit back and be patient, investing small amounts into risky avenues while investing large amounts of capital into safer, more reliable things. This strategy should allow you to keep afloat during these uncertain economic times.

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