Bukele’s Blunt Warning on Fiat: ‘Just Stop Printing Money!’ Amidst Inflation Spike

Nayib Bukele, the President of El Salvador, known for his bold moves in the crypto world, recently delivered a stark message to the US Federal Reserve (Fed). His tweet, a direct and somewhat exasperated plea, is making waves amidst growing global concerns about inflation and the future of fiat currencies.

Why is Bukele Telling the Fed to ‘Stop Printing Money?’

Bukele’s tweet, “Can you guys just stop printing more money? You’re just going to make things worse. Really. It’s a no brainer,” was triggered by comments from Fed Chair Jerome Powell before the Senate Banking Committee. Powell hinted at potentially speeding up the tapering of bond purchases, a move acknowledged by both Democrats and Republicans concerned about soaring inflation.

According to the Nov. 30 report from Bloomberg, the Fed chair’s comments before the Senate Banking Committee this week. More so, Both Democrats and Republicans have equal concerns about high prices and inflation.

Furthermore, He urges the Fed to start to wrap up its bond purchasing scheme earlier than the normal mid-2022 target.

Also, The word “tapering,” in use, means a gradual slowing down of purchases of securities and bonds.

More so, The central bank is effectively printing money to buy bonds, targeting at pushing down interest rates which are currently at 0.25%.

Let’s break down what’s happening:

• Tapering: This is the key term right now. It refers to the Fed gradually reducing its bond purchases. Think of it as slowly turning down the money printing machine.
• Why tapering? The Fed initially started buying bonds to inject money into the economy and lower interest rates during economic uncertainty. Now, with inflation rising, they are considering slowing down this process.
• Inflation Concerns: Both sides of the political spectrum in the US are worried about rising prices. This bipartisan concern adds pressure on the Fed to act decisively.

The Fed’s Money Printing Explained: How Does it Impact You?

When we talk about the Fed “printing money,” it’s not literally about physical banknotes. It’s more about a process called quantitative easing. Essentially, the central bank creates new digital money to buy government bonds and other securities from banks.

Why do they do this?

• Lowering Interest Rates: Buying bonds pushes bond prices up and interest rates down. Lower interest rates make borrowing cheaper for businesses and individuals, theoretically stimulating economic activity.
• Economic Stimulus: In times of economic slowdown, like during the pandemic, this measure is used to encourage spending and investment.

However, there’s a potential downside:

• Inflation: Injecting more money into the economy can lead to inflation. If there’s more money chasing the same amount of goods and services, prices tend to rise. This is precisely what Bukele and many others are worried about.
• Devaluation of Currency: Over time, excessive money printing can erode the purchasing power of a currency. Your dollars might not buy as much as they used to.

Is Inflation Really That Bad? The Data Speaks

Bukele’s concerns are not unfounded. The economic data is increasingly pointing towards a significant rise in inflation, challenging the narrative that it is merely “transitory,” as the Fed initially suggested.

More so, as per the Federal Reserve Bank of St. Louis Economic Research (FRED), the five-year breakeven inflation rate spikes to over 3% in November. Notably, this is the highest level for more than two decades. Consequently, the consumer price index for all urban consumers (Core CPI), measuring the average cost of goods less food and energy, is also at an all-time high.

Additionally, The figures shows clearly that the situation is not “transitory” despite what the Fed claims.

Key Inflation Indicators:

These figures suggest that inflationary pressures are not fleeting. The rising breakeven inflation rate indicates that investors themselves anticipate inflation to persist for years to come.

Bukele’s Fiat Currency Critique: A Broader Perspective

Bukele’s tweet is more than just a comment on current Fed policy. It reflects a growing unease about the long-term implications of fiat currency systems, which are government-issued currencies not backed by a physical commodity like gold.

His strong stance against money printing aligns with a broader sentiment, particularly within the cryptocurrency community, that:

• Fiat is inherently inflationary: Because central banks can theoretically print unlimited amounts of fiat currency, there’s always a risk of devaluation through inflation.
• Alternative Systems: Cryptocurrencies like Bitcoin, with their limited supply, are often presented as a hedge against fiat inflation. El Salvador, under Bukele’s leadership, has adopted Bitcoin as legal tender, signaling a move away from traditional fiat dependency.

Bukele’s outspoken criticism resonates with those who believe that continuous money printing by central banks is unsustainable and ultimately detrimental to the value of fiat currencies.

What Does This Mean for the Future?

Bukele’s warning, while pointed, is a reflection of widespread anxieties about the current economic trajectory. The Fed’s actions in the coming months will be crucial in determining whether inflation can be brought under control without stifling economic growth.

Key takeaways:

• Inflation is a real concern: Economic data supports the view that inflation is not just “transitory.”
• Fed’s Tapering is Critical: How quickly and effectively the Fed tapers its bond purchases will be a major factor in managing inflation.
• Fiat Currency Debate: Bukele’s comments highlight the ongoing debate about the sustainability of fiat currencies and the potential role of alternatives like cryptocurrencies.

Whether the Fed will heed Bukele’s blunt advice remains to be seen. However, his message serves as a potent reminder of the growing global unease surrounding inflation and the policies of central banks in the fiat era.

Photo credit : Forbes

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