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Global Inflation Surprise Index approaches a 5 year high, alternative investments like Bitcoin to surge?

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With most of the countries following a Credit based economy to attain their developmental goals, they are unknowingly and slowly hampering their economy. The countries opting for debt based structure would have to see a significant improvement in overall economic performance to match up the void created by the model. Many a times, this is where economies lack resulting in crippling inflation whose effects last for longer than anticipated. Currently ‘Global Inflation Surprise Index’ is at all time high which is ominous for all the countries. Let’s dive deep into understanding what this means and how alternative investments would come in handy:

Inflationary Cycle:

Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time resulting in a loss of value of currency. When the price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy. During inflation, people’s confidence in the currency decreases which leads to increased investments in alternative investments like Gold, foreign currencies and exotic commodities to hold the value of investments.

Global Inflation Surprise Index and its implication:

 

Global Inflation Surprise Index measures surprises in Inflation as compared to expectations. This means how high or low the inflation is as compared to the expectations/forecast of the analysts. As per Bloomberg, the Index is at the highest for the first time in more than five years. The reading turned positive in December and continued to stay so. This means that the inflation data is higher than expected for the first time since 2012. This is alarming as the index takes into account the status of all the countries and with Venezuela, Brazil and European Union in turmoil; things are more complicated than they appear.

How Bitcoin and alternative investments get impacted:

During the period of inflationary crisis, people invest in stable foreign currencies, gold and any commodity that can act as ‘store of value’. Bitcoin has dubbed itself as a very reliable store of value and earned the name of ‘Digital Gold’ owing to its non-correlation with other commodities. Hence we can expect  steady rise in Bitcoin prices over period of time powered by debt stricken economies around the world. In good measure, Bitcoin might as well go onto become a transactional resource as it was intended to in the first place.

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