Crypto is set to benefit immensely over the coming years as the wheels begin falling off the fiat system. While may have delayed the social and economic impact of the situation we face, it is becoming more apparent that kicking the can down the road only proliferates the problem.
A mass awakening to this is sweeping across the planet, as more people come to the realization that there is something deeply wrong with the current fiat system. With that, the search for alternative ways to exchange value has crypto in contention. And while no-one currently knows all of the answers to the practicality of this scenario, based on the Venezuela example, it’s only a matter of time beforeIn Venezuela fiat currency is literally garbage. — Dan Held (@danheld)
Businesses of all Size are Struggling
Small businesses account for . But a recent survey conducted by LendingTree shows that optimism from small business owners is at a low. As small businesses begin to re-open across the US, many small business owners are expressing reluctance to do so. The main reason given is is a . This can only mean that the trillions printed so far have not found their way to where it is needed most.“Approximately 46% of small business owners cite funding as the primary obstacle to reopening, and that once open, increased health and safety measures could further stifle sales.”As devastating as that is for the US economy, big businesses as a whole aren’t fairing any better, especially those that operate in the travel and automobile sectors. The biggest scalp to come undone recently is , which filed for bankruptcy protection in the US after it failed to meet a payment deadline with creditors. The 102-year car rental business relies heavily on revenue from airports, which has all but dried up as travel restrictions were enforced. The knock-on effect is seeing a glut of cars flood the used sector, as Hertz desperately tries to liquidate assets.
Negative Rates Incoming?
With that, the Fed, and central banks around the world, are fast running out of options. One thing left to try is negative interest rates. Or in the case of the European Central Bank and Bank of Japan, further negative rates. The holds that commercial banks would pay interest on the deposits they hold with the central bank. This, in turn, would encourage commercial banks to minimize those deposits by lending funds, and so economic activity is stimulated as borrowers spend. Passing this down the line at a retail level means borrowers are paid to borrow money, but savers are penalized for being prudent. As backward as that sounds, President Trump is all in with this idea. He recently his approval of negative rates by calling it a “gift.”
“Negative rates are not a gift. They are a transfer of wealth from savers to debtors. But the inflation created to make negative rates possible will hurt wage earners too, plus the overall economy will be less productive and living standards will be lower as a result.“
Crypto Can Capitalize From the Madness
The operative word here is backward. Such has been the absurdity of economic policies to date that we now potentially find ourselves in a situation where savers pay banks for the privilege of holding their money. Notwithstanding the inflationary element of over stimulus, the real question is where do savers turn in the event of negative rates? And the answer is towards a truer free market in crypto. The interest rates on crypto saving accounts are based on market prices, determined by individual lending platforms. When demand is high and supply is low, interest rates go up. Many are available, with AAVE paying up to 11.83% on deposits.
