According to German Chancellor Angela Merkel, it is the biggest crisis since the Second World War. Looking at the stock market, it is the biggest slump since 1987 and, in terms of dynamics, the biggest slump ever. The COVID19 aka Coronavirus keeps the world in a state of breathless shock, or rather to those who do not have a problem in this regard. It not only affects the financial markets, but also the real economy through the quarantine measures.
Despite the launch of one emergency programme after another, experts expect at least a medium-term recession. Some are even already drawing a comparison with the Great Depression of 1929 to 1932, when the world economy went through its biggest crisis to date.
Is the coronavirus really the only cause?
Many experts agree that the virus is only the trigger of a long overdue recession. Inflated financial markets, cheap loans, negative interest rates and zombie companies that only survive because the banks keep them afloat are all signs that the system has reached its limits.
The central banks‘ stimulation possibilities have largely been exhausted, with key interest rates at zero. The only thing they can do now is to print money.
The problem that currently exists is that not only is the money supply to help companies and private households being drastically increased, but economic activity is also collapsing. Less economic output with the money supply remaining the same means inflation. More money, same economic performance means inflation. Now both come together. The real danger of strong inflation, if not hyperinflation, as there was in Germany in the early 1920s, is hard to argue away.
Gold and Bitcoin as ways out of inflation
Novogratz recently twittered that this will and must be the year of Bitcoin.
In making this statement, Novogratz probably had the above-described facts of the state of the current financial system in mind. Bitcoin has a fixed amount of coins, which can only be changed with the permission of the majority of the hash power.
Bitcoin has properties like gold. You cannot create Bitcoins out of thin air at the push of a button and create inflation. Should there really be a strong devaluation of money in the coming months, people will look for investment opportunities and Bitcoin is relatively easy to handle, fairly easy to transport, limited in quantity and only multiplies at great expense. It is possible that Bitcoin will emerge from this crisis as a safe haven. We will see.