Inflationary Pressure: How Gold & Bitcoin Compare in the ’70s & ’20s

• This article compares how gold and Bitcoin have responded to inflationary pressures between the 1970s and the 2020s.
• In the 1970s, gold appreciated 1718%, Fed Funds increased 121%, US CPI rose 108% and S&P appreciated 27%.
• In the 2020s, Fed funds have risen 189%, Bitcoin 146%, S&P 28%, Gold 17% and US CPI 16%.

How Gold And Bitcoin Respond To Inflationary Pressures

The 1970s: High Inflation And Elevated Interest Rates

During the 1970s, investors experienced colossal inflation with rising interest rates in an economy of stagflation. Despite this, unemployment remained at record-low levels. During this decade, gold appreciated by 1718%, Federal Funds went up by 121%, US Consumer Price Index (CPI) grew by 108% and the S&P 500 index rose 27%.

The 2020s: Positive Performance For Assets

In comparison to the 1970s, many assets are performing more positively in the 2020s. Federal Funds have appreciated by 189%, Bitcoin has grown 146%, S&P 28%, Gold 17% and US CPI 16%.

How Are Investors Reacting To Inflationary Pressures?

Many investors are trying to accurately pinpoint where we are in previous cycles or decades. Although each cycle or decade may differ slightly due to certain narratives such as high inflation and elevated interest rates similar to those experienced in 1940’s financial repression (i.e., when inflation is much higher than interest rates resulting in negative real returns), understanding past trends can help us be better prepared for future ones.

Conclusion

Comparing past cycles or decades can help us better understand how different assets respond to inflationary pressures which then allows us to make more informed decisions about our investments moving forward. Although there may be some similarities between cycles/decades that allow us to draw conclusions from them, ultimately each situation is unique and must be treated as such when making investment decisions.

Takeaways

• The 1970s saw high inflation with rising interest rates while unemployment remained low. • Assets performed differently between these two eras; gold appreciated 1718% in the 70’s while it only increased 17% in the 2020’s whereas Bitcoin grew 146% this decade compared to a rise of 0% thirty years ago. • Understanding past trends can help us prepare for future ones but ultimately each situation should be treated uniquely when making investment decisions.

Kommentare sind geschlossen.