Inflation CPI just hit 7.9% in February 2022. This was the highest level in 40 Years and it could march higher to over 10% in coming months as gas and oil prices surge higher. That means Jerome Powell and the Federal Reserve are going to need to hike interest rates and tighten the money supply.
Historically, these type of inflation spikes in America cause Recessions and Market Crashes. Each time inflation went above 5% in the last six decades a recession soon followed, to go along with a Stock Market Crash and Housing Crash.
That’s because inflationary spikes lower consumer spending and lead to the Fed tightening monetary policy. The Fed and Jerome Powell just stopped money printing and now are going to hike interest rates. These could be big headwinds to the economy and create a Deflationary Crash.
If a Recession and Deflationary Crash come, the best option could be to hold Cash. This would increase a savings buffer in case someone lost their job during the Recession and also provide for liquidity in to buy cheap assets after the crash (Note: this is NOT Financial Advice).
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