From those muds, these muds. From that exacerbated printing of money, this inflation. The Federal Reserve of the United States has announced a interest rate hike by 0,75%, which is the largest increase in the last 28 years.
How does the rise in interest rates affect you?
If you are in Europe, the impact will not be felt too much in your pocket for the time being. For now. The European Central Bank (ECB) has been more cautious than its American counterparts when it comes to raising interest rates. Even so, they have already announced that, starting in July, the price of money will also rise by 0,25% and sovereign debt purchase programs will end. But let's get to the point: how will it affect you on a day-to-day basis?
Mortgages are more expensive
This is the most visible consequence. The mortgage is the main expense of Spanish families, and with this increase, those that have a variable rate and are linked to the Euribor will be the most affected. In real data, in Spain, approximately, 4,1 million mortgages are of this style. Their fee will be recalculated once the renewal period, which is usually annual, expires.
There will be no problem for fixed-rate mortgages that have already been signed. However, new mortgages will also have to go through the hoops of this 0,25% increase and whatever their banks consider. First conclusion: less money in circulation and more money in the banks.
More interest on savings
However, if those with mortgages will find it more difficult to pay them, those who still have their money in savings accounts or investment assets will benefit from the rise in interest rates. With this increase in the cost of money, banks are expected to once again offer their customers incentives to keep their money "safe". Those who save will be rewarded.
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The risk of a recession
In the end, if all is said and done, the increase in the price of money can cause the economy to contract, leading to a crisis and, ultimately, a recession. If on the one hand, money is withdrawn from circulation, encouraging savings, and on the other, it is withdrawn, taking it away from families, who have to pay more for their mortgages, there will be less FIAT to consume, causing a contraction of the economy, which, on other occasions, has caused a recession and thousands of layoffs.
Everything against fiat money inflation
The moves by both the FED and the ECB are triggered by the increase in the printing of paper bills caused by the COVID-19 pandemic. The economic stimulus aid has now caused, together with the global geopolitical situation, inflation to skyrocket to levels not seen for several decades. The solution? Going after families again to try to fix the mess with a measure that, in the short term, will mean: higher prices (inflation will not go down overnight) and, in addition, less money due to having to pay more interest on the mortgage.
With Bitcoin, however, since it has a production limit of 21 million and is deflationary, this would not be the case. There is no possibility of printing more, of creating more. The 21 millionth BTC will be the last. Will we still believe in fiat money by then?
