Right now, the U.S. is experiencing fiscal-driven inflation.
Since the start of the pandemic in March 2020, the U.S. government has spent an estimated $9 trillion in stimulus and money printing.
Add in the reopening of the economy… pent-up demand from consumers… supply chain bottlenecks… and labor shortages… and you get rising inflation.
You’ve likely seen extreme price increases reflected in commodities like housing and gas… real estate… groceries… and even used cars.
And the numbers confirm it.
As measured by the “Consumer Price Index” (CPI), inflation was up 8.5% for the trailing 1-year ended March 31. To put that into perspective, that’s the biggest year-over-year gain since 1981.
So with inflation hitting record highs, it’s no surprise that the Federal Reserve is growing increasingly hawkish.
This past Thursday, Fed chair Jerome Powell told an International Monetary Fund panel that the Fed was considering more aggressive monetary policy tightening…
That includes a potential half-percentage point hike to the Fed Funds Rate when the Federal Open Market Committee meets next month.
He said that it’s “appropriate” for the Fed to move “a little more quickly” to raise rates than it has in the recent past… and stabilizing inflation was “absolutely essential.”
With record-high inflation and the Fed playing catch-up, the real Fed Funds Rate is now negative 8%… And that means most traditional savings and income vehicles also have negative real yields.
Let me explain what that means…
In normal times, investors can make a positive “real” yield. That means their yield on a government bond is greater than inflation.
For example, if a bond pays 3% interest and inflation is 2%, your real yield is 1%.
As long as you’re earning a positive real yield, you maintain and grow your purchasing power.
But when real yields go negative, you’re no longer maintaining your purchasing power.
Today, the average savings account yields 0.06%… the average 3-year CD yields 0.22%… the 10-year Treasury yields 2.9%… and the average U.S. corporate bond yields 3.87%.
Subtract 8% from any of those options, and you’re in the real red.
Now that we know the current bout of inflation is no longer “transitory,” you need to think outside of the box to find new sources of income.
And while it’s worth noting that bitcoin and crypto took a hit after Powell’s comments (and that we believe that will be a short-term dip)…
There’s a subclass of cryptocurrencies that consistently beats inflation and the market… no matter which way things are headed.
Some even pay rates between 5,000 to 30,000 times higher than traditional savings accounts… and blow away the yields you’ll find in the anemic bond market.
The Outside the Box Way to Beat Inflation
The subclass of altcoins I’m referring to makes automatic payouts we call “crypto income.” (Longtime readers may also know them as “Tech Royalties.”)
They have the explosive upside potential of small cryptos while also paying you income.
These income payouts are somewhat similar to stock dividends. But you receive more of the underlying crypto instead of being paid in cash.
And a coming event will push crypto income into the limelight.
It’s called “the Merge.”
In a sense, the Merge will be an upgrade to Ethereum… from a Proof-of-Work (PoW) protocol to a Proof-of-Stake (PoS) protocol. And we expect it to happen sometime this year.
I don’t want to get into the weeds on this, so you can read Daily editor Teeka Tiwari’s explanation here…
But the important thing is that the Merge is guaranteed to happen… and we’ll see as much as a 90% reduction in new ETH coming to market as a result.
So after the Merge, there will be fewer ETH tokens in circulation – making each more valuable.
This presents a huge opportunity for Ethereum. And it’s one reason Teeka believes it will 10x over the coming years.
And as more big money pours into Ethereum, it’ll invariably find its way into a small class of altcoins that also uses PoS.
Because these tokens use the PoS model, you not only have an opportunity to see 3x, 5x, and even 10x returns on an investment of just a few hundred dollars…
You’ll also collect additional crypto income on top of those incredible gains.
Analyst, Palm Beach Daily