Every year, the value of financial assets in the Western world increases – Europeans, Americans and Asians have never had so much money on the books as they do today. However, this is not due to high interest rates, which increase capital, but to sheer austerity, which has become more entrenched due to the pandemic.
Meanwhile, inflation is nibbling away more and more of the hard-earned wealth of most savers and eroding the purchasing power of savings at a rapid pace. Those who continue to rely purely on their bank interest rates as the only income source, have no chance of long-term, solid wealth accumulation and face the spectre of a drastic loss of wealth.
Inflation: wealth loss that many have never seen before
The first signs of this trend can already be seen, only recently the U.S. Bureau of Labor Statistics published a 8.6% increase in consumer prices compared to the same month of the previous year. This is the highest level since December 1981, putting pressure on employers to raise wages to keep pace. Similar figures are also being reported from other countries, predominantly in Europe, with the main price drivers almost universally being housing, energy and travel.
Thus, those who have to commute long distances to work in their own cars and those who live in urban areas with high rental rates are particularly affected. Although property prices have risen steadily in recent years, rental rates have galloped away from them. No wonder, given that there has never been so much new money being printed as during the coronavirus epidemic.
Last year alone, the M2 money supply of the world’s major reserve currency – the United States Dollar – rose by over 25% to a new all-time high (see Figure 1). Yet this is not unique to the US-Dollar, since we saw similar money printing rates for other fiat currencies as well. As a result, negative implications for all savers are imminent.
The biggest problem with inflation is that it works insidiously and most people only notice it when it is too late. In the days of our parents and grandparents it was easy, as you could still achieve your dream of owning your own home with a savings book and high interest rates – today this is a relic from the past. If you save money these days, one thing is certain: it is worth less and less. In the current interest rate environment, banks can hardly pay out any interest and inflation eats up these few meagre percentages (see Figure 2).
As shown in Figure 2, real yields on overnight deposits have never been so low for such a long period of time. This combined with a significant increase in inflation could capitalize demonetization into new dimensions that perhaps only our grandparents experienced in their younger years. Correspondingly large losses are soon coming to today's savers.
Outsmart inflation and invest wisely
Slowly but surely, interest in alternative investment options such as shares or funds are on the rise. Nevertheless, there are still large sums of money lying around in savings accounts, where the value is slowly melting away. One investment alternative in particular, which has become increasingly popular over the last few years, beats many of the traditional ones by far and is also increasingly in demand across all age groups – saving with cryptocurrencies.
Crypto savings come in all shapes and sizes – from volatile cryptocurrencies to stablecoins that are mostly pegged to the US dollar and follow its exchange rate. The best part is, even though you will be holding US dollars, the interest rate will be much higher than on a savings account.
An increasing number of investors are gradually taking advantage of this evolution in saving and investing. However, the majority of investors do not yet profit from this lucrative form of investment due to a lack of technical understanding. In addition, it is clear that most of them need assistance in order to avoid saving below their worth.
Fortunately, there are companies like Cake DeFi who untangle all the techno jargon and make cryptocurrencies understandable to everyone.
Investing in cryptocurrencies makes saving profitable again, so a real increase in savings can be achieved. Crypto-savings are a new and extremely profitable form of saving. Aside from participating in the rising prices of renowned cryptocurrencies such as Bitcoin, Ethereum, and non-volatile stablecoins, you also receive guaranteed interest. Moreover, you receive up to 6.5% on your deposits with a minimum term of only one month.
It's just the tip of the iceberg, since underneath it lies a whole network of innovative products that will make investors' hearts race. Known by abstract names like staking and liquidity mining, these products deliver high double-digit returns.
Those who have stuck to interest-bearing deposits should definitely rethink their investment strategy and consider new forms of investment such as crypto-savings. Even with small amounts, one is well positioned to generate juicy returns, so this is not an either-or choice.
There is always a risk associated with such investments, but even the supposedly safe savings are not as safe as they appear. Even if the amount in the account does not decrease nominally, billions are lost in purchasing power every year.
To ease the transition into crypto-saving, new Cake DeFi customers can receive a $30 welcome bonus* when they sign up on the platform and allocate at least $50 into a Lending batch or the Freezer.
Crypto saving has never been easier! You can take advantage of it today and get interest rates that your grandparents couldn't even imagine in their wildest dreams.
*certain jurisdictions may be ineligible for bonuses