In response to the global pandemic central banks around the world have adopted some of the harshest methods and amended their policies to historic levels in order to try and "save" their respective economies from a mass collapse. Some may blame the pandemic for the recession but the truth is that the economic recession was imminent in one way or another, in fact it was expected in 2018. Upon the major responses to the pandemic the central banks utilised their policies with others going as further as to practice quantitative easing into effect while other dropped interest rates to historic levels.
Quantitative Easing
The Federal Reserve Bank along with other central banks around the world put in a massive money printing programme in attempts to stimulate the economy since people were unemployed however this played against them with consumers investing the stimulus cheques into the stock markets and abandoning the bond markets, forcing the central banks to step in and buy bonds. The unlimited money printing created a huge bubble in the traditional finance with the S&P 500 and the Dow Jones Industrial Average going surging up.
The worst case scenario of the unlimited money printing is that it could result in hyperinflation and the recent events in the markets have shown that the markets are now addicted to the money printing and low interest rates. This was evident when the markets made a huge correction after The Federal Reserve announced that it will not be printing more money anymore and is likely to increase interest rates. As a result the central banks are caught between a rock and a hard place or stuck in limbo.
Negative Interest Rates
Central bank of Japan went as far as to dipping interest rates into negative territory. When interest rates are into negative territory it means the consumers get charged a fee for saving their money in the bank, this method is used to stimulate the economy because it forces the consumers to take their money out of the bank and spend it meanwhile stimulating the local economy. Looking at the positive news, whenever the interest rates are low it becomes a good time for the consumers because the housing and property prices become cheaper also making it convenient to pay debts faster.
Better Alternatives
The best alternatives during this times is to invest in property as it is more cheaper to acquire those. The second options are the precious metals such as Gold and Silver.Lastly, Cryptocurrencies have proved to be a much better solution with most cryptocurrencies up over 50% in a year time frame. The last thing you can do is to hold cash which is inflating which would be similar to leaving your money in a vault with rats, the only end result is that the rats will eat it.
