The crash in bitcoin prices worsens the crisis, says BIS report. Inflation is already above 5% in three-quarters of the world economy.
Restoring low and stable inflation without inflicting damage is the most important goal of global economies; this is a challenge that central banks forgot many decades ago and requires a vast amount of effort.
The Bank for International Settlements (BIS) opened up about the most prominent problems that, according to the entity, the world economy currently faces. This situation is a mix that could trigger a further slowdown, including a possible recession, leading to stagflation.
The organization presented its vision of many economic systems through its Annual Report on the 2022 Economy on June 26.
In the report citing what happened between 2021 and 2022, the BIS reported that, for the first time in the post-World War II era, the world economy goes through an inflationary threat and the danger of recession.
This situation turned out to be an unfavorable global situation that was also predicted by other international entities and to which the World Bank referred earlier this month.
The Inflation Strikes Back
The BIS report focuses its analysis on how a large number of nations have experienced inflation rates rise unusually.
The growing increase in inflation levels is prominent in the United States of America, countries of the European Union, and other regions such as the United Kingdom and Switzerland. In all these areas, they have had to deal with rising interest rates as a way to restrain the pressure.
The BIS study highlights that the current inflationary escalation takes effect in a context of high financial weaknesses. These weaknesses arrived due to the Covid-19 pandemic and later by the armed conflict going on in Ukraine.
According to the entity, achieving a remedy that solves the current issue is harsh because the costs of bringing inflation back under control can be very high.
According to the entity, the global monetary and financial system is going through immense stress, immersed in dealing with the frantic improvements needed by the digital revolution, among other factors that add more problems to the situation.
On the other hand, the crypto environment is also facing hard times. This situation takes effect due to the sharp fall in prices experienced in recent months.
The collapse of Terra and the sudden drop in the value of bitcoin (BTC) became extraordinary events that show that this new environment is not the best option and cannot carry the weight of the global financial system.
This conclusion, which focuses on the weaknesses of the digital assets sector and generates distrust in its capacity, is an idea that constantly appears in the study. The BIS has already highlighted this situation in its report on the international payment system revealed last week.
By: Jenson Nuñez
