I woke up this morning to a very nice message from my bank. My stimulus check has arrived. Wow, for once the government moved faster than I expected!

Then I checked the crypto charts. WTH? Bitcoin is down 6%?

So guess what I did with my check? I put part of it into Bitcoin.

Is that a good move?

Only time will tell.

However, it’s important when you are investing to look at the big picture. And the big picture is super-bullish for Bitcoin for a variety of reasons. One of which has to do with my stimulus check.

Back in January, U.S. Federal Reserve Chairman Jerome Powell said that the central bank welcomes inflation in 2021 as a sign the economy is recovering after the pandemic.

So what is inflation?

Austrian economics define inflation as an increase in the monetary supply through both an increase in money and in credit. The federal government, however, defines it as the increase in the general price of goods and services over time. One metric the government uses is the CPI, or Consumer Price Index. This is calculated from the price paid by urban consumers for a defined basket of products.

Confused?

Not to cast aspersions on our fine government, but could there be a reason that the CPI is calculated in a particular way? For example, Social Security provides cost of living increases that are pegged to inflation.

What if, instead of the official CPI, which was 2.3% back in 2019 and is generally between 1–2% a year, we used other metrics of inflation? For example, the “burrito index”. By this metric, the actual rate of inflation might be closer to 7%.

Is this a more realistic measure of inflation? A 2019 analysis by the Economic Policy Institute implies that it might be. The study found that the federal minimum wage in 2019 had 17% less purchasing power than it did in 2009, and 31% less than the minimum wage in 1968. No wonder we are seeing increasing income inequality in America. While wage earners see their real income go down, the wealthy are invested in items that are more likely to keep up with the “burrito index” — things stocks, real estate, etc.

As someone who tends to agree with the Austrian economists, I think the stimulus checks we’re receiving add to the inflationary trends…

What does this mean for you and I?

It means that if I take my stimulus check and stick it into my savings account, I’m an idiot.

Don’t get me wrong. Everyone should have an emergency fund. Dave Ramsey advises everyone have 3–6 months expenses saved in their emergency funds. My Indian parents kept a year’s worth of expenses in theirs. When I was in graduate school, I was lucky if I had 2 months saved at any given time. What is the right number? It depends on various factors, but the important thing is that you do have an emergency fund set aside, just in case.

Beyond that, however, it makes no sense to just keep your money in the bank. Given how low interest rates are and how high the real rate of inflation probably is, it is the financial equivalent of death by a thousand cuts.

What should you do with your stimulus check?

I am not a financial advisor. However, if you were my friend, I’d advise you to pay off any high interest debt. Finance your emergency fund if you need to. Beyond that… it really depends.

Maybe you or your partner has been having a rough time due to the pandemic. Maybe your kids are struggling with depression.

So go ahead and splurge if you need to. Go for it.

If you still have money to invest… do it in ways that will beat inflation.

A simple strategy is to buy into an index funds. Real estate is another option. Precious metals are a traditional hedge against inflation, which is why some financial planners suggest keeping a small amount invested in gold or silver.

Then, there are the cryptocurrencies.

These are highly volatile.

But if you think, as I do, that cryptocurrencies are in a bull market, then it makes sense to buy the dips. Thankfully the timing of my stimulus check coincided with a drop in the price of Bitcoin.

Could I be wrong? Of course. And cryptocurrencies are still such a nascent technology that it’s harder to establish patterns. So never invest more than you can afford to lose in crypto. If you can’t afford to take the risk — buy blue chips instead. Or use your stimulus check to create memories with your kids. That’s something that will last a lifetime.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://levelup.gitconnected.com/bitcoin-down-stimulus-check-received-time-to-buy-29ab05232347?source=rss——-8—————–cryptocurrency