Ban – NEWS

Why Mortgage rates are increasing in USA ?

Before COVID outbreak in 2019, mortgage rates were 3.94% and many economist thought that this is the lowest level where federal bank could go. But 2020-21 proved them wrong.

Due to global pandemic, governments all over the world had to increase their expenditure and even ordinary people needed money to satisfy their needs.

Now, if government wanted to tackle this situation, they will have to print more money and lower lending rates so people can use excess line of credit. This is basic economics. Therefore, central banks all over the world reduced their lending rates and tried to fight and then revive from this disaster.

Similarly, federal bank which is USA’s central bank reduced their lending rate to 3% in 2020 and 2.65% in 2021.

Now, when the situation starts to recover (Post Pandemic) inflation rises as more money is pumped in the economy. The most basic thing to understand inflation is if you check your monthly grocery bill before pandemic and post pandemic you will see almost 8-10% increase. This is inflation.

Now, As prices increases, there is fear of hyper-inflation so federal bank raises interest rates. Due to this, liquidity is sucked from the market. And it eventually helps to stabilize the economy.

This same policy is followed all over the world.

Now, Why does Federal Bank or Governments do these things ?

The simplest answer is ” ECONOMY’s BEST STAGE IS WHEN IT IS STABILIZE ” Stabilize means not inflationary or deflationary stage. the reason behind this is altogether a different topic for discussion.

Further, when Economy is stabilize, Federal Bank will again start reducing the Lending interest rates at very slow speed. (Not like it did at the time of COVID).

USD vs BITCOIN ? Which is Better?

Starting with history of why Bitcoin ( cryptocurrency) we’re created, Bitcoin was created with a view that FIAT currencies should be replaced by one currency which universally accepted.

When we compare this concept with actual FIAT currency ( USD), we can see that Bitcoin solves many problems we are having with USD.

Firstly SUPPLY

SO, supply is printing of notes which wholly in control of central bank of the country or the government. Government or central bank prints currency as per their convinience to stabilisation inflation or deflation. Hence, the supply of currency can be unlimited. However in BITCOIN supply is limited. This eliminates the power to increase or decrease supply hence your currency wont be depreciated.

Second is DEFI

DEFI is decentralised financing. This is basically related to blockchain technology. In layman’s term, whenever you transact through bank account there is a centralised ledger kept for records by banks known as BANK STATEMENT, in case of BITCOIN, the ledger or records are distributed so no one watch or record the transaction which has significant impact on INCOME TAX LAWS. ( this will be discussed later in next blog)

Third is Denominations,

USD is available in notes as well as coins which can be used. Lly, in case of BITCOIN it is divisible up to 8th decimal.

There are many other differences as well but they are insignificant while you are looking for an investment in crypto.

How Crypto is helping terrorism?

To understand how crypto is helping terrorism or illegal activities first you need to know what a blockchain is.

BLOCKCHAIN

So, Crypto functions on blockchain technology. In layman’s language Blockchain is chain of computers or servers (Blocks) which routes your transaction through it so that no one can find out the root of transaction.

Also, as in banks there are ledgers of every customer which is BANK STATEMENT, which shows details of all transaction. However in crypto currencies, due to blockchain, the ledger is distributed. No centralised system is there to record these transaction.

How it is helping terrorism?

Due to this, illegal transaction including money laundering, Hawala, foreign transfers, etc. are increasing day by day as no one can trace the root of transactions. This is benefitting terrorist activities as they are receiving money from the masterminds and these masterminds are untraceable.

Stay tuned for more facts related to Crypto..

Why Countries might BAN Crypto Currencies?

Everyone of us have heard about Crypto Currency or BITCOIN as an investment alternative or a digital currency.

But it has been seen as a threat to FIAT CURRENCY ( EXAMPLE OF FIAT CURRENCY IS US DOLLAR). As number of investors in Crypto Currencies are increasing day by day, Governments are getting more worried.

WHY GOVERNMENT THINKS CRYPTO IS A THREAT?

One of the power of CENTRAL BANK or Government is they can control supply of currency that is US DOLLAR. To control Inflation or to overcome deflation ( Inflation and Deflation is altogether a wider area for discussion) Government prints currency’s accordingly

However, if the world adopts BITCOIN as FIAT Currency, it will replace USD eventually. And government won’t be able to control the supply anymore. Which is a very big reason for Government to BAN crypto currencies.

As it might increase the GAP between Rich and Poor.

A detailed analysis of impact of Crypto on Inflation will be in next blog.