Friday, September 22

Spain closes the year with the highest inflation in the last three decades

Key facts:
  • The vertiginous price of electricity is mainly responsible for the large rise in the rate in

  • The last time Spain had such a high inflation rate was in 1992.

Consumer prices rose 6.7% in Spain during the last month of the year compared to the same month last year, and annual inflation says goodbye to 2021 with the highest level not seen in three decades.

The flash data of the National Institute of Statistics (INE) revealed this Thursday, December 30, that the high electricity rates contributed to the annual price index shoots up to a 29-year high. Food prices also rose significantly in 2021, after an overall decline during the previous year.

The last time Spain had an annual inflation rate of the order of 6.9% was in 1992, although it also had that rate in 1989 when the country experienced rapid economic expansion after joining the European Community

The consumer price index continued to rise throughout 2021. Source: INE.

Inflation is unforgiving

In the United States, also the consumer price index report for the month of November, showed an increase of 0.8% and led the inflation rate at 6.8%; its highest in almost 40 years, as reported by CriptoNoticias on December 10.

However, the president of the Central Bank of Europe, Christine Lagarde said earlier that this region “is definitely different from North America”, where inflation is projected to continue.

While the United States Federal Reserve warns that inflation will continue indefinitely in the country, the Central Bank of Europe foresees an opposite scenario for its continent. The entity revealed that Europe’s current inflation is the highest in history, being 4.9%, while in the United States it reached 6.2%.

To achieve the objective of lowering inflation, it would be necessary for the Central Bank of Europe to reduce the printing of euros. The entity states that, in effect, the issuance of banknotes has decreased since December 2020. This differs from the United States, where it has not stopped growing since the hit of the pandemic.

Against this background bitcoin takes center stage because cryptocurrency is seen by many as a store of value. This taking into account that one of the properties of bitcoin is that the maximum number of coins that can be created is defined in its protocol and, therefore, it will only be 21 million.

On the contrary, a country like the United States, Spain or any other in the world, simply has the power to increase its money supply. In this way, by spending and buying government bonds reduces the purchasing power of fiat money and thereby causes inflation inadvertently for the population.

Even investing in bitcoin has been a good idea to survive inflation in countries facing a hostile economic context such as Venezuela, whose year-on-year price increase stood at 769%. By taking refuge in bitcoin, a Venezuelan or an Argentine was not only able to withstand the onslaught of inflation, but also, In just three years, you would have multiplied your funds by more than 10 times.