Bitcoin Forum

There is a popular saying that Cash is king, a term reflecting the belief that money (cash) is more valuable than any other form of investment tool, especially in the event of an economic downturn when there are cheap securities and properties that could be bought with cash.

On the flip side, I am very curious to know if the value of fiat currency appreciates or depreciates during a recession and why.

Based on the idea it's a GLOBAL recession then the value of products is based on the value of other products.

Since real estate and stocks make up a HUGE amount of assets, I'd say cash rises due to this. But your cash still probably buys the same amount of grains&veg as it did in the past... If oil falls, transportation cost decreases too, if it rises, transport cost increases. Increase in transport cost is passed onto customers (a decrease is quietly ignored by logistics firms)...

Let us first understand that recession is an unfortunate turn of events where everything falls down in value , Fiat is something that will ofcourse fall too . But the reason we don't see that much difference is because:

The government tries to control the market value by selling the shares with a particular important currency, like if you have inr and usd shares in the bank , the government advises the banks to sell the USD shares so that their Currency can maintain a strong hold .
But unfortunately this provides government with a limited power .

At the same time government tends to print a lot of money during recession to support the people and the economy which is slightly detrimental for us for the long run only .

Economic decline would affect everything including Fiat.

When we are talking about the security factor one should understand that :
It is only viable for a small percentage of population, rest are suffering to even maintain normal lifestyle for their families.

A recession could be a successive decline in GDP growth per capita; this is where the economy drops over more than one period (usually quarterly). It could also be due to negative sentiments due to vincibility of one or more economic factors and indicators.

If there is a drop in GDP growth, market confidence is low and macroeconomics gets hit hard, along with SMEs, the government would likely initiate fiscal policies that would be aimed at increasing spending to boost the economy, if this inflow of cash is not balanced, businesses still failing and loans getting defaulted, there would likely be a drop in the value of the currency.

However during a recession there can equally be a crash in value of assets such as housing and real estate, this drop in asst value has occurred over a couple or global recessions (1991/2009). A drop in asset value would mean a rise in currency value or better put; a fall in inflation rate.
So, Currency value doesn't always fall during a recession.

You should also note that it is a process, when economic recession hits policies are initiated to support the economy, we now get to the recovery stage, and then the expansion stage, each stage could last for carrying periods of time, and a rise or fall in the currency can occur at any of the stages. During the expansion stage confidence is usually high and the market is more balanced.

This is what I've noticed. When there's a surge in oil prices, most other sectors are affected and they also rise in expense. It's the number 1 commodity for these businesses to continue and operate.
Yup, those band aid solutions by the government will mostly affect a lot of people that's under the average level of living. They'll be the people that can feel the effect of it in the long run.

It depends whether there is significant deflation or not. Deflation means falling prices, which implies more valuable currencies.

In the context of the current pandemic, deflation fears in March really shook the currencies of emerging economies. When the global lockdowns hit, they plummeted against the USD because there was an expected sharp decline in growth and foreign investment while high USD denominated debts were sustained. The last few weeks as economies have reopened and the economic outlook improves, we have seen the opposite effect and the dollar has weakened.

What happens in the long run really depends on whether a deflationary cycle (like the early 1930s) takes hold or not. The jury is still out on that.

As what I read from the article, I can get the meaning, at least here.
There may be no hard or even fast rules due to what's going to happen to currency value currency during the recession, or even the deep recession. Even though, some currency may seem to fall. because, the country is not considered a worthy place for investment anymore.

The evaluation of factors that may influence:
1. In the recession period, inflation is seemly to fall.
2. Many factors may affect the values of the currency
3. It may depend on what's happening right now in other countries around the world
4. The confidence of the country even faces the recession.


Source:
https://www.economicshelp.org/blog/9746/currency/happens-value-currency-recession/

If inflation falls drastically then I am guessing that the value of the currency has a high chance of appreciating

Recession is an economic term to define the economic situation when the GDP, economic indicators have falling down. When there is recession, it means that the economy is not just stagnant but dropping because there is no enough production going on to boost growth, lose of jobs and no salaries paid. Meaning monies get devalued giving room for abject poverty.

It depends on the type of recession. If the recession due to the money supply is too big, then it will surely lose great value. but if due to other factors such as disease, money will be devalued. because when an economy is not doing well, it is in a recession, GDP will surely decrease. that will make the currency of that country lose value.

During the recession, most of assets lost their price, including cash. Although Cash is the king of the world, it can not escape the great recession like this.
However, as you can see, despite the decrease, cash still have a great value compare with other assets such as cryptos or bonds. The only asset that stand still is gold. Gold has been on this world for more than thousands years and therefore, people believe gold the most

In my opinion, fiat currencies would normally lose value when their supply is higher than needed or necessary, while the production/availability of goods/services that are in high demands remain thesame, increase a bit or remains low —  Inflation kicks in & fiat begins to lose value.
 If you have $2000 in savings since 2018, and price of a bag of rice was $50 then, today prices of goods and services start going up, and a bag of rice becomes $100, your $2000 purchasing power will lessen.... it will only be able to buy $20 bags of rice instead of 40 bags two years ago...
You could mitigate inflation if you work harder to produce more of those things that are in high demand, or you could replace them with good/better alternatives(esp local alternatives) that are easier or quicker to produce.
 I think countries will probably use robot/tech/sci to produce more, quickly. Hopefully it's safe/good for societies and doesn't reduce the quality of the goods/services.

In the event of an economic downturn in which the price of essentials increases and panic occurs because many factories stop and the unemployment rates increase, but this does not mean that paper money (Cash) is the best investment at that time.
Money loses its value quickly, but crises happen every contract or less, which means that you need to rely on assets that are considered a storehouse of value and diversification of those assets.

To answer this question, Monetarism comes first in my mind with the M v = P Y (however it's not actually used to explain recession). For the sake of simplification, let's assume it was a common recession and the money supply (M) unchanged.

When there's a recession, the velocity of money (v) decreases since people will hold money and reduce their consumption (spend less), therefore GDP (Y) also decreases. How about the price? Well, it depends on how responsive the GDP can change so that the equation remains balance (equilibrium).

You can expect P to increase or decrease depending on how much the decline in GDP. Most of the time, the rate of GDP decline itself cannot achieve equilibrium or too slow (remember GDP is "all the finished goods and services produced" -Investopedia (https://www.investopedia.com/terms/g/gdp.asp)) so the P has to decline. Well, generally, you can say that money is more valuable in a recession since goods become cheaper.

Price of fiat doesn't fall due to recession but if governments decided to float the market by printing more money the inflation will results in the value drop.Cash is the kind until the market is in bearish mode but if you keep hoarding your cash for too long it will be loss for you, so keep cash when asset prices falling then buy immediately when it reaches bottom.

At the time of recession people hold little cash in hand. Unemployment rate increases highly. Banks become unable to supply sufficient cash. Demand decreases in the minimum level. Maximum production remains unsold. As a result, price level gradually goes down. When price decreases, people can purchase more with fewer amount. Too little money goes for too many goods. That means currency value appreciates and goods value depreciates.

Yes, when bad things happen everything goes downhill That's why I think it's better to buy at a lower price during this recession Everything is hampered due to economic problems, people become unemployed and suffer financial problems in which case not only the price of the currency but also the price of goods goes down a lot. However it is a good time to buy when the price of Bitcoin is lower than the price of the currency because if the price goes down, it will go up.

Highly depends on where the recession is happening and where it is the worst. It also depends on if you're talking about the value of a currency in regards to other currencies in the world, or just internally as you'd be talking about purchasing power with your money.

But typically during a recession people are going to have less income so they're going to buy less goods, which in turn causes the price of goods to decrease and inflation will fall because of this -- as inflation is just the increase in the value of goods (averaged) over the course of a year -- so typically during a recession inflation is lower then what it would normally be. In the US this rate is typically 2-3% each and every year.

During a recession without much government intervention, this number would be lower -- but if government intervention occurs (through monetary policy like printing more money) then inflation will most likely still stay in that 2-3% range.

But to answer your question -- Yes if other countries have higher inflation, no if other countries have lower inflation. But there's no hard and fast rule surrounding this. Lot more variables to consider. Because if a country falls into a recession and confidence falls in the governments ability to pay back its debt, then the currency is going to fall/crash in value. Circumstances matter.

See here - https://www.economicshelp.org/blog/9746/currency/happens-value-currency-recession/#:~:text=In%20a%20recession%2C%20inflation%20is,currency%20causing%20it%20to%20rise.

The truth is that the value of fiat currency depreciates, not relative to other fiat currencies but on its own. That is true regardless of whether there is recession or not.

If there is no recession, the normal design of fiat will continue to work as usual, which means that its value will depreciate over time.

If there is recession, interest rates would likely fall, currency would become less attractive, and therefore its value will fall. Not to mention that the central bank would be printing more and more money out of nothing, thereby accelerating the erosion of its value.   

Cash is king in the face of contractions and economic recession. When faced with conditions of slow down or tight money, the one in charge is cash. In a crisis position caused by the corona pandemic, many opportunities arise due to credit traps or speculative acts. So for this pandemic, you should prepare cash money by selling unproductive assets or investing in short-term trading to reduce risk.

Government policy to overcome the financial crisis by controlling debt recognition and money market securities by tightening fiscal causes stress in the economy. The ups and downs of the value of a country's currency are influenced by the way the market and other worlds view a country's economy.

Yes, fiat are not that affected but nowadays, cryptocurrencies are much necessary and being prioritized by people because of its improvement in advertisement. As the market have no activities-related to cryptocurrency, bitcoins will really become less useful in transactions instead people will just hold it and wait for the increase in its price.

People are really knowledgeable and intelligent enough depending on the situation where they will benefit their assets completely. In terms of government, I know that they are only prioritizing the use of fiat because most of the people in the community are still ignorant about how market moves and they don't care about the recession, they just earn and spend their money and that's it.

For me, I think even if there is a recession or not, fiat will still do its thing. Fiat are not that really affected when there's no transactions or activities that are happening in the market to circulate the money. Cryptocurrencies are the most affected because most of the coins are volatile in the market and there are factors that can affect its price. If you are knowledgeable about the effects of recession in the economy and market, you will see that without movement, nothing will happen in terms of fiat because the government are already manipulating it with their full potential. Some countries are not that prioritizing the use of cryptocurrency in their country.

i don't think it will,because first Crypto is online currency that can be stored for long time while and can be use lesser fees while fiat demands high transaction fees and in this part Crypto is advantage right?
This is opportunity to Buy more mate,if this will really impact crypto market then this is what we all waiting for,buying at dip and selling high.

If you take many different countries, you'll often find sharp devaluations of their national currency caused by economic problems, which can be caused by war, corruption, political instability, etc. But simple recession is not necessary causing a devaluation if this recession isn't deep. Losing a few percents of GDP shouldn't trigger a massive value loss, and if this happens it can also be a coincidence instead of direct cause.

Look at the US dollar value chart - it's mostly just a steady decline, with no sharp movements during 2008 or 1979 or the Great Depression. Big currencies are more resilient than currencies of economically weaker countries that need a lot of support from their central banks.

I enjoyed the part where you talk about reasons why cash is king and but I was also expecting that you will chip in one or two things about why a currency value might rise or fall during a recession. thanks

The value of currency always depreciates during a Recession(also in a normal economy the value of cash depreciates due to inflation) and the same goes with the investments. The best example is of Zimbabwe where the trillion dollar notes were also of no use to the public and also of Germany post World war II when for a single loaf of bread you would have to give a bag full of cash. So when the government prints money the inflation increases and in a recession the inflation increases exponentially.

I am not really good at this, but I think it’s not going to be the case for every currency ::). There are some currencies that are going to fall, and there are some that are going to increase. The great recession in 2008 can be used as an example in this case. During this recession the pounds sterling depreciated for over 25%, unlike the USD and the Euro that were less affected. So, that’s how it is.

There are things that will get really high and some will fall. This is because investors are losing interest there, and as they are selling their holdings in that particular currency to invest in other currencies, that currency will keep depreciating.

The government will always want their people to use fiat for any transaction then only they can make tax from it but individuals with some IQ level will try to reduce the taxes in many ways to keep their earning with themselves.People are not ignorant but this wan intentionally hidden from human kind of purpose that is why still people doesn't know how money works.

I do not think that the value of Fiat currency increases during the recession. The crisis has affected many countries, and in order to stay in the global economy, countries will start printing money. And this in turn will lead to inflation. And, of course, we are talking more about the depreciation of money.

It can depends how hard the recession hits the economy. It could cause a decrease or cause an increase when there is also a scanty of it.
But most times whenever the value increases, this is mostly inflated by the government. This is mostly profit oriented. Especially when the currency has a worldwide recongination.

There is no general reply, that depends on.each currency, how strong it is and what is the shape of economy that is tied too, how much resilient it is. It's more likely to happen in poor, underdeveloped countries but every currency can fall, depending on circumstances.
Also, it depends how deep the crisis is and what each government and central bank do to protect their currency. So it's not an easy answer.

If the recession hits 2020, everything will be greatly affected. Especially the economy will be strongly affected. Of course, Bitcoin will also be affected in value. Perhaps the price of Bitcoin will plummet as much as possible. But this will not affect your Bitcoin investment right now.

Keyword here is FIAT and Im just going off some of what I listened to after 2008 and the vast upset and slides in market values then.     FIAT currency is not a solid currency base ever, the reserves in banks are fractional meaning when a large amount of lending is occurring each bank is receiving currency then lending out maybe upto 10 times that original amount.    The lent out value is then deposited at another bank as cash and again that separate bank will lend out the cash in quantities upto 10x what they originally received.   If banks judge badly they will call on the money lent as a debt, defaults will occur and hence we have a contraction; money returned is less then equal to the original amounts.  When the entire economy pulls back in recession then we get a wave effect and each bank receives less and has less to lend out.
   So your question on what happens to the value of FIAT currency in recession, under natural circumstances a contraction means monetary velocity drops and in effect the available monetary base becomes less.   As we know from supply and demand, if there is less supply available relative to continued demand (people continue to eat, spend, etc) then the value or price generally will appreciate.    FIAT normally rises in value at some point in recession, hence the saying cash is king as you can start to name your price as a valuable cash buyer.

The modern economics we've seen for 20 years has undermined that norm, its harder to say now.  FED recently went out of its way to ensure no contraction occurred, this is funded by debt and only they can produce currency on their own initiative like that really.   Some of us speculate eventually this will collapse as seen in many countries with endless money printing however USD is a global currency, its hard to say when or how even.

Cash is king,because it is the most liquid asset(you can turn cash into other assets pretty fast),not because it is considered more valuable than other assets(which is completely wrong).The US dollar decreased in value compared to the euro during the last few weeks,but this has something to do with the anti-racism protests in the USA and it will be temporary.
I don't see any real estate or stock prices going down so far,so cash isn't getting more valuable that it actually is.

Despite the fact that the cryptocurrency market practically originated during the global crisis of past years, one way or another, the economic turmoil of the whole world is negatively reflected in the prices of the cryptocurrency. you can give an example of 2014, when the price of Brent oil fell by 45%, and after that the price of Bitcoin fell by 55%. Of course, today the situation is even more complicated. Nevertheless, Bitcoin is one of the most profitable and sought-after investments that can become an alternative for many businessmen and investors, given the problems due to the pandemic in different sectors of large business. Nevertheless, it is necessary to take into account the fact that cryptocurrency cannot yet be considered a safe haven for storing its capital, since there is still very high volatility.

Cash is King because circulation, printing, and demand are controlled by a country..

Countries such as the US & Aussie (CMIIW) are free to print money during a recession because their currencies are used for international transactions, but printing money when a recession will be very dangerous if carried out by countries such as Venezuela, Iran, Indonesia, and several others because their currency does not have the power as used for international transactions (export/import & oil) These countries will only make their countries hyperinflation and then devaluation of their currencies..

Bitch please....

It's only a term to say that cash IS the most liquid asset so cash holders can easily do various financial decisions with almost no obstacle (remember that the timing is important):
- Paying debt;
- Buying securities (trading);
- Buying other, currently cheap, assets.

As they said it, it is the most liquid asset. Without the push of the government, people will continue to use fiat since it is the natural way of getting their essentials or their necesseities in their lives. You could use bitcoin or other currencies but the easiest one is by paying them fiat. When it comes to taxes, it is already added to it when you buy it, there is no way you could run from it unless it is income taxation of some sorts where the people themselves calculate the taxes they needed to pay.

Why is cash king? For the record it Gold that's the genuine king and after Gold is bitcoin.

The value of fiat currency (cash) does depreciate during recession and the reason is that there wont much business activities and income taxes which will increase the country yield. However,in the case like this the government will require for loan to boost the country economy.

The main reason of crypto market recession for us is good because we finally get real volume and liquidity back in our market. Inflation will help the country become more competitive, and this may increase demand for the currency. during a recession, which influences the value of currencies. If a country cuts interest rates then this generally lowers the value of the respective currency, while higher interest rates increase the currency's value.

Recession is understood as a condition where the economy slows down over a certain period and growth is made a standard condition of an economy. Gross domestic product (GDP) is the general scoreboard of a country's economic health. Sluggishness or deterioration results in a simultaneous decline in every activity in the economic sector. Starting investment, labor, low-interest rates and margins. The effect is a domino in economic activity, both demand, and supply which results in a decrease in GDP, if not immediately addressed, the domino effect of the recession will spread to various sectors such as bad credit, inflation, and even deflation.

In the recession conditions, market participants are so reactive to the dynamics that occur. In situations of high uncertainty, not many investors are willing to take risks. Almost all want to play safe, even very safe by holding cash. Trust in financial assets has disappeared. But economic actors choose not to hold cash but choose cash that is liquid and worldwide. And the choice is the dollar because everything from trade, investment, debt payments, to dividends can be completed if you have US dollars. Demand for the US dollar has increased, its value has strengthened.

It is this foreign exchange reserve in the form of dollars that is often used as a benchmark by central banks in conducting open market operations to maintain the stability of the domestic currency. Large foreign exchange reserves in the form of dollars can be a buffer in neutralizing investment mistrust in a country's economy, which in the end investors' interest can be seen from the high interest in Government Securities

Consider the spread to gold, thats some indicator that gold really requires deals of over 100k to justify movement and trade.    We can use gold on a smaller scale but its not helped when government excludes it and its not a popular in demand item in exchange for items.   The current scenario is that even BTC a new entrant is more popular with the people then gold.  Gold is used as reserve by central banks and other super large entities when costs are low in comparison to size.

Gold could be equated to cash and increasingly I think cash notes are not reliable when governments fail to hold the monetary base in line with GDP hence quite apparent inflation occurs and price inaccuracy.

The deprecation definitely depends on country, look at US as an example, they are the reserve currency of most countries and that is the reason that they can handle recession. Situational factors such as war or bad financial governance can contribute to this value depreciation, one good example of value depreciation is Zimbabwe reaching the billion dollar note which was caused by constant money printing, also the German mark after World War 1, with the war reparations they need to pay, the hyperinflation increases day by day, and lastly is the oil price plummet that caused hyperinflation in Venezuela. Regarding OP's post saying that cash is king, I do not think so, I remember that saying came from a former robber which means that cash is the heaviest item to be carried during a robbery.

But from what we've seen investment from other sources are also helping bitcoin to build a good barrier, there are people
who are engaging themselves to this business.
Recessions affects the market as it's really hitting every economic status from each sides of the world, being ready how
to react is the best thing to do by now.
Keep your investment from the knowledge that you already established and whatever happens to this industry you are
going to survive.

I get your point, "bigger currencies strive better". From another perspective, I think the purchasing power of a currency rises during a recession as prices of most goods and services are likely to fall during a recession.

Considering that money has a certain value and that this value may change over time, it is very likely that money will lose value in this recession process.  This is something that applies to all currencies, not just one currency.  I expect the major currencies to lose value in this recession process.
As I mentioned, the only reason why currencies lose value in the process is the time value of money.  The more unstable the changing interest rates and the pandemic process caused by the disease, the more currency will lose.  Of course, in addition to these situations I mentioned, unlimited money supply in today's market conditions will cause more possible depreciations.

I want to believe USA and her dollar are the only currency that can withstand the effect of the pandemic and the influx of fund, especially with response of the fund from the government as palliative, we may be disappointed. We may see a properly management fund in the economy, more so the drastic opening of the economy is strategically placed for swift recovery into normalcy.

It will be a total miracle for the economy to go through this global pandemic without sinking into a deep recession

No, currency loses its value because of inflation happened in the respective country. In some cases, inflation could lead to recession as well which means the value of the currency will most likely fall but it is not guaranteed to happen.

In this current covid19 situation, some country might have announced that they entered recession already but because the whole world suffer the same covid19 situation then those recession hasnt really give any bigger effect to their country YET

You might want to read this News regarding Japan Entering Recession (https://thediplomat.com/2020/05/japans-economy-officially-enters-recession-for-first-time-since-2015/)


Unlimited supply or if a country keep printing their money will cause hyperinflation. This happened to Zimbabwe like 10+ years ago

the depth of recession expected looks so exaggerated in the media and it is more of politicking in my own opinion cause no one will benefit from him than to witch-hunt the leadership.

In this time of crisis FIAT depreciates. Although it is the easiest way to pay for goods and services in my country, it loses value day by day. The increase in prices, especially for food, is a crazy. Only I keep in my bank account what I need for the purchases of my daily needs, and the rest Hold Bitcoin and crypto.

Yes, we need to save for the future to overcome this recession When the recession strikes the economy is disrupted and everything including food is in crisis. If we grow vegetables around our homes without investing in Bitcoin and Crypto we can make money by selling them A great way to overcome the recession and make easy money.

Recession is generally known to depreciate the fiat because of many stress on the economy from lost of jobs and shutting down of factories and companies creating a major stress that could spell a grave hell. Fiat is usually weak during economic crisis and other bad effect.

You cannot see the real value decreasing.
The value is decreasing due to inflation. This means that new money is printed because of the lack of the liquidity in the market. The result of that is that the real currency value is dropped.

Yes, I think that saying is right. You know during an economic recession the price of so many assets falls. So, I will say that it’s best not to have your money in any of those , because their price will decrease to a low price when a recession hits. Then after that has happened and you still have cash on you, you have the opportunity to now buy those assets on a lower price and hold your position till things gets better and you see the price climbing up.

Moreover, why they say cash is king is that in a situation like that you will be in need of money to do a lot of things like buying food. It’s really important to have cash man.

You will never know if the value is going to fall or not, but highly likely it will fall. If a country is going to recession, people will likely invest on that country. The prices will start to rise and inflation might start taking place. When inflation takes place, other countries will stop buying from the country suffering from inflation due to high pricing. Thus, the value of the coin will start falling.
You are saying a deflation takes place? Not really. There is no guarantee that inflation will fall during recession. You are probably forgetting about stagflation. Again, what if the country responds to the recession through printing money? It all depends on the policies taken by the government.

You are comparing apples with oranges. Since when is money an investment tool for the ordinary person? Money is primarily a measure of value, the equivalent of something. You can at least use a pebble as money if someone agrees to exchange a kilo of pebbles for a case of beer and a couple of steaks. Why cash and not any other? Because to use cash, you only need to agree to accept this money from the seller - you do not need electricity, a card, communication with the Bank, the availability of acquiring, the Internet, and so on. Cash is just very simple!
During a recession, the value of money does not increase, but rather decreases - goods become more expensive and more coins are needed for the same product. Is inflation a familiar term?

Of course currencies do lose value during recession. You know were you’re living, the kind of country it is, and I believe you can tell from what’s happening whether the value of county’s currency  will lose value or not.

During recession the dollar might stay king and a lot of people might start buying it to hedge funds. And when people start other currencies and buying dollar because they see value in it, then the other currencies will continue to fall. And I think stocks will be mostly affected because people will sell them to have cash.