The wealth rob and the printing press
Blockchain technology, digital currencies and more recently the evolution of decentralised finance have revolutionised nearly every corner of industry. Within finance specifically, the technology underpinning these innovations promises to unlock opportunities for millions of people around the world that would before not have had access to financial tools and platforms due to their physical location, credit score or a variety of other life circumstances.
In this mini-series we take a look at the current actions being undertaken by the world’s largest financial institutions during this time of economic instability. We also dive into how DeFi has emerged as a catalyst for change when it comes to financial independence for the masses, as well as how a new breed of venture capitalists are helping project founders and teams lead the charge into a future of decentralised finance.
Lastly, we look at Nova Finance, how our protocol looks to become a cog in the engine of economical change, and the people behind the product.
Quantitative easing: The wealth rob
The western world has been printing money and debasing currency at a pace never seen before. The following stats highlight the last 10 years of quantitative easing (QE) across the three major currencies of the west:
On a relative basis the UK is the most concerning of the three. Money printing, in a sense, can be viewed as the hidden tax for those who earn a living through labour or hold large savings. In-fact, by in large, it is the owners of the financial assets that end up benefiting most from the printing of money, it is QE that inflates the price of financial assets to higher returns but not for being more productive, meaning a few people are made much more wealthy, usually the 1%, but not for productive reasons but simply due to debasement of the currency.
The person that is negatively impacted the most, as said earlier, the common hard working person that trades their time for a fair day’s wage. While the mechanisms of QE don’t work exactly like this, it can be said that the level of printing the UK is doing, for the hard working man in the UK, is the equivalent of the tax man going round each every person’s home in the uk and knocking on the door each year to say:
“Excuse me sir/madam, I see that you’ve been saving some money there, you wouldn’t mind if I took £5.1K would you?”
Consider this notion for your family of say 4, this adds up to 20k of invented money every year that takes the purchasing power away from you. This is the hidden tax that many people face; it corrodes wealth & robs people without them even knowing.
Lowering the interest rates, speeding up the printing press
In recent times, the Federal Reserve (America’s central Bank) announced interest rates would be held at near zero until at least 2023. This, coupled with easy monetary policy (printing of money to give to the government), will lead to even further debasement of US currency.
Indeed, the likelihood is high that the UK and Europe will follow suit; having already debased their currencies at significant levels, the central banks will go on to do the same in the name of “economic stability”. In times of currency debasement the wealthy classes have turned to store holds of wealth.
By and large, there are three qualities needed to attain the store hold of wealth status:
- Scarce (little to no supply inflation)
- In demand (there is liquidity)
- Trusted (widely accepted, in particular by governments + central banks)
- Portable (it can easily be used as a medium of exchange)
Precious metals, Bitcoin, art, collectables and bonds are all assets that possess these qualities in varying amounts. In a future where there is large amounts of “Monetary Policy 3”, the combination of fiscal easing (lowering of interest rates and buying of bonds by central banks) and monetary easing (the issuance of more government debt by central banks, providing the finances for politicians to fund their agendas) will lead to debasement of currency, reduction of the common worker’s purchasing power and ultimately, the wealth of the labour classes.
The need for wealth preservation will be much needed in this new economic paradigm; those who recognise this and act on it will most likely benefit hugely in the years to come.
Keep your eyes peeled for the second installation in this mini-series, where we’ll look at how venture capitalists and angel investors are helping to accelerate innovation in DeFi, as well as how Nova is aiming to play a part in the upcoming technological revolution.
About Nova Finance
Built on Solana, Nova Finance is a programmable asset protocol that automates investor strategies and allows anyone to use them via an intuitive and easily accessible portfolio platform.
By providing a range of automated tools and strategies through programmable assets, Nova Finance offers users the opportunity to mitigate downside and maximise returns, whilst simultaneously giving DeFi power users a platform with which to capitalise on their expertise.
