Robin Hood Comes to Washington — Part I

The week of March 23rd should be remembered as the week Robin Hood came to Washington. Last week our Nation’s leaders decided that the hardship economic effects caused by the Corona Virus on millions of Americans needed immediate attention. No one could disagree with that.

This piece is not a criticism of that decision or an attempt to offer an alternative way to transfer wealth, but rather it is a quick analysis of where that money comes from and a look at how such actions might influence our collective future.

When a Government creates money (currency) outside of raising taxes (very unpopular with voters) or economic growth (workers producing more products-GDP), it’s simply a hidden tax on everyone. The government isn’t raising money from existing sources, but is instead creating it out of thin air.

This addition of new money to the current existing supply of money in the system is called inflation.

Put another way, inflation is the devaluing of all the existing money in the system. Saving accounts and deposits in checking accounts would experience an immediate loss of value, i.e. purchasing power.

The week of March 23rd, 2020, showed that most currencies of the world gained immediate value against the USD. By the end of the week, the Pound increased 7% against the US dollar (USD), and the Euro gained 4%. That’s the measure of buying power ‘loss’ experienced by every holder of USD. The effects were immediate. Larger holders of cash, like Berkshire Hathaway, contribute the biggest source to the stimulus. (BH’s loss last week to the Euro was $8.75B). In the end, inflation is mostly a Robin Hood affect, stealing from the rich to give to the poor. The difference here is that because the money is created via inflation, Robin Hood, aka the government, is stealing from everyone and doling out that money as it sees fit. Companies like Berkshire Hathaway may experience a larger loss of value, but everyone is affected, whether they realize it or not.

Last week, although BTC did not act like an alternative currency to USD it acted more like another alternative currency… gold.

As loans and credit dry up, one of the first sources of liquidity to make margin calls on growing losses and help loved ones out of work, is the selling of asset classes that have instant liquidity. Real estate takes time to sell and art work even longer. It’s a strength of BTC and gold that they remain liquid, even during a liquidity crisis. You’ll recall gold did fall in the initial shock of 2008 credit crisis. But while the S&P continued to decline, gold recovered.

In 2020, will gold and BTC do the same? Will they truly show they are similar assets classes during extreme situations such as black swan events?

I think so…

Click HERE to read Part II.

For more about Tantra Labs, check out our introductory post here.

For a list of beginner Bitcoin recommendations, check out this article.

For the latest updates from Tantra Labs, follow us on Twitter @Tantra_Labs.

Don’t forget to give us your 👏

Author’s opinion only. The views and opinions expressed in this article are those of the author and do not necessarily reflect the position of Tantra Labs Inc. or any other company. Examples of analysis performed within this article are only examples. They should not be utilized in real-world investment decisions as they are based only on very limited information. Assumptions made within the analysis are not reflective of the position of Tantra or any company.

Non-reliance. The information set forth herein is for information purposes only and should not be relied on or construed as investment advice, counsel, or solicitation for investment in Tantra or any other company. Interested investors should seek appropriate independent professional legal, investment, and tax advice prior to relying on any of the material contained in this article.

Forward-looking statements. Certain information set forth herein contains forward-looking statements that give a reader the opportunity to understand the author’s beliefs and opinions with respect to the future. These statements are not guarantees of future performance of Tantra or any other company and undue reliance should not be placed on them, as they necessarily involve known and unknown risks and uncertainties.

Not a securities offer. This article does not constitute an offer of securities by Tantra or any other company.