Coronavirus has changed everything in our life! One aspect that many have already felt directly "on the skin" was its harmful effects on the income received. Whether by reducing wages or even by falling unemployment. This happened because many countries, due to the lack of knowledge about the new virus, chose to force many establishments and companies to close.
Despite the sharp drop in company turnover and all the money that stopped circulating, many of the problems already existed. Giant companies with much larger debts than they are one of the good examples of how the whole system was about to implode. The quarantine caused by Covid was just what triggered a crisis that was about to happen. Analysts call it a Black Swan - an unpredictable event that dramatically affects the economy.
This had catastrophic effects on the economy of all countries. However, there are many theses that argue that we still do not feel it to its full potential. That in fact the repercussions have barely begun. Worse than that, the measures implemented to help minimize the consequences may, on the contrary, bring more difficulties in the long run.
The most pointed example is the monetary stimulus created both in the USA, with direct delivery of money to people, and in Europe, through European Union funds. In Portugal, we call it the European bazooka, such is the amount delivered to the country.
These stimuli are created through the printing of money, which creates two harmful effects in the long term in the lives of many of those who receive it:
It creates debt that, if badly applied, will increase the pressure on companies and families, by increasing taxes;
It devalues ??the money in circulation, since it increases the supply of that money.
However, these supports can be an oxygen balloon that will help many people avoid bankruptcy and the fall in poverty.
So what can we do to avoid the harmful effects that these subsidies bring to society?
The first effect depends essentially on those who receive the support and if that is your case, make sure that you invest the money well in order to generate real growth in your company. That way the money you receive will be growing and creating wealth that will be able to pay the debt you are contracting.
The second effect - the devaluation of money - will affect everyone who has any wealth in that currency. That devaluation means that that currency will be losing purchasing power. The 10 € you have today in your wallet for a year will buy less things. The chart below shows how the Euro has lost purchasing power since it was launched in 2000.
This concept is known as inflation - it means that your money loses purchasing power. It is one of the key ideas for understanding current monetary policy and how you can protect your wealth.
According to current prevailing ideas, inflation is used by governments to encourage consumption and “compel” people to use their money to get the economy moving. Therefore, the amounts that are stuck in the bank are depreciating in the face of the impression of money created by the governments.
How can you fight inflation to protect your money?
Buy goods: gold, real estate and Bitcoin!
All of these goods are finite. Therefore, they appreciate in the face of currency devaluation. In free markets, the price of a good is defined by the laws of supply and demand. The less supply there is, the more valuable the good will be. If the quantity available (the offer) remains and the quantity of the currency to which it is compared increases, the good will increase in value.
Gold is difficult to extract and the quantities that are discovered each year do not significantly change the total amount. Currently, the money printed annually is substantially greater than the amount of gold discovered. As long as this condition remains, gold should rise.
The properties represent the land that is in its foundations and that is finite. There is only a certain amount of land and although mankind has built buildings to increase the supply of housing, the truth is that the land underneath them cannot multiply. Having a piece of land in the right place can be immensely valuable.
There will only be 21 million bitcoins. Currently, just over 18.5 million bitcoins are in circulation. The total is well defined in the Bitcoin code and cannot be changed to dilute the value of the coins. Since the last halving - halving currency issuance - Bitcoin's annual increase will be less than the increase in gold it ever was. This means that at a time when governments or central banks are multiplying the money in circulation, the supply of new bitcoins has been cut in half.
One way to confirm this devaluation of fiat currencies is to compare the price of some goods against gold rather than the dollar. The median dollar value of a home in the USA has increased from $ 5,000 to $ 350,000. However, the gold value decreases from 7,090 kg to 5,700 kg of gold. Despite the appreciation in dollars, the gold value remains the same.
Why choose Bitcoin?
Both gold and real estate are traditional markets in which investors have invested their money to protect and multiply it for many years. Bitcoin and other crypto assets are a very recent asset class that is still viewed with great suspicion by many investors. However, when looking at the characteristics that give value to these goods we realize that Bitcoin is superior to others. The scarcity of bitcoin can be verified through the code. Buildings can get taller and create more supply. And, if gold values, more resources can be directed to be able to mine larger quantities. Nothing can change the amount of bitcoins created annually. In addition, if you arrive first the growing interest in Bitcoin will make your currencies appreciate and see your value grow.
For these reasons and more, the best way to protect your money is to buy Bitcoin!
