The Wealth Transfer Machine

Welcome to Financial Fluency - your weekly guide to mastering financial English, learning how money works, and making confident financial choices.

In this issue:

• A Look at the Markets: Berkshire Hathaway Inc

• The Wealth Transfer Machine

• Quote of the Day: Gary Stevenson

• We value your feedback

• Word of the Day: Stimulus

• Test Your Knowledge

• Whenever you are ready, here is how I can help you

A Look at the Markets: Berkshire Hathaway Inc

Berkshire Hathaway Inc has experienced a pullback of about 15-18% from its highest point this year. Warren Buffett's company has given strong warnings about President Trump's trade tariffs, saying that trade tensions have increased during the first half of 2025.

The chart shows the price is now at a previous area of support and resistance. Is this a good buying opportunity, or will the decline continue as markets get used to the idea of Greg Abel becoming the new CEO at the end of the year?

The Wealth Transfer Machine

How currency debasement systematically moves money from the poor to the rich

Last week, we explored how currency debasement acts as a hidden tax on savers. This week, I want to look at who benefits from currency debasement. Obviously governments do by making their own debt easier to pay back. But who else?

The Lockdown Paradox

During the coronavirus lockdowns, I watched something that made no sense, at least until I thought about it more deeply.

Stock markets crashed initially in March 2020, which seemed logical as businesses were shutting down, customers were trapped indoors, and the economic outlook appeared grim. But then something extraordinary happened: markets not only recovered but reached all-time highs while the global economy was still recovering from lockdowns and facing ongoing uncertainty.

How was this possible? How could the outlook for businesses be so positive when the economic recovery was still so uncertain?

The Money Printing Response

The answer was money printing on an unprecedented scale.

Central banks around the world responded to the crisis by creating trillions of new currency units. The Federal Reserve expanded the US money supply by approximately 40% in just two years. The European Central Bank launched massive bond-buying programmes. The Bank of England pumped record amounts of new money into the economy.

This wasn't unique to one country: it was a coordinated global response that created more new money in two years than had been created in the previous decade.

Who Received the New Money First?

This newly created money didn't reach everyone simultaneously. It flowed first to financial institutions, large corporations, and wealthy investors through various monetary mechanisms. These groups could invest this fresh capital immediately, buying assets before prices adjusted upward.

Meanwhile, ordinary people were focused on survival: paying rent, buying food, covering utilities, and dealing with job losses or reduced income. They weren't receiving the newly created money; they were relying on government support and spending their existing savings or going into debt.

This is known as the Cantillon Effect, which we discussed in this newsletter on the 31st January 2025.

The Wealth Transfer in Action

What the world witnessed was a massive wealth transfer disguised as economic stimulus.

Wealthy investors, unable to spend on their usual activities like travel and dining out, redirected their resources—including the new money flowing into the system—toward asset purchases. Property prices rose sharply in many countries. Stock markets reached record highs. Cryptocurrency values exploded.

Those without assets watched from the sidelines as everything they hoped to buy one day became more expensive, whilst their wages and savings lost purchasing power to currency debasement.

The Uncomfortable Truth

Currency debasement systematically transfers wealth from those who hold currency and those without assets to those who hold assets.

This isn't an accident or unintended consequence—it's how the system works. When governments expand the money supply to fund spending or provide economic stimulus, asset holders benefit whilst savers are penalised. The coronavirus response simply made this dynamic more visible and extreme than usual.

Next week, we'll examine which specific assets have historically provided the best protection against currency debasement and wealth transfer.

As always, none of this is financial advice. Everyone should invest according to their personal circumstances, risk tolerance and financial goals.

Quote of the Day: Gary Stevenson

Gary's diagram shows how money flow changed during COVID-19: normally money circulates between companies, workers, and the wealthy. During the pandemic, newly printed money reached the rich but then stopped circulating - they could not spend it in the economy generally, so they spent it on assets.

This created the largest wealth transfer in modern history. The stimulus money meant to help everyone ended up concentrated with those who already had assets.

We Value Your Feedback!

Your opinion helps us improve and lets you suggest topics or ask Business English questions for future issues.

Word of the Day: Stimulus

Stimulus - noun - an economic policy measure designed to encourage economic activity, typically involving government spending or money creation; also refers to any action intended to provoke a response or increase activity.

Context and Usage: In economics, stimulus refers to deliberate government or central bank actions to boost economic growth during downturns. While intended to help the broader economy, stimulus often flows first to financial institutions and asset holders before reaching ordinary citizens.

Common Collocations:

Economic stimulus - government measures to boost economic activity The economic stimulus package included both direct payments to citizens and massive liquidity injections to financial markets.

Stimulus package - a coordinated set of economic support measures Critics argued that the stimulus package benefited asset holders more than the workers it was meant to help.

Monetary stimulus - central bank actions to increase money supply The Federal Reserve's monetary stimulus created trillions of new dollars that flowed primarily to financial institutions.

Fiscal stimulus - government spending to boost economic activity The fiscal stimulus helped prevent economic collapse but also contributed to rising asset prices.

Business Example: The company's profits soared during the recession thanks to stimulus-driven demand for their services, even as many customers struggled financially.

Investment Context: Understanding stimulus helps explain why asset prices often rise during economic crises - the newly created money flows to investors before reaching the broader economy, creating opportunities for those with capital whilst potentially pricing out those without assets.

Test your knowledge: Interactive quiz

Whenever you are ready, here is how I can help you:

We provide Business English lessons and Cambridge and IELTS preparation courses.

You can book a free 20-minute consultation with Iain over Zoom here:

Why not subscribe to our sister Business Fluency newsletter? It helps English students master essential business terms and provides practical strategies to boost your career prospects.

Disclaimer:

This newsletter is for informational and educational purposes only and should not be construed as financial advice. The information contained herein is generic and does not take into account your individual financial circumstances. You should always consult with a qualified financial professional before making any investment or financial decisions.

Additionally, the authors and/or publishers of this newsletter may hold investments in securities or other financial instruments mentioned herein. These are included for illustrative purposes only and should not be taken as a recommendation to buy or sell such securities or financial instruments.