The driving factor of innovation in technology is to improve the human condition. We transform trees into toilet paper instead of using leaves for comfort and convenience. We’ve created farming and animal husbandry to streamline production of food and horses for travel, then trains, cars and airplanes. We have mobile phones for convenience and education, relaxation and validation, beautifully packed into a tiny brick to satisfy most needs at our fingertips, arguably offering the most effective means of intellectual advancement to the human condition in known history. We have the ability to learn, share and receive more information in 24 hours than any human could imagine in an entire lifetime, only 100 years ago. These are the good times. Our lives have been amazing, impossibly living on this planet where every aspect of nature works together just too perfectly, allowing us to enjoy what we call “life”. Our driving force as humans is to improve our condition in life. When ‘the market’ (society) has a need, willing and able entrepreneurs fill the void with their ideas and efforts to provide for the people. This is called ‘economics’
In economics, money/capital/duckets are used to trade value. An agreed upon medium of exchange, currently the US dollar, is the place holder for trades in society. Rather than trading 1 dozen eggs for 1 cup of coffee, we trade numerical units to exchange the value. This enables us to save our purchasing power for a later time. By transforming perishable and trade-able goods into decimals on paper, we’re enabled to save. By saving, we can save today’s efforts for a later date. This typically means someone in their younger years would spend time working, save their life’s earnings and use them to support their later years, when it’s not so easy to work as much. For the idea-driven risk taking entrepreneur, they would save this money until a good investment opportunity presented itself, where serious consideration has to be made as to the return of that investment.
Banks were created to act as intermediaries for this process. The bank would store the numerical values of their society on their paper, and when your friend Suzie comes up with a business idea, she can go to the bank and get a loan. This is why, normally, the bank pays you interest and charges for loans. The money you keep at the bank is given to Suzie when she decides to open a bakery. As interest rates are raised or lowered, the banks and loan-seekers are incentivised to loan more, or less funds (on a risk adjusted basis). If rates are high, someone with any business idea may be forced to weigh the pros and cons before going into business. When rates are low, almost anyone with any non-profit-making idea can be granted a business loan and begin operating in society. This is free market capitalism.
The financial system we are living in today is a representation of free market capitalism. America was great for decades due to the possibility of anyone improving their own, or their communities condition. If someone aspired to become a ‘Someone’, they were able to move to America and stake their claim. An idea was able to be executed with minimal overhead and bureaucracy. Any and every idea could easily become reality, and the market would decide if the idea was good, bad, overpriced or not needed by the laws of the free market. When markets are free to manage themselves, competition drives prices lower and goods are made more durable and more efficiently from increasing technological innovations. Businesses are forced to compete to expand their market share, and they have to hold themselves to a higher level of accountability to maintain desirability among their client base. In free market capitalism, incentives align by the laws of nature, not for the laws or benefit of men.
Today, we have a system that enables bad behavior by businesses and governments. Because the Federal Reserve controls the currency we all use, they have taken the place of “the free market”. Because banks issue the currency, they’re able to do so – at their discretion. This creates an insane amount of moral hazard. A bank is able to create and loan funds without any depositor money backing those loans. Being the creator of money has erased all logic behind keeping our savings at a bank. The interest payments are almost non-existent and don’t keep up with inflation. When your friend Suzie wants to start a bakery, even if it’s a terrible economic climate for one, the bank is directly incentivised, if not pressured, to loan that money regardless. This means Suzie may potentially pursue an unproductive endeavor, where her time could be better spent working on a project or business that improves the human condition through innovation. Instead she will operate an unprofitable business for an undetermined amount of time.
Through money creation, a bank is enabled to discriminate against certain demographics and enable over-leveraging of others. They can deny housing loans to certain groups. They can deny business loans, and vehicle loans. If a bank decides to loan out too much money and becomes insolvent, or unable to deliver on it’s debts, the Federal Reserve is able to step in and provide them with all of the money they need after the fact. Since the Federal Reserve controls the interest rate on the currency they issue, by dropping the rates lower, corporations are welcome to borrow money at nearly no cost. When corporations take those low interest rate loans, and use those loans to buy back their stock shares, the stock price of that corporation goes up and no real, tangible, additional value was created in that company or for the citizens. Because the Federal Reserve can issue the currency, and decree it legal by forcing tax payments in that currency, all of this moral hazard is possible, and the citizens’ savings get decimated at the same time from inflation of the money supply at the expense of central banking system.
Inflation is a word that is thrown around a lot. So much so, it’s lost its punch. Forget everything you’ve come to expect about money and living standards for a minute. Now think about these words: “Over your life time, your savings will lose value.”. Objectively, would you want to save your earnings or spend them? Subconsciously, the cheap money we use causes us to spend more today than save, because we know this environment is our reality. The majority of people don’t have any form of savings, and the covid19 shut downs and layoffs have shown that most Americans missing 1 pay check can nearly break the system. If our money had value backing it, our society would be more driven to save our wealth. The bank would be required to have capital on balance to loan out. The home buyer who received the loan would have to meet criteria to determine whether the bank loaning that money would be a risky or productive investment. In a hard money environment, buying a house to become a rent-seeker is non-productive for society, and the ability to buy properties and raise rent prices becomes more difficult. By allowing cheap money to be used for this purpose, among others, investors are incentivised to “save wealth” in real estate and other assets in the stock market, causing prices to rise infinitely, excluding those who don’t invest or who can’t qualify for loans, further contributing disparities in equality.
The money we earn is a direct representation of our expelled efforts. We spend our finite time creating, building, selling, networking, sharing, and improving the human condition overall by doing our part in a capitalistic society. The incentives of capitalism naturally align for maximum reward and efficiency in the market. If you’ve done a good job, the market will pay you. If you’ve created a product the market doesn’t need, you will also know through lack of profits. If you’ve done a good job at contributing to society through effort, your savings should reflect that. As it stands with the money we use, we as working citizens are guaranteed to lose purchasing power on our profits through inflation and taxation, among other things, unless we “invest in non depreciating assets”. The only way to avoid losing wealth to inflation is turning your dollars into stocks, bonds or real estate. These are all of the options available to you, the free American.
Saving wealth in housing is risky and unnatural, and thanks to central banking, very common. Most homes are purchased A. Based on what the neighbors paid, and B. With the idea of resale, or ‘greater fool theory’. The theory is ‘I might be a fool to buy this at these prices, but maybe I can sell it to a greater fool’. Costs of rental and housing prices in 2020 have left citizens in an entirely possible, impossible situation: working full time at $15/hour may realistically land you homeless. This is only possible because of the cheap money we use today, created by the central bank of the United States of America, the Federal Reserve.
When any system is enforced that allows the few to control the many, the incentives align for bad actors to position themselves in a point of power at the expense of the many. When a small group has most of the power, it is inevitable they will bend the rules of the system to fit their agenda. When a bank can create and issue currency and charge interest on that currency, it is only in the interest of that central bank. If 1 dollar exists on the planet, it is impossible to repay 2, and we are now approaching 10 trillion of those impossibilities on the Fed’s balance sheet.
Bitcoin fixes this. By having a finite base money supply of 21 million Bitcoins, it’s impossible to debase the value of any coin. The transparency of the Bitcoin network and it’s mining schedule allows everyone to have equality in finance. Anyone can run a node and verify real Bitcoins, and every 4 years the mined supply cuts in half. Every 10 minutes a block is produced, like the heartbeat of the internet. By using a hard money that is more scarce, the value of your time is actually saved over time. Since excess currency can’t be created and loaned out at an interest rate, the value of each decimal point in a Bitcoin can only retain, if not gain more in value from the scheduled supply drops. The US Dollar consistently loses value, investors are forced to put their money into stocks housing and other assets just to retain purchasing power and try to beat inflation. The world of Fiat Finance is a game meant to fuck you. With Bitcoin as a base money, this isn’t needed. A good investment will offer advancement to the human condition and with sound money, value can be saved until a proper investment opportunity presents itself.
If our time on this planet is finite, our money should be too.
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