The Secret and Immoral Transfer of Wealth

Imagine the following scenario:

A group of friends, ten in total, get together for a poker tournament. Each pitches in a six pack of beer, winner takes all. Every player starts with the same number of poker chips and play continues until one player wins all the chips. In the early rounds, wagers are small since the chips are evenly distributed between every player. As the game continues, players drop out and wagers progressively increase in size. Eventually, one player wins all the chips and takes home 60 ice-cold beers.

This game of poker is an interesting example of money in a closed system. Obviously, the chips can’t be used to buy anything, but they have real value. The overall value is 60 beers. If each starts with 12 chips, then a beer cost 2 chips. If instead, they started with 24 chips each, then a beer cost 4 chips. In either case, all of the chips combined is always worth 60 beers. And, since the players start with the same number of chips, they are indifferent to how many chips they play with, so long as each player starts with the same amount.

Tilt the Deck

So far, so simple. Now let’s make things interesting. Instead of a fair game, this time one of the players has a large, secret stash of chips. With more chips available to wager, the cheating player now has a clear advantage and can easily out bid the others¹. The more counterfeit chips enter the game, the less the existing chips are worth, as illustrated above. Not only does the cheater steal from the other players, he does it in secret.

As the game proceeds, the cheater wins and loses hands, just like everybody else. However, as the fake chips circulate into the game, they cluster into the holdings of players that directly interact with the cheater. Eventually the fake chips work their way around the board, but it take many hands and can never be evenly distributed. This puts the other players at an even greater disadvantage.

Banking and Money

In the real world, money works in a similar fashion. Regardless of how much money exists in an economy, the amount of physical goods and services is effectively fixed. For example, if banks in America doubled the dollar amount of every account, the number of houses, cars, and farms would remain unchanged. Instead, extra money would simply bit up prices, just as we saw in the poker example.

Of course, banks don’t evenly distribute new money. Just like the cheater in the poker example, banks cluster new money and control who receives it first. As new money flows into the economy, people who receive it first can out bit others using devalued money.

There are countless examples in history, but the most egregious is the housing boom of the early 2000’s². As banks relaxed lending standards, the new money went directly into the housing market driving up house prices to obscene levels. Eventually this money moved throughout the economy creating general inflation, but it took time and concentrated in the housing and stock markets.

Counterfeit Money

The modern world uses fiat money, as opposed to money backed by precious metals. Fiat money has no intrinsic value. And, like poker example shows, money is only as good as its purchasing power. The more that exists, the less it purchases. If new money could be distributed equally, then fiat money would be fair. Tragically, it isn’t distributed equally, and never could be.

Instead, modern economies make fiat money using the banking system. Banks and financial institutions get new money first and profit from it handsomely³. Sectors that banks prefer grow at the expense of the rest of the economy. In many cases, politics drive which sectors benefit and which are starved of capital. Stated a different way, the economy is centrally planned using the banking system⁴.

You can easily observe this trend over time. A housing bubble emerged a couple of years after the central bank shifted its focus towards housing in an attempt to combat the dot-com bust⁵. Now the favored sectors are student loans, car loans, and green energy. And you can easily observe the effects of inflation in the these sectors⁶.

Central Planning is Theft

Politicians and economists frequently brag about the positive benefits of central banking and central planning⁷. But the morality of it never enters into the conversation. The simple truth is that making new money is theft. Of course, it is not theft in the traditional since. Nobody comes to your house with a gun to steal your car.

The theft occurs when the general public makes purchases. Money they earned prior to inflation must compete against newly created money. Said another way, money created out of think-air waters down money earned via labor and real life effort. Since more effort is required to purchase things, central banks secretly steal your productivity. Sadly this productivity is transferred to the wealthiest people in the history of mankind⁸.

Calling inflation theft understates the scale of the problem. We place theft lower than murder on the morality scale. However, this IS different. Central banks steal from literally 99.99% of the population and affects every single transaction. This level of theft is almost impossible to imagine.

Concordia

In the book, Concordia, There Must be a Better Way, a team of dedicated pioneers establishes a new nation. Instead of forcing central banking on its people, the nation uses crypto currency. Crypto is the first electronic, fully transparent alternative to challenge central banking. It is the only way to build a truly free society.

What would you do if you had the opportunity to start from scratch? How would you balance freedom, liberty, and justice, while assuring that investors are rewarded for taking a risk on your enterprise.

To found out what happens, buy the book now on Amazon. It is an exciting novel that challenges your assumptions and entertains you in the process.

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