The money system works much like a game of musical chairs.

 

That's because money is created as interest-bearing debt, which means that there's always more debt than there is money. We are therefore perpetually in competition for never enough money. “The great inflations of our age are not acts of God. They are man-made or, to say it bluntly, government-made. They are the off-shoots of doctrines that ascribe to governments the magic power of creating wealth out of nothing and of making people happy by raising the ‘national income.’” — Ludwig Von Mises, Preface to The Theory of Money and Credit, 1952.

 

We have a great opportunity to strengthen our relationships with our loved ones during these uncertain times. Watching movies together, playing video games, and a casual game of Monopoly are all great ways to enjoy each other’s company. One game that I thoroughly enjoyed as a child is called Musical Chairs. Yes, that game in which you walk around a set of chairs, listening intently to the sound of the music and anxiously awaiting the momentary sound of silence that occurs just before the chaos ensues. One thing you might not be aware of is the fact that, in a way, we are all playing a massive, global game of Musical Chairs. Yes, right now, we’re all playing, whether we admit it or not. Unfortunately, 87% of the chairs are currently taken or unavailable and only 1% of the global population has a chair. Don’t know what I’m talking about? You should!

 

Let’s take a moment to think about our situation for just a minute. Millions of people are at home because governments have mandated that non-essential businesses close until the COVID-19 pandemic is over. Regardless of whether or not you agree with that decision, the fact remains that it has affected everyone. It has affected our daily life, our employment status, and it has significantly affected the entire global economy and the finances of millions of people. It’s rather chaotic, isn’t it? This economic and financial activity is what I want to write about right now. Not because I’m a greedy capitalist, or because I’m a socialist looking to demonize the 0.1%. I want to have a discussion about the economy and finance because I’m just a regular guy who has big student loans to pay, and it’s because of my loans that I’ve been somewhat forced to educate myself on this topic.

 

So, what’s been going on? If you’ve been watching the news or reading the newspaper on your not-so-paper mobile device, you probably know that incomes have been lost, mortgages have been put on hold, “too-big-to-fail” businesses are being bailed out, CEOs of mega-cap corporations have been quitting left and right, temporary universal-basic-income payments of $1200 are just around the corner, and low-interest loans — loans that will be forgiven — are being doled out to small businesses. I wonder… is a loan that is planned to be forgiven really a loan? Or is it a gift? That’s beside the point. The point is, it is definitely NOT business as usual right now.

 

Or is it? It doesn’t seem like it’s anything like the past 10 years, but think back just a couple more years to 2008. Remember what happened in the Financial Crisis of 2008? Maybe you do, maybe you don’t. (If you don’t, I recommend you watch a movie called The Big Short, released in 2015 and directed by Adam McKay. It’s one of my favorites.) But in case you don’t remember, I’ll remind you; and I’ll keep it really, really simple. Are you ready?

 

Okay, that’s extreme, and it’s obviously more complicated than that. What really happened was a bad combination of banks and financial institutions being over-leveraged on debt securities that were backed by really, really bad mortgages that all started to go into default as the Federal Reserve increased interest rates, and the response to the crisis was to bail out the rich people and let millions of regular people lose their homes, or, if they kept their home, watch their equity disappear as the housing market crashed. It actually wasn’t that difficult to recognize and anticipate if you had been listening to some famous economists like Peter Schiff.

 

Now, I’m not going to write an exposition on the evils of the Federal Reserve. That’s been done already (just search Google for a book called The Creature from Jekyll Island). Suffice to say (err, write), money doesn’t grow on trees — instead, some rich bankers type in a bigger number in a centralized database, and just like that, *POOF* more money! Again, it’s obviously a little bit more complicated than that… but not much more so. If you don’t believe me, just ask Ben Bernanke, former Chairman of the Federal Reserve, as in this article quote,

 

“Asked if it’s tax money the Fed is spending, Bernanke said, ‘It’s not tax money. The banks have accounts with the Fed, much the same way that you have an account in a commercial bank. So, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed. It’s much more akin to printing money than it is to borrowing.’

 

‘You’ve been printing money?’ Pelley asked. ‘Well, effectively,’ Bernanke said. ‘And we need to do that, because our economy is very weak and inflation is very low. When the economy begins to recover, that will be the time that we need to unwind those programs, raise interest rates, reduce the money supply, and make sure that we have a recovery that does not involve inflation.’”

 

“Okay, dude, where ya goin’ with this?” Alright, I hear you. The point is this: 150 years ago, a loaf of bread was 5¢, and now it’s 100 times that. Now, I’m no economist… but isn’t it the point of capitalism to make humanity more productive? To make it so that we can produce more for less effort? It’s obvious that the price of goods is not tracking the relative changes in humanity’s productivity. After all, unlike in 1870, in 2020 we have internal combustion engines, airplanes, computers, telephones, instant and global communications, and all of human knowledge instantly accessible by devices that fit in our pockets. So, if humans can do so much more with so much less effort, you’d think that it would take a lot less collective effort to produce each loaf of bread. Maybe, collectively, we are 5 times more productive, so that 5¢ loaf of bread should now be 1¢, right? You ever stop to wonder why it ain’t so? Here’s why:

 

Are you getting it yet? Now, you might be reading this and thinking, “well, wages are also a lot higher than they were in 1870.” That’s not the point! Here’s the point:

Do you see those headlines up above, formatted by the magic of Microsoft Word? Here’s the point: where is your money printer? “Money doesn’t grow on trees,” remember? If you haven’t been living under a rock your whole life then you know that the rich keep getting richer, and the poor keep getting poorer. Now, again, I’m neither a greedy capitalist nor a socialist trying to demonize the 0.1%. I’m just pointing out the bleak reality that bankers, and those close to them, have been stealing the value of our money by creating trillions of new dollars through no effort of their own.

 

So… what does this have to do with Musical Chairs? 

Obviously, the Musical Chairs are a metaphor. They are a metaphor for something that has been going on ever since the financial crisis of 2008. Almost everybody knows about it, but very, very few people actually understand it and recognize its significance. To put it bluntly, there is a game of Musical Chairs occurring in money, you’re playing whether you realize it or not, and those who don’t get a chair are going to lose a lot of money. Of course, the average person doesn’t really have a lot to lose anyway, but some middle class and upper middle class families might miss out on getting their chairs. And every year that passes, those people who are aware of the game are getting more and more chairs, which leaves less and less for those who haven’t figured it out. If you were unaware of Bitcoin in 2009–2016, just as I was unaware, then that’s okay, there is still time. But now, after it went viral in 2017, everybody has heard of Bitcoin. Everybody knows that it skyrocketed in value… and that it came crashing down also. But, not everybody is a math whiz, so I’m going to clue you in on a little secret: what happened in 2017 wasn’t that extraordinary. Most people think about things on a linear scale; 1, 2, 3, 4, 5. But, when it comes to exponential growth, a more useful scale is the logarithmic scale: 0.1, 1, 10, 100, 1000. So, here is the chart of US dollars-per-bitcoin, since its creation in 2009, on linear scale and on logarithmic scale:

 

You can clearly see the reason why it went viral in 2017; after all, $1000 to $20,000 in one year is a huge return! But when you look at the second chart, which is the value of bitcoin on logarithmic scale, you can see that 2017 doesn’t look very different from the rest of its history. In fact, it looks like it’s just a continuation of what happened before.

 

In case you didn’t make the connection between the game of Musical Chairs and Bitcoin, here it is: just as there are a limited number of chairs in which to sit, there are a limited number of bitcoins that will ever exist. Most of those bitcoins have already been produced — about 18 million — and those are already taken. An additional 2 million will be produced during the next 6 years, and the final 1 million bitcoins will take about 100 more years to produce. After that, nobody can make more of them. The Federal Reserve doesn’t have a magic Bitcoin printer. Donald Trump doesn’t have a magic Bitcoin printer. Amazon, Apple, Google…. they don’t have a magic Bitcoin printer. The best and brightest computer hackers in the world have tried to find a way to hack the Bitcoin protocol, and nobody has done it. The reason nobody can cheat the Bitcoin system is because Bitcoin is completely decentralized and distributed: exact copies of the Bitcoin ledger exist on tens of thousands of computers all around the world, and it’s completely open-source, which means anybody can go online, download the software for free, and get a copy of the Bitcoin ledger to verify it for him- or herself. No, the US government can’t outlaw Bitcoin because it’s just text which is protected by the 1st amendment.

 

The point is this: you are playing the game of Bitcoin whether you like it or not. There’s no force involved, it’s just a matter of fact that the choice to not buy Bitcoin is just as consequential as the choice to buy Bitcoin. At first, in 2009, Bitcoin was just an experimental project for experts in cryptography and computer science. Then it became a collector’s item among nerds and geeks who were interested in finance. Then it spread to the dark-web, where it was used by criminals as a medium of exchange in the black market. That’s when it started to catch some public attention, and millions of regular people started buying bitcoins like crazy in 2016–2017. And now, in 2020, it’s estimated that there are about 100 million people who own or trade bitcoins, and it’s starting to catch on with some very wealthy organizations. Fidelity is actively mining Bitcoins. CME Group launched an exchange of Bitcoin futures contracts. Perhaps you’ve seen the “drop gold” commercial on TV, an advertisement for the Grayscale Bitcoin Trust, ticker GBTC, now a registered SEC reporting company. You can buy bitcoins on the new Robinhood trading platform, or through CashApp, a mobile app developed by Square, Inc. Speaking of Square, did you know they helped raise $2.5 million in seed funding for a group called Lightning Labs to continue developing the Lightning Network? In case you don’t know, the Lightning Network is a second layer protocol that allows bitcoins to be transacted at scale. Hint: that means the Bitcoin network will be able to support hundreds of thousands of transactions every second, like the big boys — VISA, and MasterCard.

 

To wrap up, here’s the situation. A lot of us are at home with tons of free time, and it’s looking more and more like our money is just Monopoly money. The difference, though, is that you have to pay taxes with these Monopoly-like paper bills, and you’re not allowed to print them! Nope, you have to work for these paper bills, and you have to give some of them back to the government or they’ll send you to prison. Yaaaaay, taxes! And don’t try to print them for yourself, only the government can do that. You see, the government is broke; they keep raising the debt ceiling. But, somehow, they can still bail out businesses with 2 trillion dollars that comes from nowhere. Don’t forget to pay your taxes, though, the government needs that money… except when it’s printing it from thin air. Doesn’t make much sense, does it? Why are we working so hard for the number in our checking account to go up, when there’s somebody who can just press a few buttons and increase the total number by trillions? What’s it going to be in the next crisis? Hundreds of trillions? Quadrillions?

 

The reason Bitcoin continues to increase in value is because bitcoins are scarce — it actually costs a HUGE amount of electricity to make new bitcoins, and the number of new bitcoins that are produced each year is getting smaller, and smaller, and smaller. Meanwhile, the number of dollars is getting bigger, and bigger, and bigger. You don’t have to be a rocket scientist to figure out where this is going, right?

 

But here’s the really important thing: this isn’t about us. It’s not about you, and it’s not about me. This is going to take years, maybe even decades, to play out. So, this isn’t about us… it’s about the children, and their children, and all future generations. Do we really want to allow this broken system to continue? It’s 2020, and we have super-fast computers and artificial intelligence and self-driving electric cars… technology that our grandparents would call magic. And yet, millions of people are still struggling to put food on the table. Hundreds of millions of people are living paycheck to paycheck because our money — the US dollar, the British pound, the Chinese Yuan, the Mexican Peso — this money doesn’t actually store the time and effort that was expended in earning it. People don’t have savings because everybody knows that gas was $1.20 per gallon in the ’90s, but now it’s over $2, sometimes even over $3 in a bad year. Everybody knows that college tuition used to cost thousands of dollars, and now it’s tens of thousands. Are the children really going to take loans of $100,000 per year for tuition? Is that what we really want? It doesn’t have to be this way, and I predict it won’t be. Sound money is returning — get a seat while you still can.