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SALtoshi Whitepaper #105

Fellow humans,

Fiat currencies such as the United States Dollar are a major driving force behind financial slavery. Most people are stuck in the rat race, and many people don’t even realize. Immediately identifying two factors of financial slavery without much in-depth thought — debt and inflation, which are made possible (and even easy) when fiat is the money of choice.

• Debt — our governments create money (because they have absolute control over the money supply), and after their convoluted processes, banks end up loaning newly created money to citizens, burying the nation in debt.

• Inflation — fiat money supply is expanded during the money creation process (which is basically updating the numbers on some mysterious government documents), and this process debases (devalues) everybody’s money.

How does fiat currency enable financial slavery?

Debt motivates us (with fear) to keep a job (any job) unless we want to default on the money we’ve borrowed. High debt and high stress must be correlated. A lot of people hate their jobs, but don’t leave because of bills and debt. Imagine a life without debt, when we could leave our miserable jobs without disastrous financial consequences. The current system has been designed to work against our professional desires.

Inflation gives us zero incentive to save money. We spend quickly because we know prices will continue rising. The longer we wait to buy something, the more we will end up spending. In addition to our fiat consistently decreasing in purchasing power, interest rates for savings accounts are pathetically low, adding another reason to avoid saving. As a result, borrowing and spending have become the new normal in Western society.

We clearly have some fundamental financial problems, and our economy is a direct reflection. A debt-based economy cannot be strong or sustainable, and we’ve recently witnessed how quickly our businesses collapse. The whole financial system is built on sand, not rock. We need to become better at managing our own money, and stop relying so heavily on existing systems, because the old way is not working, and we’re setting up future generations for failure. We need better money. Too much debt and spending are never beneficial for us in the long run. Any financial system can have debt and spending, but fiat has only intensified and accelerated the underlying issues.

I’m probably preaching to the choir. Hoping most readers have some level of financial responsibility, let’s explore some practical solutions. My way is only one way, and might not work for everybody. Generally, investing in hard assets is probably the best solution to escape financially slavery and the inevitable downfall of fiat. Fiat currencies destroy wealth, and hard assets preserve wealth.

Buying stocks, real estate, gold or bitcoin have historically been reliable long-term strategies. Numbers don’t lie, and many ordinary people have made profits accumulating and holding these assets. Important to note that stocks are not hard assets, but the other three are. Each asset also has certain constraints, which I’ll briefly cover.

Stocks

Most American adults can easily buy stocks on the internet, which can be prosperous. However, buying stocks is also risky, and many people are not willing to invest their hard-earned money into a company which can go bankrupt, dilute shares, or make some other fatal business mistake. Companies are vulnerable to not only economic and human behavior circumstances, but also politics. Investing in stocks is basically putting hope in a small group of executives to make the right decisions, and perfect people don’t exist.

Real Estate

Real estate is a solid investment, mostly because land is absolutely scarce and will always be in demand. However, most people cannot afford to pay in full for their own home, so buying an additional piece of property as an investment is not a viable option. Additionally, real estate requires a lot of maintenance and upkeep, and many people simply don’t have enough spare time or desire to manage more than one property. Lastly, real estate cannot be transported, and our government forces us to pay property taxes, which means we’re kind of renting our own land from Uncle Sam.

Gold

Gold has been a sound investment for thousands of years, and will certainly be around for a thousand more. However, I’m not sure if gold will always remain a strong monetary asset (investment), because gold’s market has been disappointing during the past year — down about 6 percent. Investors seeking a safe-haven asset to protect themselves from high inflation (which is also around 6 percent), would not be very wise to choose gold at this time. Maybe the shiny rock will make a comeback someday, but who knows? Have fun sending gold over the internet, transporting large amounts, or verifying the authenticity.

Bitcoin

Bitcoin is such an obvious solution to the world’s systemic financial problems. The money supply schedule of Bitcoin was written in code at the beginning, so we can have very high confidence in the monetary policy remaining the same. Bitcoin’s market value has historically gone up since the beginning, so we can reasonably hope our purchasing power will continue increasing or at least remain protected over long periods of time. Unlike stocks (companies), Bitcoin is not controlled by a centralized group of people, so we don’t need to worry about bankruptcy, corrupt executives or politicians destroying the underlying value or potential of the network. Can’t buy 50 cents worth of real estate, but we can buy 50 cents worth of bitcoin, and there’s zero maintenance or upkeep. Plus, no property taxes while holding bitcoin. Comparing gold and bitcoin is most reasonable (as an investment), except for the fact that gold’s market value is down since the pandemic started, and bitcoin’s market value has grown by a factor of 10 since March 2020. If gold is not performing as a monetary asset during an economic crisis, why hold on? Bitcoin is like a better version of gold. Again, numbers don’t lie.

Although Bitcoin is currently the only asset mentioned which is not fully supported or trusted by most governments, companies, and citizens, Bitcoin definitely has the least amount of constraints. After understanding the basic fundamentals of Bitcoin and the free market, poking holes in the concept, operational features, and use-cases of Bitcoin is extremely difficult. Bitcoin is freedom money.

Pertaining to market performance, any of the aforementioned assets are usually better than fiat. Imagine our government as a company, and the dollar as the stock. Continually diluting shareholders’ value would motivate any investor to dump the stock, and never look back. Trust is gone, because sound decision-making is gone. We have literally been forced to use the dollar, until 2009 when Bitcoin was created. Now we have a better option.

Bitcoin has effectively removed the human decision-making process from monetary policy.

Bitcoin was not created because stocks are failing. Bitcoin was not created because real estate is failing. Bitcoin was not created because gold is failing. Bitcoin was created because government monetary policy is failing. No fiat currencies are backed by gold or any other hard asset, which means the monetary policy of fiat is continually adjusted based on the wants and needs of governments. Again, trust is gone. As I’ve mentioned in my previous letter, Bitcoin’s monetary policy is my favorite feature. I don’t like stupid or unfair rules, but I like rules that help everybody, and with the exception of corrupt individuals, the rules of Bitcoin’s protocol helps all of us.

How does Bitcoin disable financial slavery?

Treating bitcoin as a long-term savings account means buying bitcoin instead of holding dollars in a traditional bank. Most people would never borrow money, and pay high interest rates to simply hold borrowed dollars in a savings account. Makes no sense. With some exceptions (MicroStrategy), the same concept should apply to buying bitcoin — don’t use debt. Simply trade extra dollars (or cents) for bitcoin, and hold on for the ride. Bitcoin can disincentivize debt.

Bitcoin’s monetary policy was designed for bitcoin to be a disinflationary asset, which means bitcoin’s inflation rate will continue decreasing until we reach the maximum supply of 21 million coins. The implication of a disinflationary asset such as bitcoin is increased purchasing power over long periods of time, opposed to fiat currency. We’ve witnessed the first 12 years of Bitcoin and the massive success, so the future looks hopeful. Bitcoin can incentivize saving, not spending.

Becoming a bitcoin holder has not only changed my financial situation, but also changed the way I think and behave with money. My urges to borrow and spend like a reckless consumer have faded way. When I was introduced to Bitcoin in 2017, maybe I was excited to try and learn something new. Maybe I was tired of running in place professionally. Maybe I realized the failures and corruption of the current fiat system, and wanted to escape financial slavery. Maybe I’m starting to understand buying bitcoin is buying freedom.

Until next time,

Salvatore Norge

P.S. — If we invest our time and energy to earn money, then money is a representation of our time.

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Keep falsehood and lies far from me; give me neither poverty nor riches, but give me only my daily bread. Otherwise, I may have too much and disown you and say, ‘Who is the Lord?’ Or I may become poor and steal, and so dishonor the name of my God.

— PROVERBS 30:8-9

I’m not very wise. Never financial advice. Do your research.