Enabling Financial Liberty
Enabling Financial Liberty
 |
| Graphic courtesy of ChatGPT |
April
2022
The
Savvy RE Investor
“Economic freedom is … an indispensable means toward the
achievement of political freedom.”
Milton Friedman
What is financial liberty?
Probably the most fundamental, and overlooked, principle of
the system of capitalism is that it is driven by uncoerced exchanges. The lack of coercion is what makes free
enterprise actually free. As soon as coercion is present, they system is no
longer free.
Financial liberty is having the ability to use your
financial resources according to your own best judgement and your own
priorities. This includes freedom from being coerced into providing your
financial resources for others to use.
The Institute for Justice defines economic liberty as “the
right to earn a living in the occupation of your choice without unnecessary
government interference.”[1]
Some will undoubtedly read these definitions and proclaim them
selfish, self-centered, and stingy. While they are inarguably self-centered,
whether or not it is selfish or stingy depends entirely on the priorities of
the individual when they use their wealth.
Critics of capitalism and economic liberty project their own
rapacious natures onto others and erroneously proclaim that wealth is
accumulated only by stealing it from others.
They incorrectly assume that we are locked into a zero-sum game where I
can only get more by making sure you have less. Perhaps they don’t put it this
way, but they fundamentally believe that wealth is like matter and energy in
its nature. It is neither created, nor
destroyed, only transformed. This view
transforms the wealth cycle into an exercise in the “law of the jungle” where
the strong survive by eating the weak.
There are at least two, probably more, fundamental flaws in
these assumptions. The first is the
zero-sum.
The Failure of Zero-Sum Game Thinking
Critics of capitalism and economic liberty point to some
traditional Christian ideas which conflict directly with science and use that
conflict to dismiss many true principles.
Many in the traditional Judeao-Christian tradition believe
that the story of the creation of the Heavens and Earth, as described in the
Book of Genesis appears to show God creating something out of nothing. The Apostle Paul, before his conversion to
Christianity, was known as Saul of Tarsus and he was thoroughly educated in the
Jewish traditions and scripture. In his
Letter to the Hebrews he tells them, “… the worlds were framed by the word of
God, so that things which are seen were not made of things which do appear.”
(Hebrews 11:3)
Paul knew that simply because something was not visible, did
not mean it did not exist. In January of
2022 Space.com declared, “Over 80% of all matter in the universe is made up of
material scientists have never seen.”
Since the 1830’s Members of the Church of Jesus Christ of
Latter-day Saints are explicitly taught that the earth was “organized”, formed
from unorganized matter. Scientific
descriptions of interstellar creative processes support that view as we see clouds
of dust and gasses pulled together by gravitational forces until they are
compressed enough to explode into stars, which in shape the remnants of those
clouds into planets.
The first failing of those who embrace the zero-sum game is
that their understanding of the size of the pie they think we are fighting over
is much larger, more abundant, and more creative than they have ever
imagined. To push the pie analogy, they
see the pie in front of them and imagine that is all the pie that exists. They
utterly fail to see the endless fields of wheat and orchards of trees which
supply us more flour and fruit than all of us together could make into pies if
we labored day and night without rest.
They are starving in the midst of plenty.
How Wealth is Created
The second failure of these critics is their
misunderstanding of how wealth is created.
They think wealth is created by the delivery of objects in
your hands. That is wrong. The object in
your hand is the very last vestige and nearly the least important part of
wealth creation.
Wealth creation is not driven by things. Wealth creation is
driven by ideas. And, who has the sight to see to the very end of that
expansive resource? In fact, the very
nature of ideas is the total opposite of the zero-sum game.
In the zero-sum game if I have a pie and give it to you,
then I have none. However, if I have an
idea and give it to you, I still have the idea, and now you do too. What is
more, when I give you my idea you might add to it your idea and make my idea
even better, and now we both have an improved idea.
This is the true genesis of wealth. It comes from
ideas. Ideas get improved and eventually
turned into goods and services which people value enough to trade for some
portion of their material goods.
Quite literally, wealth is created out of thin air. Ideas
are the very essence of “thin air.” They
are utterly insubstantial and ephemeral until first put into words, and then
into actions. Every entrepreneur begins with an idea, which they eventually
turn into an enterprise that provides value to others.
The Wealth Cycle
The Wealth Cycle attempts to describe the relationship and
flow of money during the life of a person. The underlying assumption of most
financial advisors is that this wealth cycle is largely linear and is focused
on the lifetime of a single person.
However, that view is short-sighted and self-centered. Because of its
short frame of reference, it fails to serve people as it could.
There are four distinct activities which comprise the Wealth
Cycle. They are:
A)
Wealth Creation
B)
Wealth Accumulation
C)
Wealth Preservation
D)
Wealth Distribution
In the traditional view, the first two are synonymous. As
you will see, when it comes to financial liberty, they are not, and perhaps
never have been.
Wealth Creation
In the context of financial liberty, the creation of wealth
is driven by finding a way to provide something of value to others (Acres of
Diamonds) and making it accessible to them after making them aware of it.
In business terms this is about creating the need through
marketing and then fulfilling the need through sales.
While marketing and sales are relatively well-known
processes and have many expert practitioners, it is extremely challenging for
most of us to truly figure out what those around us need and will value enough
to make it worth our while to bring to them.
When Apple Computer and MicroSoft were founded, very few
people had any idea that they needed what those teams were about to bring to
them. Today it is almost unimaginable to
consider life without personal computing.
Wealth Accumulation
Wealth Accumulation means building up a surplus. Initially,
your surplus is there to tide you over if you hit a financial rough patch. It means having enough money to pay all your
bills for a week, a month, three months, even if you have no income.
Living without a financial safety margin is stressful. It is
living on the edge of losing everything. Unfortunately, many people are less
than four new tires away from bankruptcy.
Many entrepreneurs working hard to turn their ideas into
wealth have to shut their doors.
Meaningful Wealth Accumulation is when you have a large
enough amount of wealth that you can pay your bills for the rest of your life
without having to earn a paycheck to do it.
Significant Wealth Accumulation is when you have enough that
you, and your loved ones can pay their bills for the rest of their lives
without having to earn a paycheck to do it.
To be clear, the ability to pay your bills without having to
earn a paycheck is not necessarily the same thing as not working. First, when
you have attained significant amounts of wealth you must work diligently to
preserve it. Second, everyone, without exception, needs to invest time and
energy in something that is bigger than their own self-preservation, a cause
greater than themselves. When your
wealth allows you to no longer invest most of your time in earning the money
you need to make your ends meet, you have more time and energy to focus on
something more enduring than yourself. It is this reason that drives many of
the wealthiest people to become philanthropists. They seek out ways to use
their wealth to make the lives of less fortunate people a bit better.
The people of the United States of America are, as a people,
the most wealthy in the world. If you are fortunate enough to be born in this
country, then you are automatically among the 1% most wealthy people in the
world. In 2020 Americans gave $471.44 billion to charities. With a GDP of $20.94
trillion that same year that is an uncoerced offering of more than 2% of every
dollar they earned. In 2020, according to Forbes magazine the most generous
countries in the world were (in order) Ireland, USA, UK, Canada, and
Australia. All of those are, by anyone’s
standards, wealthy, capitalist countries.
Wealth Preservation
In the generally accepted theory of the Wealth Cycle,
protection of your wealth is correctly recognized as an activity rather than a
phase. If you fail to protect what you
have, it will go away, or be taken away.
This is illustrated as simply as the furniture in your home. If you put
all that furniture outside in a vacant lot, if no one steals it, the weather
and bugs will destroy it. However, if you keep it inside your house, it is
preserved or protected from the weather, and bugs, and thieves. You must give at least as much consideration
to protecting your wealth as you do the protection of your furniture.
Unfortunately for many of us, we are the single biggest
threat to our wealth. We want to spend it. In fact, we must spend it. If we
don’t spend some portion of it, we won’t have any furniture, or a home to live
in, or food to eat. Preserving our wealth is first about controlling our own
spending habits. Living within our means.
The second biggest threat to our wealth, again comes from
ourselves. Making good investments is not an easy task. If we make bad
investments, our wealth can evaporate almost before our very eyes. InvestTools
teaches people that they must let their winners run and cut their loser short.
This is a wealth preservation strategy.
Without using it, your bad investments will likely leave you broke and
hinder your ability to make good investments which might preserve or grow your
wealth.
The third biggest threat to our wealth is theft.
There are lots of folks who want to steal your wealth. They
will scam it out of you, litigate it out of you, tax it out of you, and
sometimes legislate it out of you. While
each of these different sorts of threats to your wealth requires different
means to protect your wealth, the threats from sovereign authority in the form
of taxation and legislation are far more powerful, dangerous, far-reaching, and
difficult to combat than all the scammers, thieves, and greedy litigants put
together. In combatting those latter
threats, the power of the State is on your side. In combatting predation by taxation and
legislation the power of the State is against you.
Government is the only thief you cannot throw in jail.
I recently listened to an interview where a successful
investor shared how he had used a strategy to accumulate some very valuable
investment positions. Before he could
translate those positions into his wealth preservation space, the US Government
changed some rules and, with the stroke of a pen, made his positions illegal
and wiped out the wealth he had accumulated in them.
Increasingly, ordinary people find that the biggest threat
to their wealth building is the very government that is supposed to be
protecting their life, liberty, and pursuit of happiness. Prior to the 1960’s
the fiscal philosophy of the US Government was that the money belonged to the
people who earned it and the government would exist on what the people could
spare it. During the Kennedy
Administration, that philosophy was upended. From then until now the fiscal philosophy
in the halls of government is that the money belongs to the government and the
people will exist on what the government decides they need.
The only way to keep government from confiscating your
wealth is to keep it where they cannot readily lay hands on it. In the past,
this meant converting wealth into portable forms like gold and jewels and
putting wealth in places that were physically secure. While that can be done
today to a limited degree, with the advent of cryptocurrency, digital wallets
(see Appendix
A: Short Primer on Cryptographic Wallets)
have arisen as the most secure and portable way to keep your wealth from
thieves. Even if your digital wallet falls into the hands of others, without
the cryptographic key, they cannot open it. In fact, if you lose your key, you
cannot open it.
Wealth Distribution
In the traditional view of the Wealth Cycle, this is focused
on living off your wealth in retirement and passing you wealth on to the next
generation. Unfortunately, this view of life as a waterfall where your
existence flows down to the ocean (and beach!) at the end ignores the reality
that your wealth is being distributed from the very moment it is created or
accumulated. Sometimes even before then.
Every day as you live your life, whether you are working or
retired, you are consuming (distributing to yourself) a portion of your wealth.
If you don’t, you die of starvation. Your family probably dies, or leaves you
too, to find someone who will provide for them.
Wealth Distribution is not a phase at the end of the Wealth
Cycle. It is an ongoing activity
throughout your life.
Predatory Government
From the standpoint of economic liberty, Communism, in all
its forms and derivations is the most predatory form of government. A central
tenet of communism is that personal property is not allowed. The State owns absolutely
everything. All the fruits of labor and production are owned by the State and
are dispensed to the individuals according to their needs, as determined by representatives
of the State.
Most communism is most often seen in the guise of Socialism.
Socialism is a tacit acknowledgment that no bureaucracy can effectively provide
for the detailed management of each individual life and needs. Under Socialism
there is a very limited amount of personal property allowed and a minimal
degree of economic liberty. Workers (and non-workers) are paid a symbolic wage
or stipend which they can use to purchase food, clothing, and a limited array
of other material goods from State operated outlets. Thus, they have enough
economic liberty to choose if they prefer to buy food, clothes, or booze. Under
Socialism all the means of production (enterprises) are owned and operated by
the State.
Fascism is a form of Socialism which allows for the limited
existence and semi-independent operation of business enterprises which are not
wholly owned by the State. These enterprises are closely regulated and are
allowed to continue only as long they serve faithfully as a privatized form of
enforcement of the State. Individual
economic liberty is greater under Fascism than under either Communism or
Socialism. However, what the individual
can do with their private property and wealth is tightly monitored and controlled
by the State and may, at any moment, be wholly or partially confiscated by the
State at the whim of bureaucrats.
Democratic Socialism is, in fact, either Communism,
Socialism, of Fascism, depending upon the degree of economic control the democratically
elected socialists decide to implement.
It is important to note that a government can support a
mixture of capitalism and communism. Accordingly, a government which does not
openly declare itself adherent to Communist principles can implement policies
and practices which limit economic liberty in ways that are entirely consistent
with any of the degrees of Communism. In
fact, in the United States of America today we see a great many
Communist-consistent laws, regulations, and practices. Nearly all of these have been put in place
under the guise of protecting the natural rights of the citizens, while in fact
depriving them of those rights.
The Bank Secrecy Act (BSA) is an excellent case in
point. Signed into law in 1970,
ostensibly to uncover the financial activities of illegal drug dealers as they
attempt to transform the (untaxedx) proceeds from their sales of illegal drugs
into ‘clean’ money which could be used to invest and pay taxes. BSA compels financial institutions to spy on
the financial dealings of their customers without need for probable cause or a
warrant. On a daily basis they report transactions and customers which the
Government has categorically defined as “suspicious.” Again, this reporting is
compelled by law without regard to the rights of citizens against unreasonable
searches as guaranteed by the 4th Amendment and searches without a
warrant as required under the 14th Amendment to the US Constitution.
If a financial institution fails to report these
transactions in an accurate and timely manner the business will be penalized
and responsible individuals can be both fined personally, and thrown in jail.
After the terrorist attacks on the USA by Al Queda in September
of 2001, in October of that same year Congress passed (and President George W
Bush signed into law) The USA Patriot Act, again under the premise that it was
needed to protect the natural rights of Americans to life, liberty, and the
pursuit of happiness. The act authorized additional financial and electronic
spying on Americans in the form of regulations affected all Americans without
the need for individual warrants and probable cause.
Since 1997 the Cato Institute has periodically published the
results of a survey of world conditions about economic freedom
Their findings indicate that per capita income and life
expectancy have a “positive linkage.”
They differentiate between economic freedom and political or
civil liberty. “Political liberty is present when citizens are free to
participate in the political process on an equitable basis, there is meaningful
competition in the political sphere, and elections are free and fair. Civil
liberties include protection against unreasonable searches, access to fair
trials, and rights of free assembly, expression, and practice of religion.”
They go on to note, “a country may be ‘free’ or ‘democratic’
in a civil or political sense, but lack economic freedom. At the same time, a
country may lack political or civil liberties, yet possess abundant economic
freedom.”
They identify the following four primary characteristics of
economic liberty:
1.
Secure rights to property (legally acquired);
2.
Freedom to engage in voluntary transactions,
inside and outside a nation’s borders;
3.
Freedom from governmental control of the terms
on which individuals transact; and
4.
Freedom from governmental expropriation of
property (e.g., by confiscatory taxation or unanticipated inflation).
They conclude, “these elements prescribe an important but
balanced role for government. The institutions of government will create and
enhance economic freedom by making and enforcing rules governing behavior in the
economic sphere—e.g., by preventing Paul from stealing Peter’s property. But
government might also diminish economic freedom by itself robbing Peter,
whether to pay Paul or achieve some other objective.”
Starting in 1994, the Heritage Foundation began to publish
an annual Index of Economic Freedom. In 1996 the USA was in the top 10
in three different surveys of economic liberty[2].
In 2022
Money Supply and Economic Liberty
Fiat currency[3]
is designed to be manipulated by the sovereign to allow them to inflate the
currency over time so that they can pay off debts later more cheaply. When the
sovereign inflates the currency, they remove buying power and rob currency
holders in the process. This is true of
all fiat currencies.
"One danger of fiat money is that governments will print too much of it, resulting in hyperinflation."
James Chen
The primary mechanism used to control the value of fiat
currency is the monetary supply. The more scarce the money, the greater its
value. The more abundant, the less its value. During the COVID Pandemic the
Federal Reserve of the USA has increased the money supply to more than $6 trillion.
Since 2020 they monetary supply increased from 4 to 6 trillion. Such
significant and sudden growth in the supply of any fiat currency cannot occur
without triggering significant inflation, and perhaps hyperinflation. It is
arguable that such a significant increase would cause any currency to suffer
inflation.
Figure 1 25 Year History of USD Money
Supply[4]
During the era of the Spanish conquest of the Americas,
Spain used specie[5]
currency of gold and silver coins. The gold and silver Spain brought back from
the Americas flooded Europe with an abundance of something that had been
scarce. This made gold and silver less
valuable, which drove prices upward. In other words, the abundance of money
(gold and silver) caused inflation. “Too many people with too much money chased
too few goods”
At a summit of actuaries in 2013, Martin Hickling blatantly
stated that “increases in the supply of money can be seen as a form of property
theft.”
“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”
John Maynard Keynes
What adds insult to this injury is that “while the process
impoverishes many, it actually enriches some.”[6]
What makes this idea more insidious still is that Keynes was agreeing with the notions
Lenin was proposing as a means to destroy the “Capitalist System.” Once again
we see that Communism is at the heart of this systemic threat to economic
liberty.
When BitCoin (BTC) was launched, a prominent objective was the
ability to store value and be impervious to inflation. This is to be
accomplished by enforcing scarcity, limiting the total number of BTC to 21
million coins
CuBit™ and TWPRR™
During the US Civil War, when Union Troops entered South
Carolina (and in some other parts of the Confederate States) they made it a
point to destroy county courthouses along with their land records. This was
seen as a way to indirectly confiscate the wealth of the Southern aristocracy.
If they could not prove their ownership of land, others could lay claim to it
without the interference of substantiated public records.
In the coming storm it may be that CuBit™ becomes an
important store of wealth. It may also be that The Worldwide Property Rights
Registry™ (TWPRR™) becomes a critical store of information about the ownership
of real estate[7].
Wars often destroy many important records. The distributed ledgers of
blockchain technology represent an opportunity to create a disaster-resistant
store of information which may be critical to rebuilding a society in the wake
of natural or man-made disasters.
While we think that sovereign records are something
government would naturally move to protect, that thinking is based on the
assumption that government is not actively trying to destroy private ownership
of property. A common theme in Communist and Socialist governments is the
abolition of private property. Destroying ownership records is an indirect way
to help bring that about.
If we can get enough sovereigns to use SovereignDirt, the
distributed nature of blockchain may preserve those records, regardless of how
many county courthouses are destroyed.
Conclusions
"Liberty has never come from Government. Liberty has always come from the subjects of it. The history of liberty is a history of limitations of governmental power, not the increase of it."
Woodrow Wilson, 28th
President of the United States of America
The single greatest threat to financial liberty is rapidly
becoming the State.
The government of the United States of America was established
for the express purposes of securing the liberty of the People. For much of its history it has been true to
that charter. However, in recent years
the government has been taken over by degrees with views that are envious and
covetous of private wealth. This poisonous elixir is transforming our
government from a protector of financial liberty into a predator seeking to
take control of both the means of production and the wealth those means produce.
As Milton Friedman notes, economic freedom is foundational
to political freedom. While we engage in
a struggle for liberty at the ballot box, those who cherish freedom must also
take reasonable measures to protect their wealth against unreasonable search
and seizure by a predatory government. Because the government has co-opted
banks into becoming an enforcement arm of the fiscal policies of the US
Government, those institutions can no longer play a significant role in your
efforts to preserve your wealth.
When did it become the right of government to know every
aspect of your financial world? The Supreme Court of the United States (SCOTUS)
has determined that income taxes are constitutional and the 16th
Amendment to the Constitution made is so when it was ratified in 1913. Does the
lawful nature of income tax give government the right to search your financial
records without warrant or due process? It does not. And yet, that is where we
are today. Through its private proxies, the banks, the US Government monitors
every transaction you make that approaches or exceed $10,000. As though a major transaction is probable
cause for warrantless surveillance.
While we believe that it is appropriate for citizens to
honestly declare their incomes for purposes of taxation, it is manifestly not
appropriate for citizens to supinely place their wealth on a proverbial
doorstep for the government, or others, to confiscate at their whim and will.
Government has increasingly shown an ability and willingness to avoid or
pervert due process of law to confiscate the wealth of citizens. It is not now,
nor ever has been the duty of citizens to submit to the will of a predatory
government, regardless of the social elements which may support such measures. The
majority of the mob demanded the crucifixion of Jesus of Nazareth at the hands
of the Romans. Neither their number, nor their volume made their demands moral
or right.
The Constitution of the United States and The Bill of Rights
established a structure of government that generally thwarted the unrighteous
will of both the minority and the majority in their efforts to oppress the
“other.” The chief principle it used to do this is the very limited rights
ceded by the People to the government. At least since the days of President
Wilford Woodruff those constitutional principles have been under attack by many
who have expressly sworn oaths to defend it. We, here in the 21st Century
stand in the path of a wave of tyranny that has been building within our
country for more than 100 years. It remains to be seen if we will be up to the
challenge to preserve our liberties for ourselves, much less for the next
generation.
In our parent’s day millions of citizens went to war in
Europe, Asia, and the Pacific Islands to directly combat the forces of fascism
which sought to dominate the world.
After World War II the struggle continued in a “Cold War” which finally
seemed at an end with the collapse of the Soviet Union and the fall of the
Berlin Wall.
Unfortunately, the seeds of Communist tyranny, like tares
amid the wheat, have been sown in the fields “behind the lines.” The
Communistic Hippies of the 1960’s now hold the reigns of power in Washington
and for decades now have overrun the halls of academia. They have indoctrinated
many citizens and our children to believe that the oppression and poverty of
Communism is good and the freedom and prosperity of Capitalism is bad.
To stand, and to win, in the face of such forces requires
not only wit and resolve, it requires financial resources. If we cannot
maintain our economic liberty, it is doubtful we will have the means to
maintain our political liberty.
Who today can say that CuBit™ and TWPRR™ will not
play a significant role in preserving economic liberty through the perilous
times to come? What great good might we be unwittingly conferring on the future
by standing these up now?
References
Chen, J. (2021, October 26). Fiat Money.
Retrieved from Investopedia:
https://www.investopedia.com/terms/f/fiatmoney.asp#:~:text=Key%20Takeaways-,Fiat%20money%20is%20a%20government%2Dissued%20currency%20that%20is%20not,U.S.%20dollar%2C%20are%20fiat%20currencies.
Crypto Pro. (2022). 5 Types of Cryptocurrency
Wallets: Comparison. Retrieved from CryptoPro.com:
https://cryptopro.app/cryptocurrency-wallet-types/
Hanke, S. H., & Walters, J. K. (1997). ECONOMIC
FREEDOM, PROSPERITY, AND EQUALITY: A SURVEY. Cato Journal, 17(2).
Retrieved from
https://www.cato.org/sites/cato.org/files/serials/files/cato-journal/1997/11/cj17n2-1.pdf
Heritage Foundation. (2022). 2022 Index of
Economic Freedom. Retrieved from Heritage.org:
https://www.heritage.org/index/
Hickling, M. (2013). Inflation and Other Risks of
Unsound Money. Sydney, Australia.
Keynes, J. M. (1919). The Economic Consequences
of the Peace. London: Macmillan & Co, Limited.
Nakamoto, S. (2008). Bitcoin: A Peer-to-Peer
Electronic Cash System. Bitcoin.com. Retrieved from
https://bitcoin.org/bitcoin.pdf
The Institute for Justice. (2022). Economic
Liberty. Retrieved from The Institute for Justice:
https://ij.org/issues/economic-liberty/
Wikipedia. (2022, 4 4). Price Revolution.
Retrieved from Wikipedia: https://en.wikipedia.org/wiki/Price_revolution#
Endnotes
[1]
https://ij.org/issues/economic-liberty/
as viewed 4/4/22
[2]
[3]
Fiat money is a government-issued currency that is not backed by a commodity
such as gold. Fiat money gives central banks greater control over the economy
because they can control how much money is printed. Most modern paper
currencies, such as the U.S. dollar, are fiat currencies.
[4]
https://tradingeconomics.com/united-states/money-supply-m0#
using the 25 year view with the Y-axis in millions of USD.
[5]
Specie currency is valuable because the currency is shaped from a valuable
commodity. In the case of Spain, it was gold and silver.
[6]
[7]
For more on CuBit™ and TWPRR™ see https://CuBitREvolution.com
Comments
Post a Comment