Personal finance 101 says that you must invest your earned income if you wish to preserve its purchasing power over time. But so few ever question why this is the case, or the conditions that make it so.
The problem with modern fiat is that it must be earned twice.
You cannot simply earn an income and save for the future because the purchasing power of those dollars get evaporated by monetary inflation over time.
To “outperform” inflation, which is propagandized at 2% per year, personal finance 101 has normalized the widespread speculation in capital markets.
You are forced to gamble and take on risk to outpace the rate at which designated institutions are allowed to steal from you.
Monetary inflation is theft, and it always has been.
From the first day a person earns an income and has discretionary capital until the die they ultimately die, they are coerced into speculating in capital markets to preserve their purchasing power (and cross their fingers that no economic calamity occurs when they must withdraw their assets for retirement).
This is perverse.
Your time is the scarcest resource on earth. You exchange the scarcest resource that you own (your time) for something that is mathematically designed to debase in value over time (fiat)? That doesn’t sound great.
You exchange your time for something that can be arbitrarily created at zero cost in a government database — all because unelected government officials decide that is what must be done today.
Those with discretionary income are presented with two options: 1) save in the currency and lose 2%-14% in purchasing power each year or 2) invest in relatively more scarce assets in an effort to preserve purchasing power, such as public equities and real estate.
This is what is meant by “fiat must be earned twice,” and what systemically creates the investooor as we have all been forced to become (more broadly, fiat having to be earned twice also creates a financialized economy that stops creating things of value and instead moves numbers around in databases — more on this another day).
This dynamic forces the average Joe to become a professional investor if he wishes to preserve his purchasing power.
The plumber cannot simply perform the job that he is good at and save in the currency that he earns from doing so; he is forced to become a professional investor in his free time and hopefully identify assets that can outpace the rate at which his government steals from him.
He is forced to take on massive risk to preserve the purchasing power that he originally earned from exchanging his time for a tool that is mathematically designed to lose value with time.
And ironically, the plumber has it better than 50% of Americans who do not have the discretionary income to invest for the future.
Relatively speaking, the plumber has one of them good problems.
Most of the U.S. population owns no investible assets; they do not even have the opportunity to be an investooor and save in an asset that might outpace inflation because they must spend all their political currency units just to make it to their next paycheck.
This is the reality for half the people in the wealthiest country in the world… imagine the state of affairs for the average person around the world.
There are levels to this. Pointing fingers at who has it better than others is not the intention of this piece; questioning “investing” from first principles is.
Socratically ask the fiat bro why we must invest and you will eventually get to the response, “To outpace inflation” … and that is where his training ends.
He assumes that 2% inflation is a fundamental truth.
He does not ever question why monetary inflation *must* occur in the first place, despite the pernicious consequences that occur downstream from it.
I am not arguing against investing in general.
In a given population, there are professionals who should speculate, take risk, and make bets on investing in technologies that will create a better future.
But the average person should not have to.
We should be able to trade our scarce time for a money that only has to be earned once. We should not be forced to be a professional investor in our free time.
We should be able to save in a money that others cannot arbitrarily create more of for zero cost, and one that follows an immutable rule-set outside the control of any centralized authority.
Thankfully, we can.
** I learned about “earning fiat twice” from Saifedean Ammous, author of The Bitcoin Standard and The Fiat Standard — two books that I cannot recommend enough. Purchasing them through those links will help support this publication. Thank you.
The “earning fiat twice” was one of the biggest takeaways from the Fiat Standard for sure!