A lot of people start to blame capitalism for their problems. They feel something is not right with how the world operates. Few people get richer by the day, many get poorer. And there is a problem. The reason - capitalism, the solution - socialism. That is just WRONG. Let us dig deeper.

The problem

Many people sense a problem. It is in the air. They work hard all their lives and still chase stuff as housing, quality education and healthcare. 💰 is never enough. The middle class is disappearing, the poor are becoming the majority. Worse, the working poor (yeah dude, working poor 🤯) are becoming a majority. Buying a house means 30 year mortgage nowadays, not good old buying a house with savings. Education means 10 year loan, not just paying the tuition from summer job.

These processes are slow but very persistent. First it is ok to have a 5 year mortgage on a house, then 10 year mortgage, but when you get to 30 year mortgage, you say to yourself “WTF, I waste all my life to pay for a house”. Kind of reminds me the boiling frog fable. And then people become disgruntled and start looking for the cause.

What is causing this (wrong answers only)

Many people blame big companies. They exploit people while making huge piles of đź’°. They are on a good trail. But not quite there yet. Their solution? From break up of big tech, to tax out of existence. One recent example of break up big tech narrative is Tim Bray (Amazon high profile, who quit of moral reasons recently).

Many people blame speculators. A vivid example are landlords in tourist destinations as Barcelona. They buy up all the property to rent out on Airbnb and make a quick buck and this makes housing unaffordable. Solution? Seize empty apartments. This group is on a hot trail but not quite there too.

Many people blame politicians. They don’t care about average Joes (or care when elections are coming) but bend over big companies and banks. They are corrupt and serve a corrupt capitalist system. These people are getting really close, however, they are still thinking very abstract.

Many people blame China. They take our jobs away and sell us cheap garbage. This destroys our communities and makes us poor. A bit of truth there, although just a bit. That is the consequence, not the reason.

And many more people blaming many things. But it all comes to the evil capitalism that sucks our souls away, makes us poor while putting big 💰 in big sharks’ pockets. “Jeff Bezos made XXX billion yesterday and I hardly make ends meet.”

What is causing this (right answers only)

Money creation

Since world moved to fiat based monetary system (not backed by gold but by the “trust” in government), central banks and governments create money out of thin air and spend as they seem fit. That means a few things:

  • Money is created by the decision of a few people.
  • Money can be created at any amount. Cost of production is 0. That opens the door for misconduct and moral hazard.
  • A few people (governments and central banks) can spend unlimited amounts of money as they create it at no cost. Me and you can’t.

🚨🚨🚨Do you start to feel the inequality?

Imagine I print my own money at home with my printer on A4 sheets of paper. Then you accept it for real services and goods. You lose. I win. Let’s be clear, this is not capitalism, this is a scam.

Cantillon effect

The above would be kind of OK-ish if everyone benefits from the new money. Well, it is not like that. The ones close to the monetary system benefit the most. Usually politicians, bankers, big companies. This is about money distribution. It is called Cantillon effect and if you think this is new, it is not. It has been around for centuries. Just modern monetary system makes it on steroids. Sounds a bit abstract, let’s 👀 some examples:

  • Big company issues debt at very low cost (or no cost). Low cost because money printing makes money abundant. They invest/speculate and get bigger. Many people borrow at far higher rates. Many more don’t have access to cheap credit. Like 0 access. For example free lancers, sole traders etc. The average Joes.
  • When big banks/companies go into trouble they are saved with newly created money. They are important to the system (who decides that?). So what should fail is subsidized. Risk is taken off and encourages bad behavior. Average Joes fail miserably. They are not that important to the system.
  • Easy money creation goes hand in hand with financialization(?) of the world. Ever more financial instruments are created to facilitate this. Leveraged buyouts, why not, money is cheap. Bundled mortgages sold as investment instruments (2008 anyone?). Everything has a financial derivative. Financiers and bankers are the new overlords. They distribute money and take a share. This puts huge amounts of money if a few pockets. These people know their stuff, take the fiat then and bid for real things like real estate. Financial capitals like London, Zurich, New York, Tokyo are impossible to survive for the average Joe anymore.

TL;DR Some people have unfair advantage when it comes to money creation and distribution. While our world runs on money and not good will, they have unfair advantage about everything.

The solution

Hard money. That’s it. This solves poverty, inequality, climate change, whatever. Ok, I am a bit extreme but this is the necessary foundation. It should be equally hard for me and you to get 1 unit of hard money. This way you eliminate unfair advantage and this is crucial.

How do we solve problems if we bring socialism or communism to the table? The unfair advantage will move from one group to another. No thanks. Folks in Eastern Europe have seen this play fail.

Will change come fast? No. Will it come easy? No. Will it come at all? I don’t know. The first step is, though to be aware. This is big. Knowing what causes all this is a huge step in the right direction. And this is what this blog post is about.

Thanks for reading!