The Game Has Changed
How do you build wealth faster than central banks are destroying the value of money itself?
It is impossible to get your head around the scale of reckless and entirely unaccountable “credit creation” aka magic money making that happens every day across the world. Every central bank is printing money and lending it to leading national banks. These central banks are also active in bond markets, precious metals and derivatives. The banks then lend capital principally direct to borrowers (major corps for payroll, acquisition finance, etc..) and to other financial institutions.
I recently wrote about the consequences of this financially engineered and largely virtual (fake) economic motor:
Worldwide approximately $3T of wealth was destroyed yesterday.
I believe it never really existed.
We’ve used economic stimulus to create more money than ever before. The “plan” appeared to be:
create money
have all that money chase a small set of assets
raise the asset values via inflation
use those inflated asset values to borrow more, buy back stock and increase asset prices even further
increase insurance premiums, receive larger bank fees, capture more service provider income, etc…
That last part may have confused you.
You may say: aren’t the people paying their insurance on their more expensive assets, suffering from increased costs as well?
It’s increasing costs for them and us but they are the owners of those institutions, as well.
They own insurance companies, financial institutions, management companies and consultancies.
They own central banks.
They love seeing asset values rise to nosebleed levels because their mega corps and their niche service and information-based businesses make more money.
Who’s they?
Meet Your Friendly Globalist Banker
Everyone talks about the FED but there is a global version from the home of the numbered bank account, Switzerland, that is at the heart of all this.
The Bank for International Settlements (BIS) is an international financial institution owned by central banks. Established in 1930, its headquarters are in Basel, Switzerland, with representative offices in Hong Kong and Mexico City.
The article goes onto to discuss the Bank for International Settlements role backstopping (and often originating) this unrelenting wave of money printing and the tragic consequences this brings to the working classes across the world.
The reality is: these people are too smart for the inflation-induced energy transfer from the savers/workers of the world to the wealthy assets owners to be anything other than intentional (read: THEFT).
Exiting The Grid
Were we born to be wage slaves in information factories (or real factories) or working as spreadsheet manipulators for Mega Corps?
Is there any escape from a system designed to transfer the value of your life’s work, your savings, all the wealth your family has passed onto you, your current income, all your future income… into worthless currency?
The first and most obvious answer is to store your wealth in non-dollar denominated assets free from central banking fiat tentacles. Bitcoin is that asset for me, for reasons explained here:
We've spent centuries chasing the idea of a perfect currency—something politicians can't manipulate, something that holds its value over time.
Look no further than Bitcoin:
Capped Supply: Bitcoin has a fixed limit, unlike fiat currencies that can be endlessly printed.
Inflation Shield: This scarcity protects Bitcoin's value from the erosion caused by inflation.
Long-Term Store of Value: Bitcoin's design makes it ideal for preserving wealth over time.
Counter to Centralized Control: No government or institution can manipulate Bitcoin's supply.
True Ownership: You have direct control over your Bitcoin, not subject to third-party policies.
They can't just print more of it like they do with dollars. The issuance schedule is algorithmically insensitive to demand. That mathematical fact makes it the shield we need against the dark forces we talked about in the intro.
Don’t We Have Gold Already?
Gold? It’s been upgraded.
I can't carry a ton of gold in my pocket. Can't send a sliver to someone across the world in seconds. Bitcoin, though...that's digital gold that moves at the speed of light. It can't be confiscated by some government decree.
My Bitcoin is mine alone, secure and accessible whenever I need it. Let’s expand on that list of BTC’s strengths to showcase its full power.
Digital Portability Bitcoin can be transferred effortlessly across borders, unlike physical gold.
Perfect Verifiability: Authenticity, value, provenance… all instantaneously confirmed
Infinite Divisibility: You can use tiny fractions of Bitcoin, impractical with gold bars.
Seizure Resistance: Bitcoin can be stored securely in ways that make it harder to confiscate.
Global Accessibility: Anyone with an internet connection can access Bitcoin.
Lowest Storage Costs: Securing Bitcoin digitally is far cheaper than storing large amounts of gold, or any other asset. Even with the Proof-of-Work costs factored.
Fastest Money: Send economic energy around the world with settlement in minutes.
If you’d like to go further down the “fiat vs bitcoin” rabbit hole, no shovel required:
For now, let’s geek out about why BTC is the solution to the parasitic printing problem.
Cross-Domain Brilliance
Bitcoin isn't just clever code, it's a masterpiece of synthesized math, game theory and computer science.
Bitcoin cleverly combined existing mathematical concepts in a unique way. The underlying cryptography (hash functions, elliptical curve cryptography) was already well-established.
Bitcoin's true breakthrough was in how it used these mathematical tools to create a secure, decentralized, and trustless digital currency system. This involved:
Distributed Consensus: Using Proof-of-Work to achieve agreement on a shared ledger without a central authority.
Incentive Design: Aligning the economic interests of miners to ensure the network's integrity.
The blockchain is an unbreakable ledger, transactions are secured in a way that hackers can only dream of breaking. Transparency and security rolled into one.
Incentives decide outcomes.. and this is where Bitcoin’s brilliance is clear. The design of Bitcoin's PoW and reward system ensures miners act honestly. It's more profitable to follow the rules than to attempt to cheat the system. Miners compete to solve complex mathematical puzzles (using hash functions) to add new blocks to the blockchain. This secures the network and creates new bitcoins as a reward.
Transactions are grouped into blocks. Each block contains a reference to the previous block creating a chain (the now famous blockchain).
Bitcoin relies heavily on cryptographic hash functions (like SHA-256). These turn data into a unique, fixed-size fingerprint. Hashing is used extensively in mining, creating addresses, and linking blocks in the blockchain. Bitcoin uses Elliptic Curve cryptography for its public-key cryptography system. This allows for secure ownership and transfer of funds through the use of digital signatures.
And all this, powered by a network no single entity controls. Truly the bitcoin network is one of mankind’s greatest engineering marvels.
Money That Gets More Valuable Over Time
Imagine a resource that gets rarer as time goes on.
That's Bitcoin.
The BTC supply issuance rate gets cut in half regularly, a code-enforced scarcity that could make it more and more valuable. Compare that to endless money printing. I'm betting on the thing designed to get harder to find, not the one pumped out with reckless abandon.
Stock-to-Flow: This model suggests Bitcoin's value increases with its scarcity relative to new supply. S2F is the reason gold gets so much love, that and a 6,000 year track record. Bitcoin is even harder than gold (already) with a programmed increase every 4-years.
Predictable Issuance: The halving events reduce Bitcoin's creation rate in a known schedule.
Contrast to Fiat: Central banks have no limits on money creation, devaluing currency relentlessly.
The common definition of "hard" usually conjures up ideas of something tangible and durable. But monetary hardness isn't about physicality, it's about difficulty to create, which makes it to undermine. It's resistance to the inflationary forces we see in fiat currencies. It's about creating an asset that is costly, time-consuming, or even physically constrained in its production.
The Stock-to-Flow ratio (S2F) is how we quantify the hardness of money.
It's an easy calculation: the total existing supply (stock) divided by the annual new production (flow).
A high S2F means the annual mining output has a negligible impact on the grand scheme of the existing supply. It would take decades, or even centuries, to significantly alter the stock, making the asset more resistant to inflationary shocks.
And BTC’s hardness will continue to increase with each halving far into the future. Its S2F ratio is on a path towards infinity, which is a concept that boggles the mind when it comes to money.
As I mentioned in the bullets above, hardness has been the primary reason gold has been the choice for store of value for the last 6000 years. Watching this inevitable trend play out is going to be rewarding.
Just Bitcoin?
While BTC is where I am storing most of my wealth, it’s a wealth battery with a capital appreciation component… income is still required to live!
For that reason, I advocate building multiple “wealth engines”:
dividend income portfolio
write options atop the dividend portfolio
capital appreciation portfolio
e-commerce businesses
tech-enabled service business with motions that can be automated
Integrate these engines, and other income sources, together to form a wealth system. Eventually, as resources allow build a multi-engine wealth system.
In a tax and profit efficient way sweep your income into BTC. Harness compounding forces at the wealth engine level (dividend portfolio DRIPing, etc..) and then compound at the macro level, across the entire wealth system.
The less you waste spending the more you can reinvest back into your wealth engines, or directly into BTC buys.
The keys are:
track your spending ruthlessly
build your wealth engines and constantly add energy ($, technology, skill gains) to them
add new wealth engines when your margins indicate you are operating your existing engines efficiently
reinvest your income to make your engines larger and/or to activate entirely new engines
store your wealth in places that will resist the constant damage of inflation
benefit from a systematic approach to wealth 24/7 while you focus on LIVING
👋 Thank you for reading Wealth Systems.
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I started Wealth Systems in 2023 to share the systems, technology, and mindsets that I encountered on Wall Street. I am a Wall St banker became ₿itcoin nerd, ML engineer & family office investor.
💡The BIG IDEA is share practical knowledge so we can each build and optimize our own wealth engines and combine them into a wealth system.
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