Is there a more snakier subject in the world of finance than money itself?
Sure, we all use money daily. Many of us spend most of our waking hours working for it. We know it’s important. We need it to buy the things we need to live.
But how many of us think deeply about our money? How many take the time to analyze it? To consider just what money is… and why it is?
I spent twelve years going through the public school system. Then I spent another five years at a large public university.
First I studied chemistry – but it didn’t take me long to realize that wasn’t for me. So I switched gears and spent my time studying finance and economics. I read their textbooks and memorized their principles and their equations. But guess what? They didn’t commit even a single drop of ink to the subject of money.
Instead, the finance and economics books presented their material as though money was a static entity. A cosmic fixture. Something that never changes.
Nothing could be further from the truth.
We live in a world where central banks and national Treasury departments can create money from thin air any time they want. There are no restrictions. Our money is “fiat” money. Fiat is Latin for “let it be done”.
You know what that reminds me of? In the book of Genesis it’s written that one day God said “let there be light”. Then there was light.
Well, our central bankers and Treasury Secretaries take the same approach to money. They say “let it be done”, and trillions of new dollars appear from nothing. And when they do, the new money steals value from the money that got here before.
In other words, the act of creating money from nothing destroys the purchasing power of the money. This is why we see costs of living rise sharply over time. Houses, rent, cars, groceries – you name it and it’s probably risen dramatically in price over the last several decades.
But this isn’t a situation where those items got more expensive. It’s just that our money isn’t as valuable as it was before. Like a geriatric retiree, it can’t buy as much as it once did.
Yet, we are led to believe that money is money is money. And we are taught that “having money” makes us wealthy. What a scam.
That’s why I see the subject of money as “snaky”. I’m not sure if that’s a word, but it seems appropriate.
If we don’t understand the true nature of our money – fiat money, then we become easy to deceive. That is to say, we are more apt to make bad financial decisions. Then we are doomed to remain stuck on the hamster wheel – constantly having to trade our time for money. Money whose value constantly dissipates.
To me, the true purpose of money is to acquire assets. That’s the key lesson in the classic board game Monopoly. If we acquire the right assets, then we will always have the financial means to take care of ourselves and our families, even if our active income were to go away.
And isn’t that really what we all want? To get rid of our active income? To not have to work so hard for money anymore?
This is why I’ve always rejected consumerism. If you come to my house, it’s like walking back in time. Everything is dated. It’s like you’re walking back into the early 1990s.
That’s because I don’t upgrade anything. And I don’t buy new stuff. Instead, I spend all my money acquiring real assets. Gold… Bitcoin… real estate… blue-chip stocks trading at incredible valuations – these are the items I spend my money on.
I see it this way… I’m working around sixty hours a week right now. If I were to spend the fruit of my labor on consumer goods, it’s like I never worked in the first place. The money is gone… and I have to get back on the hamster wheel to earn more.
But if I spend my money acquiring top-tier assets, those assets will produce even more money for me. This creates a virtuous cycle. The money I worked for now goes out and works for me. Then at some point I’ll step back and let the money do all the hard work. I won’t need to work as hard anymore.
That’s what I want. That’s my philosophy on money.
But this raises an important question. Why? What’s the point?
We’ll answer that one tomorrow.
-Joe Withrow
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