Let's Get Physical

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In last night's post, I was talking a bit about the debt model of the current economy, and how fragile it is. While being able to "take debt" is a good thing in terms of being able to trade, an economy with an increasing debt system is always going to collapse, because at some point, people are no longer willing to keep providing goods and services on IOUs. And, once that happens, the demand is ultimately going to drop, because without a line of debt credit, the consumers have nothing to spend.

In this regard, it is pretty simple to see.

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However, over the last few hundred years of modern banking, the debt model has been increasingly encouraged and new and innovative ways of getting into debt have been established. This means that by continually kicking the can of repayment down the road, there is the potential to keep the illusion that the economy growing and keep extracting value from consumers.

However, extracting the value isn't enough, because if that value is held in something that is going to be impacted when the debt model collapses, it isn't valuable. So, there is no point holding large amounts of cash in the long-term, because due to inflation through debt growth, it is going to continually lose purchasing power. Instead, what needs to happen is that the value they extract gets converted into something that will hold value above what the value of everything else will drop.

Traditionally, this is in property, because it is a physical asset that is always in some demand. However, in a more general sense, it is about ownership, where anything that can be owned and will hold value long-term could be a store of the value extracted. For example, companies are property too and they act very much like a farm, where they produce something that is in demand, sell it at market and take the proceeds to produce more value, and distribute left over to the owners. They in turn invest their returns into generating more value also.

So, over the last few hundred years, there has been a shift in the definition of property, where it has gone from only the physical (land, gold, humans), to the non-physical (companies, patents, copyrights). But, what is similar between the two is that both are able to generate value into the future for the owners, but what they produce will only benefit the consumers for a short period of time. That is the thing with consumption -

you can't have your cake, and eat it too.

And the challenge we are now facing is the "wealth gap" which people seem to think is because some get paid more than others, but that is not the case at all, or at least, that is not the major reason. The real reason for the wealth gap is because of who owns what, with those who hold generative assets that give a return to the owners, will continually leech value from the consumers. It doesn't matter who of the workers gets paid more, without owning generative assets, that gap will keep increasing, as will the speed of increase.

And, this is what the debt model has enabled, as it has allowed people to keep consuming depreciating or valueless goods and services, through using the value earmarked for the future, today. This monetary time machine pulls in future value into the present to be spent on goods and services that generate wealth for the owners of the physical and non-physical "farms", pushing that future wealth into their hands and allowing them more capacity to expand their ownership portfolio.

This happens whilst the consumer who is spending tomorrow's value is going to increasingly have to take on more debt in order to keep spending, whether it be on luxuries or necessities. And, because that future value is pouring in, the value of the currencies will keep falling, so inflation will increase and more debt will get created through interest payments, where people are literally overpaying for the value of an asset, because the amount extra paid in interest, is higher than the value of the asset purchased. This creates another source of income for the owners to use to expand their portfolio.

And, currently, while people are worrying about owning their own home, the actual global value of real estate is a drop in the ocean in terms of all the money in the world. In fact, if you have a look at that visualization (updated November 2022), consider how much of that wealth is physical, and how much is non-physical assets. The biggest sector for example is the derivative markets, and they don't even know what that is worth, because it is such a convoluted and opaque system. However, the estimated notional value (over the counter) is over 600 trillion, which is twice the value of all the residential property combined.

And you thought buying a house was expensive.

But, other than the physical assets, nearly all this value is potentially valueless, because it is tied to property that can't be secured, that can be unnaturally inflated, that can be commandeered. Not to mention, if the people decide that the current economy and its tools are valueless.

And that is what I want to bring up to close this article. The chances of changing the economic system using the mechanisms of the current economy, is never going to work. Even the most successful individual in the system, can only by themselves a higher rung on the ladder. The reason is that no matter what you spend in the system, it is going to generate wealth for the owners and when it comes to most of the goods and services we consume, the owner pool is very narrow.

However, there is one thing we do own that can collapse the entire system almost overnight.

Ourselves.

While we act like financial slaves, what keeps the system going is that we are choosing to value what we are told to value. Yes, physical assets like real estate and precious metals are valuable, but much of the rest is not. And because this is where those who control the rules of the economy place their value, all we need do is devalue what they hold, which is incredibly easy. Why so easy, well, it all comes down to changing the definition of value again, just as it has been changed over the last centuries to move wealth from physical holdings to non-physical.

And, this is where crypto comes into it, as while it is a non-physical asset, similar to a derivative, it also algorithmically acts like a physical asset, like real estate. This means that it can be owned like a house, but not be commandeered like a house. And, not only that, unlike a house, it can also be cloned, where one blockchain can be abandoned in favor of another blockchain. This means that there is a self-regulating mechanism in place that allows the people to decide if they still find value in the asset, rather than being forced to hold value in it by central authorities.

Seems easy, eh?

But obviously, the difficult isn't in the theory, it is in the changing of behavior in order for people who have been conditioned their entire lives to believe what has value and what does not, to unlearn and redefine value. And this is what one of the values of blockchains is, as through tracing transactions transparently, we are able to more accurately see the value of actions and better evaluate what we value and what we do not. Yet, even this requires us to demand that all value be tracked in this way, including all of that derivative value that is hidden away from sight, but impacting our daily lives in ways we can't even imagine.

But it is interesting to note, that we believe we own our bodies, yet we don't even know what and how it is being affected in the economy. We feel the impacts, but have so little understanding of what is causing them and so little interest in finding out, that we just keep on going about our daily lives, feeling powerless. Yet, it is exactly our unwillingness to seek alternatives, that lead us to support what is causing us all this economic pain.

Will enough of us wake up and change everything?

I have hope. I don't have faith.

We are too happy to consume nothing of substance.

Taraz
[ Gen1: Hive ]

Posted Using LeoFinance Beta



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39 comments
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Agree few years ago I didn't even know about inflation reserve etc then I just thought it's government bad governess which causes goods price to increase it still do but I know little about why

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Bad governance is big part of it, but they are also incentivized to do it this way, which is part of the bad governance :)

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he who lends money, becomes the lender' slave

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Seems people love to be a slave these days. Addicts.

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Now there will be 100500 comments, but no one will write what a beautiful wife you have. My last post had 30 comments, but no one noticed what kind of coffee I have been drinking for 2 years.

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I don't mind them not commenting on the pictures and there is so much in each post, that I like that people pick what is relevant for them :)

What was the coffee?

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The coffee was delicious. But the main thing is that I read the inscription on the cup, only a year later I started drinking it))

77.jpeg

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I, noticed, but thought it was photoshop. I've never seen that before. Local coffee shop?
!ALIVE

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Thanks for sharing that infographic about the debt in your other post. It's very telling now that I have had more time to ruminate on it.

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Yeah, it is a pretty amazing image really. The one linked in this article is another that gives some food for thought. Look at the attention crypto gets and how little attention derivatives get - then compare their size.

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You make such valid points when you write. I’m concerned, but it’s renewed my vigor towards delivering my view to this platform and my people.

So many times I hear things like, “I can’t believe X company just did this!”

I’m fun at parties cuz I respond typically like this, “Well, I did.”

Companies have always sought the bottom line. This I do not ever forget. I’m honestly perplexed so many people do so often.

I try not to smother people with info, but my calling card recently became a phrase along the lines of, “If only there was a technology for this…”

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I’m fun at parties cuz I respond typically like this, “Well, I did.”

It is a funny thing, as quite often, I have posts that back it up - times stamped years earlier :D

Companies have always sought the bottom line. This I do not ever forget. I’m honestly perplexed so many people do so often.

Blinded by the marketing, or "wanting to believe" that they havea chance.

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Yes, physical assets like real estate and precious metals are valuable, but much of the rest is not.

crypto is more valuable. Because having crypto helps to get even more crypto(Hive/ HBD) on the other hand a bar of gold is not gonna grow a second bar.

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on the other hand a bar of gold is not gonna grow a second bar.

That is what makes it valuable. Crypto can get more crypto, but that crypto has to be worth getting - Hive is :)

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I think bad governance is one of the major things that is causing this. I am very sure that this happens in every part of the world

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Infact, Your conclusion is thought-provoking, it reminds us that we have the power to make a difference by owning ourselves through the blockchain and other means. Thank you for sharing this perspective, it's a timely reminder to focus on building value through ownership of generative assets

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Just want to say this is the first post of yours I have seen as today is the first day I've thought to write and branch out from Actifit and Splinterlands.

I really enjoyed the post. I will probably have to read it again because I just woke up 10 minutes ago and my mind is a little too fuzzy to dig deep into what you wrote :)

Totally agree about people being stuck in a debt trap or consumerism trap. Borrow to get stuff that ultimately depreciates so then work harder to pay debt and get more depreciating stuff. I often hear that America is the "land of the free" but ultimately in my mind I'm thinking .... but it is so easy to become a slave to debt there.

My grandmother taught me to always avoid debt but I've grown to see it as a tool which can be useful but always understand the danger. Now my Grandmother didn't warn me to avoid money but it also is a tool which can be very useful but again avoid the danger with it. What danger with money? People put way too much faith in it and living only to get more can be a path to ruin.

Then there are assets and investments which are kind of the anti-debt. They provide money over time but only because someone else is running the wheel of debt to provide it. Or at the very least working hard to get the money to fund the payments of the asset.

Then there is our self / our own body as you wrote. We think its ours but as you mentioned how is our economy and way of doing things affecting it? I see too much food making people obese. Too much comfort keeping people from being active. Too much pollution / garbage from unnecessary products destroying our environment. The list goes on but chase for wealth and comfort isn't doing our planet or our bodies any favors.

As a Christian I take a little comfort and direction from my Bible:

Let no debt remain outstanding, except the continuing debt to love one another (Romans 13:8)
... getting in debt is bad idea... at least if money is concerned.

Do not store up for yourselves treasures on earth, where moths and vermin destroy, and where thieves break in and steal (Matthew 6:19)
... Do not rely on stuff, investments, property, or even yourself as it can be lost in a moment.

and as a Christian I've been taught to be 'in this world' but not get caught 'by the world'. In short the financial system and the greed that supports it are things that are a simple part of life. I have to learn to navigate it, see the dangers in it, and use it as I need to.... but not let myself get trapped in the futility of debt or the transient nature of wealth (none of us take it with us).

Sorry for the bible tangent there, didn't mean to preach.

Now my big task is convincing my wife that debt, wealth and money are useful but a trap to be avoided and to work towards enjoying the days we have in other ways :)

(that's going to be a big big task :D )

And final note:

Loved your post, thanks for it.

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is the first day I've thought to write and branch out from Actifit and Splinterlands.

Awesome! Welcome and you will find there is a very rich variety of written content on Hive. Just find the right people :)

I often hear that America is the "land of the free" but ultimately in my mind I'm thinking .... but it is so easy to become a slave to debt there.

Powerful words. I think that this is part of the psychological game they play, similar to corporations that make people believe that the company cares about the consumer.

What danger with money? People put way too much faith in it and living only to get more can be a path to ruin.

Have you noticed how people have a strange relationship with money? They hate it, but want more. Love it, but can never have enough. Label those with it as scammers, yet want to be like them...

The list goes on but chase for wealth and comfort isn't doing our planet or our bodies any favors.

It is "too expensive" to be environmentally friendly. Don't they know how economics works?

In short the financial system and the greed that supports it are things that are a simple part of life. I have to learn to navigate it, see the dangers in it, and use it as I need to.... but not let myself get trapped in the futility of debt or the transient nature of wealth (none of us take it with us).

And this goes back to the "tool" of it. It is a utensil to cook with, but what we make with it is up to us. At the moment, we are making a lot of low-nutrition nonsense.

Glad you are exploring more of Hive now - stay in touch! :)

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I think we will either wake up voluntarily or involuntarily. Right now, it seems that many people are sleeping with their eyes open. It doesn't take a sixth sense to be aware of the economic mess we live in.

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Confidence and liquidity matter too.

Distressed sellers of property can cause crashes if people sell all at once.

Do Kwon's panic-selling of bitcoin to get the funds to prop up TerraLuna tanked the price from $45,000 to $16,000.

Central bank selling of gold reserves in the late 1990's tanked the price to $200 an ounce.

What we need most is good govt, but it's rarer than hen's teeth. We finally got a PM who stabalised things last Oct (Rishi Sunak) but it looks like he'll lose the election for being "too clever". Opposition leader is a slippery flip-flopper who changes all his policies every eight months or so, depending on the media fashion of the moment. I wish people would stop regarding politics as a game.

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You needn't have faith, for your beautiful wife has the faith and that leaves you with the hope! It's a beautiful team.

At times I believe the masses are waking to the realization that the system is doomed and they need to take a different track...the one leading to crypto. And then.....they are scared to death of the unknown and refuse to listen to any more 'hocus pocus'. You just can't drag some people away from their staid way of thinking.

Posted Using LeoFinance Beta

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And then.....they are scared to death of the unknown and refuse to listen to any more 'hocus pocus'.

Maybe they think they have heard these promises before, and it hasn't panned out. The difference is who is doing the promising I believe. Decentralized governance is very different to centralized authority.

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Agreed...time will win them over. The skeptics among them will be forced to see the difference as they are thrown under the bus time and time again by the centralized authorities.

It seems the old adage you can lead a horse to water but you can't make him drink is more relevant now then ever. I can't even make my own family see the light lol. One day....

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It will take time but I don't think many people would really wake up at all. The current system doesn't really teach people financial education and most people don't even know how to get out of the current system. They just rely on the current system which is the government and live within those bounds.

Posted Using LeoFinance Beta

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The current system doesn't really teach people financial education and most people don't even know how to get out of the current system.

This is the truth. Yet, who is going to teach? Can't rely on the schools, as the curriculum is geared toward the status quo. It has to be self-directed, or community supported.

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Yes, but I find that it will be tough when people are comfortable with their lives. They won't move towards change so I think it requires quite a few factors.

Posted Using LeoFinance Beta

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I think the real reason for the wealth gap is our covetousness. To survive, the wild capitalism has taught us so unfortunately.

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That is part of it, but it is also the system of incentive. We are hunters and gatherers by nature.

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First of all, you have a very beautiful wife and I thin that a harmonious couple is even more important that the mud the banks are doing.

Second, inflation from Federal Reserve Advent is dramatic, making all the people poorer and poorer.
Like the Pareto Law, more than 80% of the wealth is in the hand of less than 20% of the people in the world. And in the last years the span has also increased

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A few years ago, the 6 richest had the same wealth as the bottom 50% - not sure what it is now.

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I think I just got clickbaited.....what's this post about again?

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Splinterlands assets make me happy, knowing we have the governance of the DAO to manage us and a community of people generally motivated to continue to improve the gameplay. Still no property for me and my other most valuable assets are also collectible trading cards - paper Magic the Gathering. I hate that the paper game is being controlled by a company that is destroying value for the collector in terms of chasing more corporate profits, so over time I am shifting that value from paper to decentralized blockchain as well.

Will I ever own property one day? I hope so... but first I will need to learn how to manage it, and improve on it to make sure I don't destroy it. And trying to stay in one place for an extended bit of time... always a scary proposition to me. Hopefully at least I pick a place that is exciting to others in case I need to rent it out to fund a new change of place.

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You have been in Splinterlands from near the start, right?
I came in quite a bit later, so I still have a fair way to go to be comfortable that it is a good investment!! :D

Property is important, as regardless, we all need somewhere to live. For some, renting might be better, but I think even having a small property as a fallback position in worst case scenario, would be valuable. However, the non-physical assets of value, secured by blockchains and transparency are the future. Cut out the middlemen, lose the leeches.

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