Two weeks ago, I wrote about how money mistakes are temporary. My main argument was that unlike other kinds of mistakes, money mistakes rarely have permanent consequences.
I’ll return to that in this post, but first let’s consider a few things that have happened this month:
- We’ve all been hearing about NFTs, also known as “non-fungible tokens,” also known as digital art that can be reproduced over and over but sells for a ton of money. The NBA has sold $230 million on these intangible “items.” An artist sold one for $69 million the other day, and I’m sure that record will be broken soon.
- The price of a single Bitcoin, another modern invention, has risen to more than $60,000. Like NFTs, Bitcoin is also completely digital. There is no such thing as “a Bitcoin” you can carry in your pocket or store in your safe deposit box at the bank. Everyone who trades Bitcoin or other digital currencies simply accepts that it exists.
- The U.S. government has passed a law enacting a $1.9 trillion stimulus package. Put another way, the U.S. government has printed $1.9 trillion more dollars. This was on top of another $2 trillion they printed last March. And presumably there’s more where that came from!
I stand by my original argument, but let’s add another one to the mix: The reason why money mistakes are temporary is because money itself is fictitious. Money is imaginary. It’s as abstract as a highlight reel of Lebron James that sells for $200,000.
To be more precise, we could say that money is the product of a collective imagination. If two parties agree that something is “worth” a certain amount, then it is. If they don’t, then it isn’t.
So here then is the question: If the government can print money and no one seems to mind, why can’t you?
Your answer might be, “Because I want to respect the rules of western capitalism,” and that’s a perfectly reasonable answer. Sometimes it’s good to follow traffic laws, at least if they’re necessary.
Just understand that these rules—especially the financial ones—are products of our imagination.
Like Bitcoin or NFTs, they exist because people decide they do. Without collective belief, no form of money has any real value. To return to my statement from my original post: “The thing about money mistakes is that you can always make more money.”
This is what you should be thinking about. Once you accept that money isn’t real, you worry less about a lot of things—and not only money.
But What About the Homeless? (etc.)
In response to the last post, a few people brought up a few concerns. It’s easy to say “Don’t worry about money” if you have plenty of money, they told me, but what about everyone who is poor?
This is a very good point! (I made the same point in the original post more than once, but most people don’t read before complaining.)
So let’s get into this more here, and consider the issue of homelessness. This issue is not at all insignificant—but money can’t fix it, at least not for society at large.
This is because unlike money, homelessness is not something that is essentially imagined.
You either have a safe, comfortable place to live or you don’t. If someone says, “Being homeless isn’t real, so don’t worry about it”—you should rightly suggest that they see how they feel after being homeless for a while.
But when it comes to addressing the issue of homelessness, that’s where a tangible problem meets an intangible resource. If money could solve homelessness, Bill Gates could just write a very large check. Not only could he, he probably would! The man is incredibly generous.
But he’s also incredibly smart, and knows that his large check wouldn’t work, at least not at scale, so he spends his money on trying to eliminate malaria and improve sanitation for Africa.
We could say the same thing about any other number of societal problems, including educational and healthcare disparities in the United States, the richest country in the world. Not everyone has access to the same systems, so that’s what we need to work on.
In short: don’t miss the forest for the trees. If you do, you’ll miss the chance to think about how you can use the fiction of money as a tool—just like the government does.
“But the government can’t just keep printing money, right?” (Answer: sure it can!)
This is another concern that people tend to bring up when you point out that money isn’t real. You may have been told in economics class that the government can’t simply print all the money it wants without consequences such as inflation kicking in.
Well, this is true in places like Zimbabwe, where I once paid one million dollars in local currency for a Diet Coke. (Exchange rate: 300,000 Zimbabwe dollars was $1 USD.) The price was actually $800,000, and I added $200,000 as a tip—partly because, I admit, I thought it would be cool to spend a million “dollars” on a soda. But in Zimbabwe they stopped trusting their own currency, so the U.S. dollar became the de facto instrument of exchange.
Will the world stop trusting U.S. dollars too? Probably at some point! But a) it won’t be anytime soon, and b) when they do, where are they going to turn?
The answer to that is decentralized digital currency, which brings us back to where we started. Bitcoin and NFTs have value because people decide that they do, just like gold or paintings by 19th century impressionists or anything else.
Whenever someone says “The government shouldn’t print extra money,” what they mean is “The government should only print extra money for something I agree with.”
So here’s my proposal: what if, instead of arguing over which interest group should get paid, they all did? Stimulus checks today, tomorrow, and the day after.
It’s probably not going to happen exactly like that, but again, don’t miss the forest for the trees. The forest is that money is only as real as people say that it is. What can you do with this knowledge?
Time to Get to Work!
What you need to do in these situations is apply them to your own life. How can you hack systems for your benefit?
- If you have tens of thousands of student loan debt, what would happen if you just decided to ignore it? (I’m not kidding. Think it through: what would happen?)
- If you think you’ll have more money in the future (however “money” is defined), why should you sacrifice today? Dave Ramsey tells you to live frugally, but his house is currently listed for sale for $15 million. Financing at low rates is widely available, just as it was before the bad lending crisis of 2008.
- Don’t stop on the consumer side: lots of businesses do just fine paying their executives large bonuses while never actually making a profit. Better yet, start an airline and get billions of dollars in taxpayer money that you’ve already said you don’t need.
Most of all: what if you just made the system work for you instead of the other way around?
To use a hockey metaphor, don’t skate where the puck is now, skate where the puck is going. (Disclaimer: I know nothing about hockey, but this seems like a logical enough idea.)
If you don’t like these examples, that’s okay. Plenty of other people will default on their student loans or get billions of dollars for operating unprofitable airlines.
That said, I challenge you to think about how you could apply this perspective to your life. If you’ve always believed that money is real, do you feel differently now that you know it’s not?
If nothing else, don’t let people or institutions use the threat of an imaginary resource against you any more. Educate yourself!
If your boss threatens to fire you, call their bluff. If a debt collector harasses you, fight back. Or better yet: them they can collect it in the form of digital art.