Broken Money: Why Our Financial System is Failing Us and How We Can Make it Better

by Lyn Alden

“Who controls the ledger?” The answer, geopolitically, is that in the telecommunication age, whichever country has the most economic and military prowess is likely to have the primary control over the world’s ledger, unless or until there is a better solution, or until no single nation is large enough to force its will onto the rest of the world.

big enough to issue a fiat currency that the whole world can use and would want to use. The only thing that can be big enough is a form of supranational money; one that has natural scarcity and is not issued by a government.

Ultimately, I view this primarily through a lens of technology,

This is an inevitable condition that we find ourselves in, unless or until we develop and adopt a better ledger system.

A 2% inflation target means that prices on average will double every 35 years.

A 2022 study by the American Economic Association called, “The $800 Billion Paycheck Protection Program: Where Did the Money Go and Why Did It Go There?” found that three-quarters of the funds went to the top 20% wealthiest households, and very little went to actually keeping workers in their jobs:

During the 2020 and 2021 crisis stimulus response overall, the typical person received several thousand dollars in stimulus checks and extra childcare tax credits, but there were wealthy lawyers, investment managers, and business owners that received hundreds of thousands of dollars per person in unneeded fiscal aid, and certain corporations that received billions of dollars and laid off employees anyway. All of this was with printed money, which devalued the savings of anyone holding cash or bonds. As the dust settled over the following years, the combination of fiscal stimulus and the recovery of asset prices led to very uneven results. The bottom 50% of the population collectively saw their net worth increase by $1.5 trillion from the beginning of 2020 to the beginning of 2022. The top 1% of the population collectively saw their net worth increase by $11.8 trillion over the same period267.

Therefore, both the amount of base money and broad money grew rapidly during 2020 and 2021. Over a 2-year period from the start of 2020 to the start of 2022, the broad money supply increased by approximately 40%.

In 1972, according to FDIC, there were 13,733 banks in the country with 24,829 branches. Fifty years later in 2022, there were only 4,135 banks with 71,190 branches.271

The banks get bigger and bankers fewer

However, if violent revolution occurs, it is more often the case that poverty is redistributed upwards rather than wealth being redistributed downwards. Rather than the poor becoming wealthy, the wealthy become newly poor alongside the existing poor. The wealthy are overthrown, but along with them the whole system risks being plunged into chaos, and the fragile set of economic incentives risks being destroyed. For the most part, the only people who become wealthier from this process are the handful of leaders of the new regime.

The great danger of civil war

In the United States in 1950 for example, there were 16 workers to support every retiree receiving Social Security benefits. In the 2020s, that number is now under three workers per retired beneficiary, and in the decades ahead it is projected to fall to as low as two.

1984, Nobel laureate economist Friedrich Hayek said in an interview: I don’t believe that we shall ever have a good money again before we take the thing out of the hands of government. Since we can’t take them violently out of the hands of government, all we can do is by some sly roundabout way introduce something they can’t stop.307

Since the ledger is highly distributed and relatively small in terms of data, node operators can store a full copy of the ledger and constantly reconcile it with the rest of the network.

The people control the ledger

Bitcoin is a decentralized ledger, existing across the world in a decentralized cloud of computers, that is costly to attack and impossible to unilaterally change the rules

In addition, Bitcoin closes the speed gap between transactions and settlements that I’ve described several times in this book.

As we finish the chapter we should ask “who controls the ledger?” for Bitcoin. The primary answer is that the tens of thousands of users that run nodes control the ledger, and anyone with a basic laptop (or similar hardware) and a standard internet connection can join as a node operator.

Unlike banks, central banks, and fiat currency financial systems, there is no entity that can unilaterally debase the Bitcoin ledger. There is no central node that can create a million new coins for themselves.

You can’t bring a lot of physical cash or gold through an airport and across borders. Banks can block wire transfers into and out of their country or even within the country. But if you have bitcoin, you can bring an unlimited amount of value globally, on your phone, on a USB stick, or stored in a password-protected file in a cloud drive that you can access from many different countries — or simply by memorizing a twelve-word seed phrase (which is an indirect way of memorizing a private key). It’s challenging for governments to prevent that without extremely draconian surveillance and control, especially for technically savvy citizens.

Globalize currency

In contrast to Bitcoin, CBDCs empower the controllers of the ledger at the expense of the users, and therefore give central banks and state agencies the ability to control their ledger with even finer precision

Today, many signs suggest that the current version of the global financial system is breaking down once again. The combination of large sovereign debts after decades of deficit spending, increasing wealth concentration, and a shift from a unipolar to a multipolar world order, is putting a lot of pressure on various fiat currency systems.443 As wealth concentrates toward the top and as people begin to feel that the economic system is no longer working well for them, people tend to turn toward populism. It’s a cycle as old as civilization.

This book repeatedly explored the question of “who controls the ledger?” and the answer to that question has shifted over time. In early history, the answer was that local communities and nature (for commodity money) controlled the ledger. As some civilizations gained large technological advantages over others, their technology gave those advanced civilizations a way to basically control the ledgers of the less advanced civilizations they encountered by producing a lot of certain types of commodity money that those less advanced civilizations thought was rare. With the rise of banking and central banking in a telecommunication-enhanced world, where gold was too slow to serve as money anymore, the ledger became increasingly centralized and controlled by nation states. Governments and their central banks essentially acquired a monopoly on fast, long-distance money transmission, which gave them more flexibility to devalue the savings of people within their borders and channel that value toward their goals in opaque ways. Going forward, bottom-up digital monies such as bitcoin attempt to give the ledger back to the people, while top-down digital monies such as central bank digital currencies give nation states even more control over the ledger that people use.

Open-source money in the form of bitcoin may eventually become large enough to compete with the U.S. dollar more directly,

As the world became increasingly industrialized, gold won out over every other commodity. And then as the world became increasingly connected by telecommunication systems, fiat currencies displaced gold in every country. Now that digital scarcity and digital settlement exist as new forms of technology, there is an opening for a new monetary era yet again.