“The fiat game” is succeeding in an economic environment void of hard backing or asset-based currency. It’s the mainstream economic environment today.
The Cantillon Effect
The closer you are to the source of money, the greater your benefit. Money is sourced and created in a fiat environment through banks.
The two banks that matter for this post are the Federal Reserve, and commercial banking.
In a fiat system, money is created when a bank makes a loan. Every dollar is circulation today was created as a loan from a bank.
When a bank creates money, that’s cash that never existed. But it’s worth the same as every other dollar out there (everyone’s dollars just become worth a little less together).
Real Estate
The most accessible way to take advantage of this is real estate loans. Banks are extremely comfortable making real estate loans, and real estate is a simple business to make money off of, yourself.
Buy property. Rent it out or flip it. Repeat.
Because it’s so simple, real estate becomes an easy way to store value while also creating cashflow.
Government Grants
Since the federal government has access to the most unaccountable bank of all (the Federal Reserve), the Fed is the most liberal with creating cash.
If you have a mega-corporation and you’re designated as a key piece of the nation’s financial infrastructure, you can get bailed out by having your bad assets bought.
Otherwise, a more accessible version of this is taking advantage of other programs and grants. E.g. my county has a program where they will give you a loan of 3% less interest than whatever the current rate is for home improvement projects. You might use this on solar panels, increasing the value of your home, and also getting cheaper electricity in the process. You can also make sure you buy American-made solar panels for an even further tax abatement.
The theme for all of these is government-led or gov-backed programs.
Elon: the master of fiat financing
Is it any wonder that the richest man in the world has mastered this game?
- SpaceX: their only client is NASA, a government agency
- Tesla: took advantage of massive EV grants in its early days (it even was mentioned in a presidential debate)
- Boring Company: their biggest client is government-owned entity in Las Vegas
- Twitter / X: when he bought it for $44 billion, 13 of it came as finance directly from banks. The vast majority of bank-loaned money is created out of thin air, with the bank only having to have a portion of that money held in reserve
The cold reality of using debt as leverage is that it pulls up the ladder behind you just a little bit by making all dollars worth less. You get more by taking fractions from everyone. Because it’s easier to get more debt when you already have a lot of assets to fall back on, the end result of the Cantillon effect is the rich getting richer while the poor fall further behind.
The best thing you can do is (1) get in on the game on yourself and contribute to the tragedy of the commons, and (2) invest in your escape hatch from the fiat money system.
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