In a paper debt-based economy, wealth generation is concentrated in the hands of a select few—namely, those who create the money, like central banks and primary dealers, and those who own substantial assets and understand how to leverage them. This dynamic benefits the wealthy, who can exploit inflation and the easy access to credit to accumulate more wealth, while the majority are left behind as the system makes it increasingly difficult for newcomers to enter the game.

The Real Estate Game: Turning Liabilities into Assets

At the core of a paper money system, the conventional understanding of assets becomes distorted. In today’s economy, owning a home is often considered an asset. However, if you’re living in the house, it is more of an expense. Homes require maintenance and, over time, can lose value without continued investment. In a debt-based economy, this perception changes.

There are two ways a house can be considered an asset in a system fueled by paper money. The first is through appreciation in its nominal value. As the money supply expands, the price of real estate increases, often driven by speculative investments. For instance, if you purchased a house for $1,000,000 in 1971 and its price rose to $5,000,000 over ten years, you now own an asset that has appreciated significantly.

However, this increase in price is not due to any intrinsic improvement in the property itself. Rather, it reflects the inflationary pressures on the currency. When this happens, owners can take advantage of the inflated value by refinancing their homes, borrowing against the newly appreciated equity. In this case, a homeowner might refinance a $1,000,000 mortgage to take out $4,000,000, benefitting from more favorable loan terms. Nominally, this looks like wealth, but in real terms, it’s a result of the currency losing value over time.

The second way to turn a house into an asset is by renting it out. If rental income exceeds the mortgage payments and expenses associated with the property, the homeowner creates positive cash flow. This cash flow can then be reinvested into more properties, leveraging the debt system to build a portfolio of income-producing assets.

Leverage: Borrowing Without Limits

What truly fuels this wealth accumulation is the ability to leverage debt. In a paper money system, borrowing doesn’t require using your own money. Instead, you’re using someone else’s money, with banks facilitating the transactions. Banks profit from the fees generated by loans and by packaging these loans into securitized products, such as mortgage-backed securities, which are sold to investors.

Through this process, individuals can borrow against the growing equity in their properties without needing to use their own capital. As long as the properties continue to generate positive cash flow, they can keep acquiring more assets. Inflation, which erodes the currency’s purchasing power, continues to drive up the nominal value of real estate, making it easier to acquire more property without worrying about rising costs.

The Rising Wealth Divide: Inflation and Exclusion

This system creates a growing wealth divide. Those who already own assets can benefit from inflation and leverage, accumulating more wealth over time. However, for those just starting out, purchasing assets becomes increasingly difficult as wages fail to keep up with inflation. The cost of acquiring real estate or other valuable assets rises beyond the reach of many, leaving them unable to participate in the system.

Over time, this increasing concentration of wealth leads to significant societal challenges. As the bottom 99% struggle to accumulate enough capital to enter the game, purchasing power diminishes, and the economy faces systemic instability. Eventually, the widening gap between the wealthy and the rest of society may give rise to political ideologies such as fascism or communism, as these movements often emerge in response to extreme wealth inequality.

Public-Private Partnerships and the Rise of Fascism

In today’s economy, we see a growing trend of “public-private partnerships,” a euphemism for the kind of monopolistic capitalism that can be described as fascism. Fascism, by definition, refers to a political and economic system where the government and corporations work together as a unified entity, consolidating power in the hands of a few. This form of “Monopoly Capitalism” emerges in economies based on paper money, where inflation constantly erodes the value of currency, benefiting those who can leverage debt to their advantage.

A System Designed for the Few

In a paper money system, wealth creation is concentrated among those who already have assets and access to credit. By leveraging inflation, debt, and credit, the wealthy can continuously amass more assets without ever having to use their own money. Meanwhile, those who are not already in the game are increasingly excluded, unable to accumulate wealth or participate in the system. This dynamic leads to an ever-growing wealth gap, which can eventually fuel political ideologies that seek to address the extreme inequality. The sad truth of this system is that paper money capitalism benefits only those who can borrow, while the majority struggle to make ends meet.