Last August we paid off our house. We took advantage of the inflationary period we are in…where asset prices are pushed higher through the expansion of credit.
We are now seeing the beginning stages of a credit contraction…where central banks increase interest rates and slow down their buying of debt. Soon to follow, decreasing asset prices. BTC is an asset.
A zero-sum game is someone has to lose for someone else to gain and vice versa. In the finance industry, most of the time, especially with trading, there are winners and losers.
However, some of the time, like crypto, credit, and other financial engineering, it facilitates good things. Like building bridges, funding cancer research, maintaining a homeless shelter, or providing income internationally through awesome social media like steemit and hive.
But out of the total amount of money transacted, most of it is zero sum.
For example, in order for us to pay off our house, we exchanged Bitcoin for USD. And the only reason we were able to do that is because we bought Bitcoin almost a decade ago.
Other people bought Bitcoin after us and pushed the price up. And since 90% of money is actually credit, most of the money that has pushed Bitcoin up has been credit.
During this credit expansion, over the past 12 years, some people have been continually bidding Bitcoin's price up with credit/debt…and we cashed in that “debt fueled” bitcoin price to eliminate our debt.
We were put in a better financial position at the expense of somebody else degrading their financial position. They went into debt, and we increased our net worth.
This zero-sum situation happens in the vast majority of cases. In finance, especially with transacting assets, it is about taking money out of someone else's pocket, and putting it in your pocket.
If you think this is an awful thing, one person suffering while the other person benefits, you would be right. But people do this all the time, with big and small stuff.
When people go to garage sales, and buy old stuff from people at a fraction of the cost that those people bought it, their loss was your gain.
Between 2008 through 2010, mortgage defaults in the US accelerated, and people lost their homes.
The people who originally owned those homes, drowning in unsustainable debt, and no longer could afford the mortgage payments, got their homes repossessed by the bank. Then the bank sold those homes to people who did have money at half the price.
One person lost their home and ended up with debt they couldn't pay back, and another person bought a house at a discount, which made them a lot of money in the years that followed when they sold the property. One person's debt turned into another person's income. Zero Sum game.
I write this because I want to stress to people that the finance industry, including a lot of crypto, is interested in pretty much one thing, your money. Building wealth not only includes putting money in your pocket, but KEEPING money in your pocket.
So pay down debt, increase your income, and learn to say no a lot when people ask for your money.
Stay frosty people
