After writing a bit about the latest bank bailout, I decided to look up a couple of general stats. Financial services, including insurance, make up about $2 trillion or 7.78% of the total US GDP. Defense spending amounted to $742 billion in 2021, which was about 3.3 percent of GDP. And the total cost of our criminal justice system amounts to $1.2 trillion, or about 5% of GDP. Together, these three sectors account for over 16% of our $23.3 trillion GDP. This figure probably seems perfectly reasonable to most people, but I think it's pure madness.
For starters, the cost of financial services is completely outrageous. In a basic sense, the fact that money has any cost at all makes very little sense in the digital age. This cost of money is an invisible tax on all of us, paid to the financial system. Every Fed rate hike increases this invisible tax, but no one talks about it in those terms. Moreover, crypto tokens like Hive and EOS have proven that financial transactions can be both free and instant, so the whole legacy economy model of forcing people to pay extra to access or move their funds is obsolete. Personally, I feel like the financial services sector should account for less than 1% of GDP, and even that seems a little high.
Our economic regime is of course underwritten by military force. Even when our military isn't fighting directly, it tacitly supports the economic regime in a variety of ways. The Ukraine conflict is already a feeding frenzy for firms like Blackrock. Regardless of how this and other current conflicts evolve, legacy bankers and defense contractors will continue getting paid. And when lobbyists claim they're not getting paid enough, they receive massive government bailouts.
Domestically, the will of the economic regime is articulated by a criminal justice system that imprisons millions while shoveling money into the accounts of corporate contractors like Corizon, an inmate healthcare provider that was sued for malpractice 660 times between 2011 and 2016. The law enforcement component of this system forms the regime's first line of defense against anyone agitating for change. And when a bank evicts a residential tenant for failure to pay exorbitant rent, it's county sheriffs that throw the person out of their home.
Putting it Together
Together, the financial services, national defense, and criminal justice segments of our economy work together to keep the legacy system propped up even though it's outdated and harmful to the general population in a variety of ways. The rules underpinning these economic segments are largely leftovers from the paper-based systems of yesteryear. Every attempt to modernize these systems is co-opted by special interests long before it ever begins.
If our financial system and its guardians account for 16% of GDP, that means millions of people are dependent on this slice of the pie for their livelihoods. These people will do whatever they can to keep their pie and capture even more if they can. For this reason alone, talking about alternatives may be an exercise in futility. And our country's level of generalized financial illiteracy prevents most real conversations about improving the economic system from ever taking place.
At this point, most people think of Venmo when asked to consider financial system alternatives. Many don't even know the difference between fiat currencies and sound money. Business schools teach Keynesian economics as if that theory accurately describes the monetary system, which is arguable at best. And the media neatly hides the nuts and bolts of how things really work behind cartoonish representations of the economy.
The emerging blockchain economy could realistically replace most of the financial sector with more affordable alternatives in the next 10 years. This is my great hope for the future. Already, crypto has made remittances free and easy. But remittances are low hanging fruit. A much larger disruption will occur as crypto firms replace the legacy credit system with collateralized smart contracts, transforming lending and borrowing on a fundamental level. And when all real estate titles and insurance contracts become blockchain entries, our economic transformation will be complete.
Read my novels:
- Small Gods of Time Travel is available as a web book on IPFS and as a 41 piece Tezos NFT collection on Objkt.
- The Paradise Anomaly is available in print via Blurb and for Kindle on Amazon.
- Psychic Avalanche is available in print via Blurb and for Kindle on Amazon.
- One Man Embassy is available in print via Blurb and for Kindle on Amazon.
- Flying Saucer Shenanigans is available in print via Blurb and for Kindle on Amazon.
- Rainbow Lullaby is available in print via Blurb and for Kindle on Amazon.
- The Ostermann Method is available in print via Blurb and for Kindle on Amazon.
- Blue Dragon Mississippi is available in print via Blurb and for Kindle on Amazon.
See my NFTs:
- Small Gods of Time Travel is a 41 piece Tezos NFT collection on Objkt that goes with my book by the same name.
- History and the Machine is a 20 piece Tezos NFT collection on Objkt based on my series of oil paintings of interesting people from history.
- Artifacts of Mind Control is a 15 piece Tezos NFT collection on Objkt based on declassified CIA documents from the MKULTRA program.