Liberman Brothers on Rigged Economy, CBDC and Investing in Humans
The current global economic system is fundamentally imbalanced and flawed. It produces highly inequitable outcomes that benefit the few at the expense of the many, especially younger generations. This systemic imbalance threatens to undermine long-term prosperity by constraining human potential.
Fundamental reforms are urgently needed to transition to a more decentralized economic model aligned with broad human goals. Without such reforms, we risk continued deterioration, loss of social cohesion, and potential crisis. The transition will face resistance from entrenched powers, but is necessary to foster innovation, unlock human potential, and create shared prosperity.
Chapter 1. The System Works Against Young People
The current economic system is systematically skewed against younger generations, who face shrinking opportunities and soaring debts. Policy choices since the 2008 financial crisis have redirected capital away from the young towards older established interests. This compounds over time, creating a generational wealth divide.
When the financial system was bailed out in 2008, pension funds were made whole while subsidies for education sharply declined. This enriched the predominantly older holders of capital while leaving youth to take on rising tuition costs through student debt. From 2003 to 2023, the total volume of student debt rose from under $200 billion to over $1.6 trillion. This imposes a huge debt burden on those starting out in life.
With large monthly debts, young people's options are constrained. Debt forces focus on immediate incomes rather than passion, purpose or entrepreneurship. Millennials and Gen Z are delaying or forgoing major life milestones like marriage, home ownership and children due to their finances. This dampens economic dynamism as young people are unable to take risks, invest in themselves or envision ambitious new ventures.
Statistics quantitatively demonstrate the declining fortunes of younger generations:
- Home ownership among adults under 35 has fallen from 45% in 2005 to 37% in 2020, while rising for older cohorts.
- New business formation has steadily declined among young people. People aged 20-34 made up 35% of new entrepreneurs in 1996 vs. only 25% in 2017.
- The average age for women having their first child rose from 24 in 2000 to 26.3 in 2018, reflecting economic uncertainties.
- Real median wages for young workers have stagnated compared to substantial gains among older workers.
- 52% of millenials have nothing saved for retirement, compared to 33% of Gen X at the same age.
- Student debt has made it harder for younger people to accumulate wealth. A 35 year old graduate owes $42,000 more on average than a non-graduate, but has only $29,000 more in wealth.
- Young workers face exploitation and underpayment. For example, unpaid internships at major companies provide no income while benefiting the firm.
These statistics demonstrate that younger cohorts are clearly disadvantaged across multiple financial dimensions, from income to savings to wealth. Opportunity has become more stratified by age.
Economically stressed youth have less freedom to explore passions, develop skills, take professional risks or start new ventures. The necessity of immediate income to repay debts crowds out the space for long-term career fulfillment. This results in risk aversion, frustration, and a transactional view of labor.
Institutions take advantage by normalizing unpaid or underpaid work like internships. This further entrenches power imbalances where inexperienced youth create value they don't share in. Younger workers are undercompensated for their actual contributions.
This bleak economic reality has caused many young people to delay or forego major life decisions like having children. The U.S. birth rate has declined 15% since 2007, straining social systems like Social Security that require population growth. When young people feel deprived of agency and a fair chance at prosperity, they naturally hesitate to undertake new long-term responsibilities.
Thisdadversely affects the entire economy by reducing entrepreneurship, innovation, and the assumption of mortgage debt that provides liquidity. Economic growth suffers when young people are overburdened.
The current system essentially chains the young to employers through debt. This echoes similarities to indentured servitude and slavery. While not identical, today's youth often feel they lack real agency and self-determination due to economic dependency. Educational costs force accepting whatever income is immediately available rather pursuing dreams.
But rather than expand options, the system increasingly restricts them. Social mobility has declined with the demise of pensions, stable career ladders, and rising inequality. The loss of trust resulting from this raw deal further discourages building families, investing in community, or participating fully as activated citizens in democracy.
The constraints only tighten over time as education costs rise further. Without reforms, the generation now coming of age may be the first to experience a lower living standard than their parents. Promises of shared prosperity ring hollow when the data shows limited prospects for better futures.
These bleak realities demonstrate how the current economic system works against ordinary people and young people in particular. Urgent reforms are required to reignite innovation and restore faith in institutions. The very future depends on empowering youth with agency and opportunity. Otherwise we risk continued erosion of social cohesion and faith in the system.
Chapter 2. Comparison to the USSR
There are disturbing parallels between the current economic system and the stagnation that led to the decline and collapse of centralized economies like the Soviet Union.
In both cases, a rigid system developed that enriched entrenched interests at the expense of dynamism, innovation and shared prosperity. Power and capital concentrated among an insider class while ordinary citizens lacked agency. This created a backdrop for deterioration.
There are echoes of this stagnation in the current economy’s structural barriers against the young. As outlined earlier, student debt and other burdens constrain options and reduce risk-taking. Insider boomers extract value through pension funds and other mechanisms while restricting opportunities for those that follow.
The parallels include a growing generational wealth gap, reduced economic participation among the young, barriers to entrepreneurship, and a rigid system that protects the status quo.
This combination of exploited youth, wealth concentration, and barriers to participation sap an economy of the drive to compete and innovate. Central authorities tighten control rather than undertake reforms. But this only further depresses dynamism in a doom loop. It portends a Soviet-style stagnation unless fundamental changes are made.
The way forward must involve bottom-up re-energizing of economic participation, especially among younger cohorts. This requires decentralizing power, capital allocation decisions, and opportunity.
Top-down solutions like universal basic income managed by central planners would repeat the same fatal flaws. Lasting prosperity can only flourish through broad based initiative, competition and open access to opportunity.
Chapter 3. Centralized Digital Currencies Pose a Threat
The risks of centralized power over finance and economy are likely to grow with the advent of digital currencies like CBDCs (Central Bank Digital Currencies).
CBDCs would give central banks and governments much greater ability for financial surveillance, control and coercion. China's digital yuan project foreshadows the oppressive potential uses by authoritarian regimes.
By directly controlling every transaction, centralized authorities could monitor purchases down to an individual level. Significant realms of private economic activity could be extinguished. Daily commerce would become dependent on state monitoring and approval.
Beyond surveillance, CBDCs would enable direct control over how individuals use their money. Funds could be restricted to certain uses while freezing out disfavored ones. Money could even be issued with expiration dates, forcing endless cycles of re-spending and depositing back with banks.
This complete loss of financial autonomy would strengthen centralized power beyond anything seen in history. It would deprive individuals of agency over their rightful earnings. All spending and transacting would be subject to state consent.
To counter these risks, decentralized cryptocurrencies offer an alternative channel for voluntary exchange outside centralized control. Bitcoin and other blockchain projects provide a means to preserve economic freedom and independence.
Of course, crypto is still maturing as a technology. The ecosystem remains unstable, fragmented, and dominated by speculative activity. But the underlying promise is clear.
Blockchain at its best enables trustless, peer to peer exchange between free individuals without centralized oversight. This provides an escape valve to authoritarian overreach by states or corporations. It allows economic self-determination to flourish even in repressive contexts.
However, most existing blockchain implementations are still highly centralized and concentrated in terms of mining power, platforms, and governance. Crypto cannot yet fully deliver on the ideal of decentralization.
Many projects mimic the flaws of insider control and exclusion seen in legacy finance. So the technology remains nascent. But at its core, crypto represents the frontier pushing toward greater decentralization.
To realize that promise, blockchain ecosystems need to continue evolving beyond speculation to actually empower decentralized finance and economic autonomy. Projects focused on anonymity, privacy and censorship resistance deserve support.
Though immature, crypto at its best exemplifies the type of bottom-up, participatory economic activity that can unlock human potential. It provides an escape from the dangers of authoritarian central control. Crypto's ethos of decentralization and autonomy provides a counterbalance to the totalitarian creep of CBDCs and surveillance.
The solution lies in fostering open, decentralized networks that allow initiative and exchange to flourish beyond regimes of central control, whether public or private.
Chapter 4. Investing in Individuals Rather Than Companies
To reignite economic participation and opportunity, we need to shift investment from institutions to individuals. Directly funding human potential creates aligned incentives that unlock innovation and growth.
Currently, the mainstream investment system operates through intermediating institutions – pensions, banks, venture capital, etc. These institutional investors concentrate power rather than distribute it.
Individuals are separated from capital, forcing dependence on stacked centralized systems of credit ratings, student loans, and bureaucratic gatekeepers. Accessing capital requires conformity and elimination of risk. This filters out non-conforming voices and experiments.
In contrast, investing directly in individuals allows capital to flow directly to promising agents without bottlenecking through legacy institutions. It connects upside to human ingenuity and aligns incentives for mutual benefit.
Income share agreements are one model to invest in prospective individuals in exchange for a small share of their future earnings over time. This provides capital to youth to access education, start ventures, develop skills, and pursue their ambitions without taking on paralyzing debt.
Investors profit if and when the individual succeeds. The incentive is to provide support for maximum use of talent and ability. Upside is tied directly to human output. This represents a shift from investing in companies to investing in people.
Unlocking human potential without taking on debt obligations allows pursuing passion projects, exploring careers, starting companies, and taking risks free of short term pressures. Income share agreements enable a longer time horizon without immediate repayment burdens.
Enabling youth to access their future incomes today catalyzes economic participation and opportunity. They can become independent entrepreneurs and agents of change rather than depending on legacy institutions for security.
When young people have agency over their financial futures, they can access the power of compounding early enough to close generational wealth gaps. Investing in potential makes tomorrow’s prosperity available today when it can have maximum impact.
Of course, not all individuals will succeed. But diversified portfolios can mitigate this risk. The failures are overwhelmed by the outsized impacts of those who capitalize on the freedom to fully activate their abilities.
Income share models exemplify how decentralizing access to capital invests in the variable potential of individuals rather than ossified institutions. This distributes opportunity and aligns incentives for mutual benefit between capital and talent.
Ultimately, financing youth to develop their abilities and pursue ambitions earlier enhances wellbeing and shared prosperity. Investing in human potential rather than institutions helps reform society by unlocking the agency of promising individuals.
Economic participation flourishes when individuals can access capital to develop themselves on their terms. The generational divide narrows when youth are funded to fulfill their aspirations. Income share models are one decentralizing solution to broaden opportunity.
Chapter 5. Transition Will Be Resisted but Necessary
Shifting investment from institutions to individuals will inevitably meet resistance. Entrenched interests oppose losing control over capital allocation and power. But reforms are essential to catalyze an economic renaissance.
Income share models and other decentralizing reforms erode insider power and privilege by distributing financial leverage. Incumbents such as venture funds, banks and pensions would lose their intermediary role controlling access to capital.
When individuals can access capital directly based on potential, they become less dependent on legacy institutions for security and opportunity. This risks making powerful intermediaries obsolete. Gatekeepers naturally protect their position.
Many leading institutions only maintain dominance because alternatives are actively suppressed through policy, monopolies, regulatory capture, intellectual property and other tools to limit competition. Their business models rely on capturing users, not providing value.
Reforms that enable capital to flow directly to promising individuals represent an existential threat to entrenched interests. Decentralized models would disrupt the insider monopolies and bottlenecks that constrain innovation and access.
We can expect staunch opposition from established players including governments, banks, pensions, venture capitalists, educational institutions and other incumbents. Each has incentive to stifle innovations which obsolete their function.
Powerful interests will attempt to stratify reforms as radical or dangerous rather than acknowledging the current system’s imbalances. Gradual adoption under the radar may be more pragmatic than directly confronting entrenched power.
But it remains imperative that capital begins to flow around legacy gatekeepers towards productive individuals ready to create value. Despite resistance, reforms that invest directly in human potential answer a systemic need.
Unlocking the agency and initiative of younger generations is the engine that drives growth, dynamism and shared prosperity. To reignite economic participation, youth must have a fair chance at opportunity unconstrained by birth or connections.
Economies thrive when individuals at all levels have access and incentives to maximize their talents. As outlined earlier, our current system stacks the deck against ordinary youth while protecting insiders.
This mounting imbalance has echoes of the stagnation in centrally planned economies before their decline. A revolution that activates human potential is needed to avoid similar decay.
Income share models offer one pathway to begin this transition - providing capital directly to those ready to create value, bypassing gatekeepers. Alternative funding models for skills acquisition and entrepreneurship must emerge.
Despite inevitable attacks from threatened interests, it is imperative we explore innovations that distribute financial leverage and opportunity. Economic renewal depends on capital flowing to productive individuals rather than captured institutions.
Ultimately, reform will require the insight that our fates are intertwined across generations. Shared prosperity depends on empowering those who come next. By funding youth to fulfill their ambitions, we all do better. The trust and social cohesion generated when all have agency breeds its own returns.
Economies thrive when individuals are unconstrained in developing themselves and charting their own courses. A society that lives up to its ideals will decentralize opportunity rather than hoard it. Besides being just, reforming systems to nourish human potential rather than exploit it, is smart economics.
This begins by investing directly in youth to pursue their passions on their own terms. Income share models decentralize access to upside. Though the transition will be resisted, reforms that activate agency are essential for mutual prosperity.
The current economic system is fundamentally imbalanced against ordinary people, especially younger generations. Youth face escalating barriers like debt burdens that reduce opportunity, entrepreneurship and participation.
Troubling parallels exist with the stagnation that led to the decline of centralized regimes like the Soviet Union. Excessive insider control deprives economies of creative energies from below.
New centralized digital currencies like CBDCs risk unprecedented financial surveillance, coercion and control by central authorities. Decentralized blockchain models provide an alternative to preserve autonomy.
To reignite inclusive growth, we need to reform how capital flows - away from captured institutions and towards promising individuals. Models like income share agreements invest directly in human potential.
Despite resistance, redistributing financial leverage to youth is essential to unlock innovation and restore trust in a system that feels rigged. Economic participation flourishes when individuals have agency to develop their talents.
Funding youth to fulfill their ambitions earlier without debt attachment provides a lifeline to closing generational inequities and catalyzing growth. Progress depends on society investing optimistically in human beings over protecting insider interests.
Economies thrive when all have a fair chance to maximize their abilities. By funding dreams rather than constraints, we seed the future with compounding returns. The Transition won't be easy, but decentralized opportunities aligned with human goals provide the only viable path forward.
Shared prosperity depends on granting agency to younger generations to steward society's continued advancement. Funding individuals to determine their own futures ultimately benefits all. Progress renews itself when power and capital circulate freely to those ready to create value.