Schedule a Free Consultation

facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
Producing "Real" Assets.  Who is Paying for Them? Thumbnail

Producing "Real" Assets. Who is Paying for Them?

“There is no such thing as a free lunch.”

-Origin unknown but popularized by Milton Friedman in the 1960s


During my last two years of college, while majoring in Economics, I had a poster with the above quote on a picture of a fish about to eat a smaller fish who is about to eat an even smaller fish and so on.   The truth of this statement seems (or at least once did!) self-evident.  Imagine you live alone on an island.  Everything you have to eat, everything you wear, every tool you have, etc. you have to make or get yourself.  Your total wealth is the sum of all your efforts.  If you have a partner on the island, your combined wealth is the sum of what you both produce.  Add a third person, a fourth, and ultimately a billionth, and this doesn’t change!  

Now that common sense is under assault from many sides, often from important and trusted institutions.  Take “Quantitative Easing”, or QE, first instituted in the U.S. in 2011.  In QE, the Treasury prints a piece of paper (a bond) -- of course, now they do not actually “print” bonds, it’s all electronic, but let’s pretend.  The Federal Reserve then prints more paper (money) to buy this bond (from the Treasury or in the market after the Treasury has sold it to a dealer) and hold it.  The Treasury then spends this money.  Supposedly this boosts economic growth.  The only thing that really has happened is that the money supply has been increased.   Imagine our island again.  Suppose the inhabitants of our island use clam shells as a universal numeraire (that is, money).  Suppose one day the islanders discover a huge cache of clam shells; is everyone richer?  They still have the same “real” stuff as before.

More recently, we have been told by politicians, media pundits, and even some economists that the Government can spend trillions (with a “t”) on goods and services and it will be “free”, that it will really cost nothing – financed by smoke-and-mirror tricks like QE.  Remember the suggestion --- recently posited by “serious” economists -- that the Government just mint $1 trillion coins (why stop there?) and deposit them with the Fed?  Where will the “real” stuff come from?

A story on CNBC recently featured an economist who said every American could be rich in a few years by buying Bitcoin (I don’t like to call out names, but you can Google it).  We’ve discussed what Bitcoin is and isn’t in other pieces (and will probably address it again), but regardless of what it is, how can we all get rich buying it (or anything else for that matter)?  Several reputable investment firms and economists (again, easy to find) suggest that 5-15% of portfolios should be allocated to Bitcoin (or other cryptocurrencies).  There is approximately $100 trillion in investable assets in the world.  There are currently around 19 million Bitcoins in circulation (and the maximum ever is 21 million).  If 10% of investable assets were in Bitcoin this would imply a minimum price of well over $500,000 per coin.  If that happened, are we all rich?

We can (as the people on our island can) and should discuss how society divides up the “real” stuff we all produce. This, in fact, may be the most important function of government.  But like every fish on my poster, someone ultimately has to pay for lunch -- we have not yet mastered producing real things out of thin air.

Click here to schedule a call with a BWC advisor today.

 The information presented in this article is obtained from or based on sources believed to be reliable. BWC does not represent or warrant its accuracy or completeness and is not responsible for losses or damages arising out of errors, omissions or changes or from the use of information presented in this article. The article does not purport to contain all the information that an interested party may desire and, in fact, provides only a limited view. Information presented does not constitute an offer to sell or a solicitation of an offer to buy any security.

 All investments involve risk, including loss of principal invested. Past Performance does not guarantee future performance. Individual client accounts and performance vary. BWC does not provide tax advice.

 About Beirne Wealth Consulting Services, LLC –

Beirne Wealth Consulting Services, LLC (“BWC”) is a privately owned, SEC Registered Investment Advisor* with offices in Connecticut and Pennsylvania. BWC provides independent, fee-based investment management services and customized financial planning solutions. Our institutional business provides consulting expertise to defined benefit and defined contribution plans, endowments, foundations and non-profit organizations. Our private clients include high net-worth individuals and prominent families, many of whom bring complex wealth management challenges and multigenerational planning needs. For more information, please visit or give us a call today at 888-231-6372.

 *Registration does not imply a level of skill or training.

 © 2021 Beirne Wealth Consulting Services, LLC (BWC). All rights reserved. Reproduction or Use without permission is prohibited.