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The Useless Economy

Let me give you a million dollars a month. That's your new salary. What happens next?

You'll pay your rent or mortgage, buy some food to stay alive, pay your heating bill and buy whatever electricity, gas and communications services that you need. At the end of the month, your spending on living a good life may come to somewhere between $500 and $2000, depending on where you live and how much services you buy outside of the necessities. What happens to the rest of the money? You still have more than 99% left.

It goes into the useless economy.

The useless economy consists of buying stocks, shares and bonds on secondary markets, investing in real estate, keeping the money in a bank account or under your bed. When you buy assets in the useless economy, the seller is likely in a similar situation to you: they've got excess money and want to store it for a rainy day. After receiving the money from your purchase, the seller very likely turns around and buys another asset in the useless economy that they predict to give a higher rate of return.

In this way, excess cash piles up into the useless economy of second-hand assets and escapes the real economy.

If you, instead of buying second-hand assets, decide to use all your money on buying expensive new things, you're only slightly better off. You can't increase the amount of your personal consumption all that much. After all, you only need a certain number of calories per day, have only a certain number of hours to travel, and a certain number of clothes you can wear in a day. Instead of quantity, you will increase the quality of your consumption by buying luxury versions of your basic staples.

Luxury products are a bit problematic though. The mass-luxury market is driven by immense amounts of marketing. The large luxury brands use 60% of their yearly spend on marketing. When you're buying such goods, you're essentially buying marketing. Additionally, luxury goods have a very concentrated profit margin. The production phase that employs a large number of low-paid people, who spend their money in the useful economy, is a very low margin operation. The marketing system on top of that is the high profit margin operation. Meaning that the majority of the price of your purchase gets funneled into the useless economy.

How do you escape the useless economy? Invest directly into new businesses. Use your money to build new useful infrastructure. Spend it on new research. Give it to people who aren't living a good life. Use it to convert interest-bearing loans into zero-interest loans. Pay off people's debts. Turn rental contracts into ownership deeds. Open-source patents. As long as you keep money out of the useless economy, it'll make the world a better place.

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