The History of Money Part III

We left off talking about paper money, and we’re now going to look at the future, but before we do, let me give you a few facts.

The US currently owes $27.551 Trillion dollars. Normally I would round up or down, but when we’re talking about TRILLIONS, you can’t just round up or down because that’s hundreds of billions of dollars! The debt represents 129% of the US Gross Domestic Product, a higher ratio of debt to GDP than we’ve ever seen before, even during WWII. But that is nothing compared to the $156 Trillion in unfunded liabilities in the US, which means that down the road we will owe $156 Trillion that we have no clear way of paying back.

When we think of US National Debt, we think that a lot of it is held by foreign governments, like Japan or China, but the truth is that they’ve been dramatically reducing their exposure to US debt since 2014 and earlier. At this point, it is mostly the US Government that is buying the US debt. Indeed, the US Federal Reserve along with local governments hold over 11.3 trillion in US debt, way more than Japan and China, who hold less than $2.5 trillion combined. What this means, is that the US is printing debt and no one else wants to buy it, so the US buys it from itself. It sounds

There are over 18 Trillion dollars in negative-yielding debt in the world. A negative yielding bond is one that promises the buyer that they will lose money, but only a little bit. Let’s take a commonly used negative yielding bond, a German 10-year Bund, where you pay $105.8 Euro today, and in ten years you collect 100 Euro. Tens of billions of this bond have been sold already. If companies and funds are pouring trillions of dollars into negative yielding debt, it means they have very little faith in the future, and believe that anything else they do would lose them even more money.

Apple is a pretty awesome company, adored around the world for creating sleek, competent, and cool products that often set the tone for the global tech space. Apple stock was first offered to investors on Jan 2, 1981. It took the company thirty eight years of hard work and cutting edge innovation to grow into a company with a valuation of one trillion dollars, the first US company to achieve that milestone ever. By the time it reached that valuation on August 2, 2018, Apple products were being sold on all seven continents, and it had a stable of products recognized the world over; iPhone, MacBook, iTunes, AirPods, Apple Watch, Beats, etc.

Just a little more than two years later, on August 19, 2020, Apple’s stock reached a valuation of 2 Trillion. Apple’s sales hadn’t doubled from 2018 to 2020, as a matter of fact, they were almost the same, neither had its profit doubled, it was also almost the same. For that matter, there was not a single new product launch of any significance between August of 2018 and August of 2020. So how did the company’s valuation double? And how did it add another $260 Billion in value from August 19, 2020 to December 31, 2020?

The answer is in the P/E ratio, which is the ratio of price to earnings. It’s a number that tells you how many years of earning at the current rate would it take to meet the price of a stock. If a stock is trading at $100, and each year the earnings per share is $10, that would have a P/E of 10, it would take 10 years of earning $10 to reach the current value of the company, $100. Stocks generally trade in the 12-15 range of P/E, and growth stocks, those that people expect will grow dramatically, in the 25 P/E range. In 2018, Apple was trading in a P/E range of 13-18. It closed out 2020 at a P/E ratio above 40. It means that Apple isn’t making any more money, but people are throwing so much money at it, that its stock price is soaring.

In case you think that Apple is trading at a high P/E ratio, which it is, try checking out Zoom, a company the does nothing other than offer live video meetings, something many other companies do just as well. Zoom (ZM), is valued at close to $100 billion dollars with a P/E ratio of 234, meaning that they would have to keep earning at their current level for 234 years to match their current share price.

How about Tesla, the most talked about stock this past year, which closed the year with a $669 billion dollar valuation and a P/E ratio of 1398! Maybe there are a lot of people who don’t want to buy bonds with a negative interest rate, so instead they throw money at the stock market hoping they can ride the elevator to the top floor and get off just before the cord snaps and the elevator plummets, we’ve seen this happen before! There is a phrase running around today, “Stocks only go up.” And unfortunately, many people have seen this come true so far, no matter what happens to the economy, stocks go up. As they did in the 1920’s.

The United States printed more money in June of 2020 than in the first two centuries after its founding. In June of 2020, the U.S. budget deficit — $864 billion — was larger than the total debt the US incurred from 1776 through the end of 1979. The whole world economy was crippled by a pandemic that shuttered millions of small businesses, many of which will never reopen, yet the stock market danced its way to all time highs.

If you feel like something isn’t right with money today, you’re not alone. If you find the phrase stocks only go up more frightening than reassuring, you’re not alone. If you think there will be a reckoning coming down the line for a US government that keeps printing trillions of dollars out of thin air, you’re not alone. In Part II of this series, we learned that money is really based on trust, and when the trust erodes, economic disasters happen. So, what is the future of money?

On October 31 of 2008, a paper was released on the web called, “Bitcoin: A Peer to Peer Electronic Cash System.” It came just as the financial system was melting down, in the 2008 Great Recession. The paper described a currency that would not be governed by central bankers or shadow bankers, who could just print money on a whim, but by math. Bitcoins could be “mined” by solving super complex math problems, at a very specific rate, and the total number of Bitcoins would eventually top out at 21,000,000 coins.

No one knows who wrote the paper, whoever it was called himself Satoshi Nakamoto, and much ink has been spilled trying to figure out who he really is, but the beauty of Bitcoin is that we don’t have to care about who wrote the paper, because the value of Bitcoin is in the code, and the code is visible to anyone and everyone at anytime.

To ensure that people didn’t play with the code or change it in their favor, the code was decentralized, which means that it is isn’t held in one place, but repeated in tens of thousands of computers across the world. Each computer keeps track of every single transaction ever done with Bitcoins, and you can’t sneak any information into the code unless you control more than 50% of all those computers, a virtual impossibility. All that information is stored in “blocks,” with new blocks being added roughly every ten minutes that contain all the latest transactions, and all the blocks together make up the “blockchain.”  (For more about blockchain see here [1]

But what backs Bitcoin? What value does it have? It’s nothing but a bunch of numbers? It’s a computer program, not money? You can’t actually do anything with Bitcoin?

Money as we’ve seen again and again in this series is not something that you can use, no one can feed their family with a stack of hundred dollar bills, or a roll of quarters. Money is something people trust as valuable and something they will exchange for food, medicine, houses, gas, or clothing. US Dollars are not backed by anything physical, we’ve been off the gold standard for decades, but people trust dollars and will give you almost anything for the right amount of dollars. And people trust Bitcoin so much that they will give you more than $29,000 dollars for one Bitcoin (as of printing on 1/1/2021).

On Jan 3, 2009, when the actual Bitcoin program surfaced on the internet, a single Bitcoin was worth almost nothing, famously what is known as the first transaction using Bitcoin was 10,000 Bitcoin for two pies of pizza. But in the twelve years since then, more people around the globe have seen the value in money controlled by math over money controlled by central bankers who can’t seem to print money fast enough, and give away trillions of dollars like I give away Chanukkah presents.

In the early days of Bitcoin, it was mostly used by nefarious actors; drug dealers, hackers, and tax evaders. But over the years it has grown in its respectability. In 2017, there was a surge of interest in Bitcoin, mostly fueled by individual investors who were mostly speculators who didn’t really understand the idea behind Bitcoin, but saw something rising and wanted in. They pushed the price of Bitcoin to just below $20,000 after which it crashed all the way down to $3,000. People only knew that Bitcoin crashed, they didn’t recognize that it went from less than a penny in 2009 to more than $3,000 by mid-2018 which is still a remarkable return.

This time around, the rise of Bitcoin is not being funded by individual investors buying on their phones, but by corporations, hedge funds, and even pension funds. Wall Street is starting to look at the dollar (which is down 10% since March), and the way the US government is printing and spending money, and they are saying, “We want to keep a significant amount of our cash in money backed by math, not in money backed by the US Government.” This is a pivotal moment for Bitcoin, as some of the most respected names in the world of finance are piling on board.

Fidelity has been recommending to its institutional clients to hold 1-5% of their assets in Bitcoin, for a few years now. Tom Fitzpatrick, a Citibank managing director, in a recent note to clients spoke about why he believes we will see Bitcoin at over $300,000 in the near future, and Mass Mutual, a 170 year old, extraordinarily conservative insurance company just bought $100 million dollars in Bitcoin. When these big companies buy Bitcoin, they are doing it in an extremely thoughtful way, and won’t panic-sell the minute the price dips, which means they keep the price of Bitcoin from the big drops we saw in 2017.

No one can say for certain what the future of Bitcoin is, but I do believe the story of money is changing in a dramatic way. Ever since the Chinese Government printed money in the late 1200’s that was not backed by gold, governments have been in charge of money, and when they print too much and don’t have enough backing it, economies have crashed, causing wholesale misery to entire populations. This has happened on every continent except Antarctica, hundreds of times. The future of money is people taking money out of the hands of government and back into the hands of citizens, who through the medium of blockchain control their own currencies. Whether Bitcoin itself is the dominant cryptocurrency, or Ethereum, or one that has not yet been invented, people and companies are beginning to vote with their feet, and their feet are walking away from government run money. Big Changes Ahead, Proceed with Care!

One fascinating lesson you can see from money is that a currency will often continue to operate functionally, even long after it no longer has anything backing it, just because people are used to using it, but eventually, if there is lots of printing and nothing behind it, it loses all of its value and falls away.

All of our relationships are like money. If we back our relationships with gold or treasure, which consists of love, spending quality time with the other, forgiveness when the other messes up, being present in the relationship, showing extreme empathy, noticing the others’ needs, going out of your way to do things that give them joy, responding to them even when it’s not what you want to do, then that relationship is on solid footing. Even when we print a little too much currency and take out of the relationship instead of putting in, the currency still stands, there is still trust in the relationship. But if we keep messing up, again and again, even if we say we’re sorry afterwards, eventually the relationship begins to feel bankrupt.

You can only print and print and print for so long before people begin to look for another source of currency, something more solid and stable they can rely on. Often, when children turn away from the currency of the home, they seek stability on the street, and they don’t find it there either, and instead end up using an even worse currency.

We want our currency to be strong. We want people to know that our currency is backed by treasure, that we don’t take other people’s trust for granted and just keep printing. We don’t want people voting with their feet and walking away from us, feeling that they can’t get real value in their relationship with us because we don’t respect our currency.

But relationships are also like currency in another way. When we use our relationships appropriately, people store their value with us. When we don’t overprint, and we value every person we relate to, more people want to have relationships with us, and more people invest their time and effort into us, they vote with their feet, and their feet come to us. Then our currency goes up in value, enriching us, and enriching everyone who chose to be in a relationship with us.

Big Changes Ahead, Proceed with Love and Respect!


Parsha Dvar Torah

In this week’s Parsha, our forefather Yaakov passes from this world. Before his passing, Yaakov calls his children together and blesses them. At the end of the blessings, the Torah summarizes the event with the following verse, “And this is what their father spoke to them and he blessed them, he blessed each according to their blessing.” (Gen. 49:28).

On the surface this verse is troubling, why did he bless them according to their blessings? Shouldn’t he have blessed them according to what they were lacking? If one of the tribes was already blessed with a particular attribute, shouldn’t that be the one area in which he doesn’t need a blessing?

The answer to this puzzle contains a gem that will teach us an important lesson about human development. We all have certain natural qualities. Some of us are soft, some super intelligent, some have leadership qualities, some academic prowess, but everyone has some quality in which they shine. Many people think that since they have that quality naturally, they should ignore it, and focus on acquiring skill they don’t yet have. But the truth is that through focusing on their natural strength and developing it they can accomplish whatever they need.

This doesn’t mean that I can expect to breeze through college by being kind, rather, it means that if I find my natural tendency is to be very kind and warm, I should probably look for a job in the caring professions, while if I find myself to be analytical I should try to become an analyst or a lawyer, etc. When dealing with interpersonal problems, if I am the kind type I should use my kindness as a strength and find a way to draw myself away of the dissonance, whereas if I am analytical, I should sit back and tackle the problem as an equation, determining how to best go about solving it. (Sometimes the kind thing to do is to pull back and let someone else learn the hard way, and sometime the analysis will determine that an extra dose of caring and emotion is called for. The focus here is how a person arrives at the conclusion)

This is the meaning of Yaakov’s blessings. Yaakov was able to see each of his children’s strengths and to bless it, to ask G-d that it be brought out even more. He showed his children that he felt that it was that particular trait that they should focus upon. And this is how we should interact with our children. We should find their strengths and encourage their growth. Contrary to popular belief, not everyone is created to be a doctor, a rabbi, or a lawyer. Parents need to be in tune with that reality while raising their progeny, and college students need to be in tune with it when picking careers. If we stop trying to shoehorn children into what we think is best for them, but instead focus on their strengths and develop them, we will have a truly blessed world!



Parsha Summary

This parsha begins at the end of the life of Yaakov. It discusses the last things that Yaakov did before passing from this world. First, Yaakov asked Yosef to ensure that he would be buried in Israel. He asked Yosef and not the other brothers because he understood that Yosef was the only one with the power to guarantee it, as Yosef was the viceroy of Egypt. Yosef readily agreed.

Soon after that encounter, Yosef got a message that his father was ill, so he immediately hurried to his father’s bedside with his two sons, Ephraim and Menasheh. When they arrived, Yaakov gave Yosef’s sons the status of tribes, thus equating them with their uncles, the rest of Yaakov’s children. This meant that they would each have a separate share in the distribution of Israel, would camp in the desert as two distinct tribes, and would have their own tribal flags. This was an enormous honor not accorded to any other of Yaakov’s grandchildren.

After that, Yosef brought his sons forward to be blessed by his father. Yosef purposely put Menasheh on the left which would be Yaakov’s right, because he was the older brother and the right hand is considered the choice hand. However, Yaakov switched his hands and placed his right on the head of Ephraim. When Yosef tried to switch them back, Yaakov told him that he did this purposely, because the younger brother Ephraim would produce greater people, most notably Joshua who would lead the Jews into Israel after Moses’ death.

Yaakov then blessed them with the following blessing, “Through you shall [the People of] Israel bless saying; ‘May El-him make you as Ephraim and Menasheh.’” (Gen. 48:20). To this day, when parents bless their children on Friday night, as is the custom in many homes, they say that exact formula: “May El-him make you as Ephraim and Menasheh.”

After that, Yaakov called in the rest of his children and blessed all of them, except three, whom he reprimanded. Those chastised were Reuven for moving his father’s bed to his mother’s tent without consulting his father, and Shimon and Levi for destroying the entire city of Shechem after their sister had been kidnapped and violated by the city’s prince. After blessing his sons, Yaakov asked them to bury him in Me’aras Hamachpela, the same place that Adam and Eve, Avraham and Sara, and Yitzchak and Rivka were buried. After his final request he pulled himself onto the bed and joined his people in heaven.

The entire Egypt mourned the passing of Yaakov, as the famine stopped when he moved there. Pharaoh gave Yosef permission to leave, and the twelve brothers all traveled to Israel to bury their father in the Me’aras Hamachpela. When they came back, the brothers were concerned that now that their father was not there Yosef might try to take revenge on them for the time they sold him. However, he reassured them that he bore them no ill will; rather he understood that G-d sent him down to Egypt to sustain his people through the years of famine.

Yosef was the first of the twelve tribes to die. However, even he lived to the ripe old age of 110 and was able to see three generations of progeny (that means he helped raise his great grandchildren). Before he died he asked the Jewish people that when G-d takes them out of Egypt they bring his bones with them to be buried in Israel. And with that the book of Genesis concludes!!


Quote of the Week: Simplicity is making the journey for this life with just enough baggage. – Samuel Fremont

Random Fact of the Week: As you read this sentence, your eyes are moving back and forth 100 times per second. Funny Line of the Week: The crows were all calling him, thought Caw. Have a Top of the Line Shabbos,R’ Leiby Burnham

[1] Using blockchain technology is an incredibly secure way to keep track of information, and eventually a significant portion of the information in our world will be verified by blockchain technology. The deed on your house, the commitment the insurance company made to you on your car insurance, the authenticity of a Hermes Birkin bag, the truth behind that Stanford Ph.D. in Economics on your job applicant’s resume, or the true amount a company has in its cash reserves, all of that will be verified by blockchain.  But that refers to the utility of blockchain, not necessarily blockchain as money.


There are hundreds of projects that are being worked on by some of the smartest people in the world to make blockchain uses for everyday life. Most of them have their own “token” or cryptocurrency, and there are over 5,000 of them. Most of them are worthless and will fade like the stocks of the dot com bust, but some of them will prove to be exceedingly valuable and will garner billion dollar valuations in the coming years. We are living through the explosion of blockchain technology which will eventually change the way we interact with the world the same way the internet

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