Written by: Ryan Adams, co-founder of Bankless
Translated by: Luffy, Foresight News
Editor's note: This article is a letter from Ryan Adams, co-founder of Bankless, to his son. In the letter, Ryan provides some wealth management advice, with the core idea being 'Don't keep money in banks.' Banks are actually threefold 'scams.' Ryan's alternative recommendation is to keep some dollars for daily expenses and then invest wealth in assets such as Bitcoin, gold, and stocks that can store value across time. The full translation follows:
Dear son:
Don't keep money in banks; banks seem safe, but they're actually a threefold 'scam.'
'Scam' one: they stole your yield.
At any time, the dollar actually has a risk-free yield, which is government bonds. Government bonds are essentially 'dollars disguised as short-term government securities' that can provide you with a fixed yield of 4.2%.
No extra risk, equivalent to free money, it's simply tailored for you.
But banks won't actually give you this money in your savings account; they pocket it for themselves. They don't inform you of this income, nor do they help you convert dollars into government bonds, and they even actively lobby the US government to prevent depositors from accessing this income.
The bank takes a 4.19% yield but only gives you 0.01%.
The wealthy don't keep their money in banks; they put cash into government bonds rather than savings accounts. But the middle class and those lacking financial knowledge are daily robbed of their yields by the 'friendly' bank next door, completely unaware.
Bank lobbying groups are also eyeing the yields from cryptocurrency stablecoins, preventing you from accessing them. They spread panic, claiming that if the 'vampire' business of savings accounts disappears, the entire financial market will collapse!
Yields will change, so you need to pay attention to the statements of the Federal Reserve Chair, but as long as the yield is positive, put dollars into short-term government bonds and money markets, don't keep them in a bank account.
'Scam' two: so-called yields are not real yields.
Now you should know the next secret: yields are fake.
Do you think the 4.2% yield you get now can offset the loss of purchasing power? Actually, that's just the 'nominal yield.' Because the purchasing power of the dollar shrinks every year, that's what we call inflation; even if times are good, inflation is to be expected, and when times are bad, it will only get worse.
Over the past four years, your actual returns have looked something like this:
The yield from the account minus the annual CPI is not impressive at all.
So over the past four years, there were two years when you lost much more than you earned.
But the reality is worse: the 'fake gains' you receive are also taxed as income.
Assuming your income tax rate is 20%, you first have to pay tax on those 'fake gains' at 20%. So the actual yield is like this:
Before the inflation 'tax,' you first pay income tax, making the dollar subject to double taxation.
Real yield = nominal yield - inflation.
They want you to think inflation is a natural force like gravity or physical laws, but it's not; it's a deliberate design of modern governments and central banking systems.
Inflation is a kind of tax, no different from other types of taxes, it's just been hidden by them.
I know you don't mind paying your fair share of taxes. Public services are important, and you agree on the common good. But what about this hidden tax? Specifically targeting middle-class savers who want to save for the future, is that fair?
Learn from the wealthy: they evade the 'savings tax' by holding large amounts of assets instead of dollars. This leads us to the third and most insidious layer of the nested 'scam.'
'Scam' three: money itself is not 'real.'
Okay, I might be exaggerating a bit. The dollar does exist, but it's just a 'temporary thing.' It's suitable for short-term payments, not for storing wealth across time, and it's not meant to be left for the future. It's a medium of exchange, not a tool for storing value.
The base money supply is called M0, which is cash and bank reserves. Look how sharply it rises during crises; the overall trend is upward.
The dollar has no long-term scarcity constraints, and its supply is constantly increasing. The share of dollars you hold in the total supply shrinks faster than the yield can compensate because they keep printing money.
The issuance of dollars has hardly been mentioned. Economists only focus on inflation and purchasing power, but in the long run, an increase in the money supply will devalue the dollar relative to assets. The more dollars printed, the less value your money holds.
M2 (M1 plus short-term savings) also rises sharply during crises; the trend is a steady increase.
Don't get caught up in the debates of economists, just look at the charts yourself. Regardless of who is in power, the government will use the printing of dollars as an 'economic and political lubricant.' The dollar is designed for this purpose, not for saving.
Look at the blue line in this chart:
The S&P 500 has increased by 6339% in USD terms since 1971; but when priced in gold, the S&P 500 has actually dropped by 21%.
Over the past 54 years, storing wealth in gold has been better than keeping it in the 500 largest and best-performing companies in the US.
This chart is not telling you to buy gold; it's trying to tell you that what they call 'money,' the thing we use to measure everything, the dollars in your bank account, are not real 'money.' It cannot store value, it has never been able to, and it will not be able to in the future.
The 'money' they refer to is not a tool for storing value. So this is a three-layer nested 'scam':
'Scam' one: stealing your yield;
'Scam' two: so-called yields are not real yields;
'Scam' three: money itself is not 'real.'
So what should you do?
Keep some dollars for short-term needs, such as daily expenses, taxes, and emergency funds. Earn returns in the form of government bonds.
Put all long-term wealth into a portfolio of assets that can store value across time: stocks and real estate are fine, but Bitcoin, Ethereum, and gold are also good. The latter three have a scarce supply and won't be diluted by inflation. These assets may seem high-risk due to their volatility, but volatility does not equal risk.
Mid-term wealth can also be placed in government bonds, and when long-term value-storing assets depreciate, put cash into them. This is the essence of investing; as Buffett said, 'I am greedy when others are fearful, and fearful when others are greedy.' No need to rush, think in terms of years or even decades when a major drop occurs.
Try to use cryptocurrency tools and exchanges for these operations. Avoid the cutting-edge risks; this way, you can be at the forefront while steering clear of the pitfalls of cryptocurrencies disrupting traditional finance.
Schools won't teach you this. But you need to learn, you need to continue to delve deeper and protect your future.
Don't keep money in banks. Turn money into assets and invest in cryptocurrencies.
