Safe Retirement With Bitcoin
How Fake News Is Affecting Our Financial Future

Donald Trump has done many things, but perhaps the most significant thing he has done is to bring mainstream awareness to the idea of fake news. We all lament how terrible it is that we live in a social media society that allows us to build echo chambers and custom tailored news feeds that give us only what we want to see. The truly horrifying thing about fake news however, is that it has shown us how much of our critical thinking we outsource to people with credentials. How could someone be so stupid as to trust someone else to tell them what the truth is?
As we sit on our high horse perhaps we should stop and ask ourselves a question. How could someone be so stupid as to trust someone else to tell them the truth about investment ideas or what to do with their life savings? How could someone outsource their critical thinking when it comes to their life savings, the thing they have spent their whole life working for?
Easy, just give them lunch during a 30 minute meeting and allow them to automatically deduct some money from their paychecks.
It is with this level of critical thinking that many happily sign away their life savings. After all, Fidelity told them it was a good idea. Prudential showed them what they would earn. Vanguard gave them the historical data! How could all of these trusted institutions misrepresent something that they have a financial interest in misrepresenting? The idea is preposterous.
Equally preposterous for many is the idea of owning Bitcoin. Forbes says that Bitcoin is dead. Bloomberg says Bitcoin is a thing of the past. The Washington Post says that Bitcoin has no value. How could anyone trust it if the credentialed media says that it’s bad?
What “fake news” are we trusting our life savings with?
Myths and Social Security
If we look at how most Americans are planning to retire we find that a shocking amount of critical thinking has be outsourced to fake news that tells us what is “safe” and what is “risky”.
Social Security is a perfect example. Many people believe the fake news that Social Security is well funded. There is more than $5 trillion in the Social Security Trust Fund. How could Social Security not be funded?
Most Americans believe that when money for Social Security is withheld from their paycheck that money goes into the Social Security Trust Fund and that money is used to pay out benefits to retirees. They have a mental image of a fund that is full of cash collected from the paychecks of working Americans. This mental image is only partially true.
What actually happens is that the left over money collected from the paychecks of working Americans is immediately used to purchase U.S. Treasury bonds. The Trust Funds get filled up with bonds and the money is handed to the government and spent almost immediately. The idea that there is any money in the Trust Funds is fake news. As someone once quipped,
“The thing about the Trust Funds is that they aren’t funds and you shouldn’t trust them.”
Barrack Obama publicly confirmed this himself during the government shutdown in 2013.
“In a government shutdown, Social Security checks still go out on time. In an economic shutdown, if we don’t raise the debt ceiling, they don’t go out on time.” — Barrack Obama
In other words, Social Security is fully funded until the government loses the ability to borrow one dollar. If that were to happen then retirees would stop receiving money. As the Office of Management and Budget (OMB) puts it.
“The existence of large trust fund balances, therefore, does not, by itself, have any impact on the government’s ability to pay benefits.” — OMB
The presence of trillions in Social Security Trust Funds on paper doesn’t actually mean there is any money in them. Anyone planning on collecting Social Security in retirement is therefore betting on a few things.
1. There will be more people paying into the system than there will be collecting benefits in the future.
2. The U.S. government will always be able to borrow money at favorable terms.
3. The dollars that retirees receive will still have adequate purchasing power, i.e. there wont be significant inflation.
The imminent retirement of the Baby Boomer generation means that condition #1 is unlikely to be true for much longer. The Federal Reserve will always step in to buy Treasury bonds so condition #2 will always be true. However, the Treasury also needs to sell bonds in a way that doesn’t cause too much inflation and thus affect condition #3. To do this they need to come up with a solution that doesn’t involve the Fed buying 100% of the bonds. This means the Treasury needs to find someone else (foreign governments) willing to buy bonds to the tune of several hundred billion.
When you realize that a fully funded Social Security system is fake news then other real news starts to make more sense. How could the U.S. be allies with a country that doesn’t allow women to drive, beheads its own citizens, and sponsored 9/11? They also buy hundreds of billions worth of our Treasury bonds, effectively underwriting a portion of our Social Security system.
How risky is a retirement plan that involves immediately spending money in exchange for a government IOU and then hoping that foreign governments will still be buying a significant amount of U.S. debt around the time when we plan to retire? It might not be risky at all, or, it might be very risky.
401k Plans
In 1981 the IRS made it possible for employees to contribute to 401k plans by withholding a portion of their paycheck. Today more than $4.8 trillion sits in these 401k plans. The flood of money into this system was done with the help of fake news that billed 401k’s as a secure form of differed savings. In reality, 401k plans represent massive financial bets on the state of the world 20 to 30 years in the future that cannot be undone without severe financial penalties.
A 25 year old who commits money to a 401k today is making a bet that in 35 years time the world will look roughly the same as it does today. More specifically, they are making the assumption that during those 35 years, a span which could cover 8 different presidential administrations, the following will be true.
1. The age that people are legally allowed to withdraw from their 401k plans will not be changed.
2. No tax laws will be changed in an unfavorable way.
3. The stock market will have favorable inflation adjusted returns over the 35 year period.
4. The stock market will be performing well on the specific date that retirement funds are required (assets in the 401k must first be sold into the market).
5. Baby Boomers retiring and removing money from the stock market en masse will not affect the market in a significant way.
These are assumptions that even the U.S. government doesn’t believe will be true. For example, this figure is taken from the 2015 Trustee Report for Social Security.

According to the government’s own estimation, around the year 2034 Social Security will experience “Scheduled but not fully payable benefits.” At this time the amount of benefits available to be paid to retirees will be equal to government income(taxes and debt sales). 401k investors are therefore choosing to defer their tax payments to a time where Social Security has insufficient funds to cover its obligations and retirees (a large percentage of voters) are helplessly dependent on tax revenue according to the government’s own projections. Even if this wasn’t the case there has never been a 35 year period since income taxes began where the tax laws weren’t changed.
401k investors are hoping that the trillions of dollars locked up in 401k plans, upon which no taxes have been paid, does not become a political target. This is despite the fact that Social Security is one of the most sensitive political topics there is and the government itself is predicting that it will come under stress in the near future. Is $4.8 trillion worth of untaxed money likely to remain untaxed in a period where the government is desperate for tax revenue?
This is just one of the risks investors are taking on. They are also ignoring the fact that the projections they are shown by their plan providers include a period where $4.8 trillion was added to the market and this $4.8T, along with all of the interest and dividends earned, was legally not allowed to leave the market.
It’s possible that everything will all work out fine, but its also possible that it won’t.
Bitcoin and Fake News
The retirement investments that Americans have placed their trust in are at best, far riskier than the news has lead them to believe. This same news machine is simultaneously trying to get them to believe other ideas. They are pushing the idea that “Bitcoin is a useless investment,” that “Bitcoin is an extremely risky investment,” and that Bitcoin is “fake money”. But is this real news or fake news?
What is riskier, having control over your own assets or legally tying them up for several decades?
Which one is more likely to occur? A flaw is discovered in secure hash algorithms or in public-key private-key systems that prove fatal for blockchains like Bitcoin? Or that the rules and assumptions that retirement investments are based on are changed when Social Security enters a period of crisis which the government itself expects to happen?
Are people more likely to decide that they do not want to conduct instant and private transactions with anyone in the world for no fees? Or are they likely to decide that they do not want to lock up their assets in a system that
“[Many early backers of the 401(k)] say it wasn’t designed to be a primary retirement tool and acknowledge they used forecasts that were too optimistic to sell the plan in its early day.”
What system is more likely to be corrupted? A public system that depends on verifiable proof of work backed by a global network of hardware? Or a system that is backed by $100 trillion worth of unfunded liabilities backed by promises of good faith?
What system is more likely to fail? A system that is distributed around the globe with no single point of failure? A system created not through mandate or law, but because there was a serious and real demand for it? Or a system that depends on favorable demographics, ever increasing tax revenue, honest behavior of its constituents, a precise balance of economic forces, and the good will of foreign governments to continue purchasing that systems ever increasing debt on unfavorable terms?
What investment decisions are we making because we have spent time researching them, fact checking them, and thinking about them critically? What investment decisions are we making because the news told us to?
Are cryptocurrencies a risky fad? Their price certainly changes frequently. Does this make them risky? The government guarantees Social Security. Does this make it safe?
We live in a world of fake news. Trust is a rare and fleeting thing in this world not to be bestowed lightly. What can we trust in? Where is our trust likely to be rewarded? Is it likely to be rewarded in systems that depend on people behaving honestly and ethically? Or would it be better to place our trust somewhere else?