The Culture of Soft Money

Under the gold standard, debt was expensive and saving made sense. Interest rates had to exceed inflation. Borrowing cost you purchasing power over time. The dollars you paid back were worth as much as the dollars you borrowed. Debt was a burden to escape as quickly as possible.

After 1971, those incentives inverted.

With permanent inflation baked into the system, borrowing became profitable. Borrow $100,000 today. Repay with dollars worth less tomorrow. The government calls this “price stability”: 2% inflation, managed by the Fed. But 2% inflation over thirty years means you’re repaying half of what you borrowed in real terms.

The debtor wins. The saver loses.

This didn’t just change economics. It changed culture. It changed how people think about time, about money, about the future.

It changed everything.

The Student Debt Trap

Michael Chen graduated from UC Berkeley in 2007 with a degree in computer science. Smart kid. Worked hard. Did everything right.

He also graduated with $85,000 in student loans.

His parents hadn’t been able to help. They’d encouraged him to go to a good school, told him education was an investment, assured him the degree would pay for itself. Everyone said this. High school counselors. College brochures. Financial aid officers. Society itself.

So Michael borrowed. Freshman year: $18,000. Sophomore year: $20,000. Junior year: $22,000. Senior year: $25,000. The amounts increased each year because tuition increased each year. He signed the promissory notes without fully understanding what they meant. He was eighteen, then nineteen, then twenty. The numbers were abstract. The debt felt distant. The degree felt essential.

He graduated in May 2007. The economy crashed in September 2008.

Michael was lucky. Sort of. He found a job as a junior developer at a tech company in San Francisco. Salary: $65,000. Before taxes, that sounded decent. After taxes, rent, food, transportation, not so much.

His student loan payment: $950 per month.

He paid it. Every month. On time. Never missed a payment.

But here’s the thing about student loans: they’re designed to be nearly impossible to escape.

Michael’s loans had an average interest rate of 6.8%. High, but standard for student loans at the time. On $85,000 in principal, that’s about $5,780 per year in interest alone. His monthly payment of $950 meant $11,400 per year. After paying the interest, only $5,620 went toward the principal.

So in his first year, despite paying $11,400, his balance only dropped by $5,620. He paid $11,400 to reduce an $85,000 debt to $79,380.

And that’s if the balance stayed constant. But it didn’t. Because he’d consolidated his loans, and some portions had variable rates. When rates increased, so did his payment. When he struggled to make payments during a period of unemployment, interest accrued. The balance grew.

He’s been paying for seventeen years now. Seventeen years of $950 per month, with occasional increases. He’s paid over $180,000 toward his student loans, more than double what he originally borrowed.

He still owes $71,000.

A decade and a half of his life, gone. Every month, $950 that could have been a down payment on a house, or an investment, or a wedding, or children’s savings, or literally anything else. Gone. Sent to loan servicers who applied it to interest first, principal second.

Michael is 39 years old. He’ll be paying these loans into his fifties. Maybe his sixties, if he ever faces another period of unemployment or financial hardship. The degree he borrowed for. obtained when he was twenty-two years old, will have cost him hundreds of thousands of dollars by the time he’s free.

He did everything right. Worked hard. Got good grades. Chose a practical major. Found a decent job. Made every payment.

The system crushed him anyway.

The Trap

Michael’s story isn’t about one person’s bad luck. It’s about systemic design.

The student debt trap exists because of soft money. Before 1971, college was expensive but manageable. Students could work summer jobs and cover most costs. State universities charged minimal tuition. Most students graduated with little or no debt.

After 1971, the government decided to make college “affordable” by guaranteeing student loans. Banks would lend to students. The government would guarantee the loans. If students defaulted, taxpayers would cover the loss.

Universities realized students had access to unlimited credit backed by the government. So they raised tuition. Why not? Students could borrow more. The government would guarantee it. And unlike other debts, student loans couldn’t be discharged in bankruptcy.

Tuition exploded. Since 1971, college costs have increased over 1,500%. A degree that cost $10,000 in 1971 now costs $150,000 or more.

The debt accumulated. Today it exceeds $1.7 trillion. Over 43 million Americans carry student debt. The average balance is over $37,000. Many, like Michael, owe far more.

This debt is special. It can’t be discharged in bankruptcy. It follows you forever. The government can garnish wages, seize tax refunds, withhold Social Security.

The system works perfectly for everyone except students. Universities get money and raise enrollment. Banks get risk-free profits: lend at interest rates higher than inflation, and if students default, the government pays. The government expands its control. Student debt becomes political leverage.

Students get degrees of increasingly questionable value and debt that chains them for decades.

Debt as Virtue

Your grandparents’ generation avoided debt. They remembered the Depression, when debt meant losing everything. They saved to buy things. Paid cash for cars. Only borrowed for a house, and rushed to pay it off. Being debt-free was a goal. Something to achieve. Something to be proud of.

Your parents’ generation was less cautious. They borrowed for houses, cars, education, sometimes furniture or vacations. Debt was normal. Manageable. Nothing to fear as long as you made payments. Credit scores became important.

Your generation has been taught that debt is just how life works. Student loans for college. Credit cards for daily expenses. Auto loans for cars. Mortgages for houses. Debt for everything. Living debt-free seems almost impossible.

This shift didn’t happen by accident. It was engineered by governments, banks, and corporations that all benefit from a debt culture.

Governments benefit because debt-fueled spending drives GDP growth. Politicians get credit for booming economies. By the time bills come due, they’re out of office.

Banks benefit because they create money through lending. Under fiat currency, banks don’t lend deposits; they create new money when they issue loans. Borrow reserves from the Fed at near-zero rates. Lend to consumers at 5%, 10%, 20%. Collect the difference. If loans go bad, the government bails you out.

Corporations benefit because people with credit cards spend 12-18% more per transaction than cash users. They buy more impulsively, spend more freely. Consumer debt drives sales.

So debt was normalized. Then celebrated. Advertisements showed happy families buying homes they couldn’t afford. Credit card companies sent pre-approved offers by the millions. Universities encouraged students to borrow without explaining they’d spend decades repaying.

The message, repeated everywhere: debt is fine. Smart, even. Sophisticated. Everyone does it.

Today, total U.S. household debt exceeds $17 trillion. The average American carries over $100,000 in debt. Not because they’re irresponsible, but because the system made debt the rational choice and saving the foolish one.

The Boom and Bust Machine

Soft money didn’t just create a debt culture. It created a bubble machine.

Here’s how it works.

The Federal Reserve keeps interest rates low to stimulate the economy. Low rates mean cheap credit. Cheap credit means people and businesses borrow more. They spend the borrowed money. Spending increases. The economy grows. GDP rises. Politicians celebrate. The Fed takes credit for managing the economy.

But cheap money doesn’t create real wealth. It creates the illusion of wealth. Asset prices inflate. Houses, stocks, bonds. Everything rises in nominal terms. People feel richer. They spend more. They borrow more against inflated assets.

Then something breaks.

Maybe it’s overextended banks. Maybe it’s bad loans. Maybe it’s a realization that assets are overvalued. Whatever the trigger, prices start falling. Panic sets in. People try to sell. Prices fall further. Loans default. Banks face insolvency.

The economy crashes.

The government responds by… creating more money. The Fed cuts rates to zero. They buy assets to prop up prices. They bail out banks. They inject trillions of new dollars into the system.

This stops the immediate crisis. But it creates the conditions for the next bubble. Because cheap money, low rates, and bailouts teach everyone the same lesson: borrow as much as you can, take maximum risk, because if things go wrong, the government will print money to save you.

This pattern has repeated every decade since 1971.

The 1970s: Oil crisis and stagflation. Response: print money.

The 1980s: Savings and loan crisis. Response: print money and bail out banks.

The 1990s: Dot-com bubble. Response: cut rates, reflate into housing.

The 2000s: Housing bubble and financial crisis. Response: print trillions, zero rates, quantitative easing.

The 2020s: Everything bubble. Response: print more than ever before.

Each crisis is “solved” by creating more money. Each solution creates the next crisis. The boom-bust cycle accelerates.

Under a gold standard, this couldn’t happen. There was a natural constraint. Banks that made bad loans failed. Borrowers who overextended went bankrupt. Recessions were painful but brief. The economy self-corrected because reality imposed limits.

Under fiat, there are no limits. The Fed can print unlimited money. The government can bail out anyone. Failures aren’t allowed to fail. Mistakes aren’t allowed to be liquidated. Bad debts accumulate instead of being cleared.

So the debt grows. The bubbles get bigger. The crashes get worse. And each time, the response is the same: print more money.

The people who suffer most aren’t the bankers who made bad loans or the speculators who took excessive risks. They get bailed out. The people who suffer are savers whose money is devalued, workers whose wages stagnate, and young people priced out of housing markets inflated by cheap credit.

The boom-bust machine grinds on. And the machine runs on soft money.

The Death of Patience

Perhaps the deepest change is psychological. Cultural. Spiritual, even.

Sound money teaches patience. If your money holds its value, if your savings will still be valuable in ten or twenty years, you can wait. You can save for years. You can invest in projects that take decades to pay off. You can build something that lasts.

This shift in time preference isn’t just economic. It’s cultural. It shapes how people think about everything.

Education used to be a long-term investment. You studied for years, accepting poverty as a student, because the knowledge would pay off over a lifetime. Today, students borrow enormous sums for credentials that may never justify the debt. The education itself is secondary. It’s about the degree. The signal to employers. Get it, check the box, move on.

Michael spent four years at Berkeley. Did he learn to program? Yes. But mostly, he learned to pass tests. The actual learning, the deep understanding, came later on the job, after he’d accumulated $85,000 in debt.

Businesses used to invest in long-term research. Bell Labs invented the transistor, the laser, the solar cell. Blue sky thinking. Projects that might take decades to pay off. Today, businesses optimize for quarterly earnings. CEOs focus on stock prices. Research that doesn’t promise immediate returns gets cut.

Families used to save for generations. You inherited from your parents. You saved for your children. You built slowly, thinking beyond your own lifetime. Today, most people spend everything they earn. Live paycheck to paycheck. The concept of building for the future feels quaint. Almost naive.

Even entertainment reflects this shift. Binge-watching entire series in a weekend. Skipping songs halfway through. Swiping through social media at lightning speed. Patience is gone. Attention is gone. The ability to defer gratification is gone.

We’ve been trained for immediate consumption. For instant gratification. For high time preference. Not just by technology. By money itself.

The culture changes.

What We Lost

The shift from sound money to soft money didn’t just change economics. It changed us. Who we are. How we think. What we value.

We lost the habit of saving. Entire generations grew up never learning to delay gratification, never learning to set aside money for emergencies, never learning to build wealth slowly.

We lost resilience. Individuals and families living on debt are desperately fragile. One missed paycheck and they’re in trouble. An economy optimized for consumption rather than production is fragile. Governments drowning in unpayable debt are fragile too.

We lost trust. Everyone knows, at some level, that the system is broken. That the debt can never be repaid. That the promises won’t be kept. This breeds cynicism. Hopelessness. Social trust, the foundation of civilization, erodes.

And when it breaks, the next generation will pay the price.

The culture of soft money optimizes for consumption, not creation. For spending, not saving. For the present, not the future. For debt, not equity. For speculation, not production.

Michael Chen took on crushing debt for an education that should have been affordable. He’ll spend decades repaying loans for a degree he earned at twenty-two. His twenties, thirties, and forties, chained to debt because the system made borrowing easy and saving impossible.

Dorothy Martinez saved for forty years in a currency that evaporated. Michael borrowed for four years in a system designed to trap him. Both did what they were told. Both worked hard. Both believed in the system.

Both were betrayed by soft money.

But soft money didn’t just change how we think about time and debt. It changed something more fundamental. The tool that enabled all of this, digital money, had another property. One that would transform it from a tool of commerce into a tool of control.

Money was becoming surveillance. And surveillance was becoming power.