The Debt-Leverage-Gambling Complex

The Debt-Leverage-Gambling Complex
Girih tiling in the decagonal pattern on a spandrel from the Darb-e Imam shrine

Governments, Central Banks and Financial Media promote taking on excess debt and leverage. Collectively, they encourage gambling and speculation. These practices disproportionately hurt the poor and those lacking in financial knowledge and education. It gets even worse for those with a gambling addiction or impulse control problems.

Looking at this complex landscape through the lens of Austrian Economics and the principles of Individual Sovereignty requires emphasizing the importance of sound money, and the ideals of limited government intervention in the economy and personal responsibility.

Austrian Economics, of course, criticizes central banking and fiat money from the get-go, arguing that they lead to malinvestment and distorted economic cycles. We have seen this play out time and time again: Dot-Com Bubble, 2007 Housing Bubble, 1980's Japanese Asset Bubble, Chinese Real Estate Bubble, etc.

Individual Sovereignty stresses personal autonomy and responsibility, including in regards to financial decisions. There is not much talk in the Freedom Community about Gambling Addictions and Emotional Intelligence, however. So I hope to kick off further discussion about that here.

The Federal Reserve and Interest Rates from an Austrian Perspective

Austrian Economics views the manipulation of interest rates by central banks as a distortion of the natural market signals that interest rates are supposed to provide. Lower interest rates encourage borrowing and can lead to an artificial expansion of credit, which, according to the Austrian business cycle theory, results in malinvestments and eventually necessitates a painful market correction or recession. Basically, volatility is suppressed and then explodes up much higher once a breaking point is reached, like a balloon held underwater.

Retail investors often get corralled into acting "as one", like a herd of rampaging buffalo being driven off a cliff. Taking part in the little "micro-revolutions" like #SILVERSQUEEZE and #GAMESTOPTOTHEMOON that pop up do little to change the system or enrich the plebs. For the most part, it's the same incumbents that benefit: Predominately, market-makers and hedge funds.

Government Interventions: Subsidies and Fines

Regulations, subsidies, penalties, taxes and fines also distort markets and (mis)align incentives. From an Austrian viewpoint, subsidies and fines mess up price signals and confuse resource allocation decisions. These create inefficiencies and potentially dependence on government support. A free market with minimal government intervention, where prices are determined by supply and demand, should lead to the most efficient allocation of resources. Think about it: If you wouldn't trust your neighbors to set prices economy-wide, why would you trust some neck-tied bozo 1000 miles away to do so for you?

"The correlation between poverty and obesity can be traced to agricultural policies and subsidies."
– Michael Pollan

Financial Media and Profit Motives

Financial media and institutions profit from speculative behavior, emotional trading, transaction fees and front-running of retail investors. While some good actors exist, it is hard to separate the signal from the noise. So we must emphasize the importance of due diligence and self-education. Individuals have to develop a critical mindset towards all financial news and advice in general, and focus on long-term wealth preservation and accumulation. In my humble opinion, the best vehicles for this are sound money such as gold and bitcoin, and possibly real estate investment, with assets held in individual LLCs.

β€œFear of missing out single-handedly caused every single investment bubble in human history. No other emotion is more powerful than FOMO.”
– Naved Abdali

Do you struggle with Debt, Gambling or "Financial Addiction"?

I have often fallen into the trap of over-emotional trading and get a dopamine buzz from seeing short-term gains in my brokerage account. I've slowly been reducing this activity and aim to eliminate it entirely from my life to focus on more important things.

To some extent, I have found it helpful to revisit the core concepts of Austrian Economics and try to develop a more fixed asset allocation approach. But having this knowledge only helps so much. You have to also refrain from betting on the next shiny object as well...

So reflecting on your goals and what triggers you emotionally, just noticing at first, is most helpful, I think. Thinking long-term is good, but you have to get a handle on yourself and your behaviors. Try to at least pause and think for a few extra seconds before pulling the trigger on anything.

Whether it's trying to play "catch up", or "revenge trading", a lot of these unwise impulses stem from some other struggle in life. Digging into that can help a lot to cut off the destructive habits.

Finding other hobbies and networks of like-minded people can help too. For me it's been my faith community, home bitcoin mining groups, and real estate investing networks that have been most positive for me and keep me grounded in the real world.

Paying down debt can help with the desire to "play catch up" or take excessive risks as well. If you can be prudent about the big expenses that helps too, of course: Education, Housing and Cars are the things to watch out for. Try to be strategic about those things and the rest can somewhat fall into place over time.

If you are really struggling, you might also consider some professional help too. I can't not mention that. There are some caring and skilled people out there that can help you if you need it. But you have to ask for help. It's hard but it may be worth it.


Austrian Economics and Individual Sovereignty offer a fairly robust framework for understanding and navigating the complexities of the modern financial system.

They help elucidate the corrupting influence of easily printed money in politics and society as a whole. And they prescribe a solution based on free markets and hard monies that can't be inflated capriciously.

For the Freedom Maximalist, a long-term perspective, low time preference and continuing self-education go a long way. Reflection on what matters and connecting with like-minded people can further help you to stay grounded in this crazy, chaotic and destabilizing, media-saturated world.

Addendum on Alternatives to Usury (Riba)

Since I mention Real Estate Investment, often a debt-fueled enterprise, I feel it is important to touch on the concepts of Riba and alternatives from Islamic Finance. These offer a different perspective that aligns with the framework I outlined regarding increased individual sovereignty and "inner financial peace"...

Usury (Riba) refers to the practice of charging excessive interest on loans, which is prohibited within Islam. In contrast to conventional finance, which relies heavily on interest-bearing loans as a primary mechanism for funding and investment, Islamic finance adheres to principles that promote equity, risk-sharing, and ethical (Sharia) investment.

Alternatives to traditional interest-bearing loans include co-investment, profit and loss sharing, and asset-backed financing. These are meant to help foster a sense of partnership and mutual responsibility between the investor and the entrepreneur.

  • Mudarabah (Profit and Loss Sharing): This is a form of investment partnership where one party provides the capital, while the other provides expertise and management. Profits are shared according to a pre-agreed ratio, while losses are borne by the capital provider unless they are due to misconduct or negligence by the manager.
  • Musharakah (Joint Venture): In this model, all partners contribute capital and share in the profits and losses according to their respective investment shares. This approach encourages mutual cooperation, risk-sharing, and involvement in the business venture.
  • Murabaha (Cost-Plus Financing): While not a loan in the traditional sense, this is a sales agreement where the financier buys a good and sells it to the client at an agreed markup. Payment can be made in installments or lump sums, providing capital while avoiding interest.
  • Ijarah (Leasing): This involves leasing equipment, buildings, or other assets to a client for a fixed period and fee, similar to renting. The financier retains ownership of the asset, while the client gains its use without needing a large initial outlay, making it a useful mode of finance for businesses.

Many Islamic and non-Islamic financial institutions and investors are using these alternative approaches to conventional financing in our present-day, debt-laden world.

Consider how you can partner with someone with mutually-aligned interests on your next endeavor and avoid the perpetuation of the current fiat-debt system.

Hit me up if you have questions or comments.