Why Young People Are Gambling to Get Ahead...

Why Young People Are Gambling to Get Ahead

 It seems like a growing number of young people have concluded that saving, working hard, and investing prudently won’t get them anywhere. So they’re turning to sports betting, meme stocks, crypto speculation, and lottery-style trades. Is this simply bad judgment, or is it a rational response to a broken financial system?

 First, we should define our terms. Namely, what's the difference between saving, investing, speculating, and gambling? There’s no doubt that speculating and gambling are way up. But these are four very different things, although people conflate them.

Saving is about producing more than you consume and setting aside the difference. That builds capital, which allows you to invest. Saving is the foundation of building wealth and prosperity; it’s indispensable for both individuals and nations. But savers look like fools when banks typically pay no more than 3%, before tax, while the general price level is over twice that.

Investing is about taking that saved dollar and allocating it productively so that it creates more real wealth and grows. But investing only pays off after years of patience—assuming that the investment is a winner. In an unstable high-inflation environment, good investments are hard to find. Entirely apart from the fact that the average person lacks patience, and knows essentially nothing about economics, business, or finance.

Speculating is about capitalizing on distortions in the marketplace. Distortions generally arise from government intervention or mass hysteria. They’re the friends of the skilled speculator, but poison for the average citizen. In a stable society with low taxes, few regulations, and no inflation, speculators would be chronically unemployed—like policemen in a monastery, or firemen in 10,000-foot-high Quito, Ecuador. But in today’s economy, prices go up and down like an elevator with a lunatic at the controls. Speculation, therefore, offers great opportunities. The problem is that the public confuses it with gambling—hoping to get lucky on stocks they’ve heard about in the news or from a friend. Of course, the public only hears about something when it’s being hyped or after the party’s over.

Gambling seems like the easiest and quickest way to make big money. And it can be fun. But the public is generally unaware of how much the odds are loaded against them. State lotteries, for instance, typically take about a 50% rake. The "numbers" game, run by the Mob in big cities, is actually a much better deal with only a 33% rake—and there aren’t any taxes withheld if you win.

Gamblers are players in someone else’s game, one that’s tilted against them. After the rake, random chance dominates the outcome, not knowledge or technique.

The bottom line is that in a high-inflation economy, everyone is forced to get rid of their fiat currency as fast as they can. They either wind up promiscuously consuming because there’s no way to get ahead. So why not eat, drink, and be merry, for tomorrow we die anyway. Or gambling, even if they think they’re speculating. Or, if they’re especially ill-informed, they think they’re investing.

When people believe the game is rigged, does gambling start to look less like vice and more like one of the few remaining shots at escape?

Gambling promises the largest return in the shortest time with the least effort or knowledge. The unsophisticated and desperate will buy a lottery ticket for $1, hoping to win a million, but never consider that their odds of winning are vastly less than a million to one. It’s not even a "zero-sum" game, because, as I just said, the house rake on a state lottery is typically close to 50%. That’s before ordinary income tax captures another 50%. Worse yet, the gambler typically can’t even tax-deduct his losses. Worse yet, the gambler winds up directing funds to the government, which amounts to financing the rope they’ll use to hang him.

We can expect to see more lotteries and casinos, because they are great sources of income for the State. In principle, I have no problem with gambling. I enjoy playing poker, a game where luck of the draw is tempered by a knowledge of practical psychology and basic math. But I treat poker as entertainment. Almost nobody beats the odds in the long run.

One problem with government endorsing gambling is that it legitimizes the concept of gambling. The public starts to see it as wholesome because the money partially funds "public goods". But gambling is innately unproductive and potentially addictive. It’s like drugs. I have no problem with people taking whatever they want. Your primary possession is your own body. But when the government starts promoting to generate revenue, it’s a slippery slope. It’s one thing to tolerate vice, seeing it as everyone’s private affair. It’s something else entirely for the State to promote it.

The old path was: get a job, save money, buy a house, build a family, and retire with dignity.

For many, that path now looks impossible. What happens to a civilization when its young people stop believing in gradual progress and start chasing jackpots instead?

 Once upon a time, America was a high-trust society. It now seems the ethos is to grab the money and run. Americans were once encouraged to delay gratification, to put off consumption today in order to be more prosperous tomorrow. But with increasing currency debasement, who wants to wait? Time preferences have gotten shorter as the world, and the dollar in particular, have become more unstable.

Polymarket, the "prediction" app, has recently started advertising on Zero Hedge, one of the largest financial sites. This shows the melding of gambling and speculation. Polymarket lets the public bet on everything and anything, including the direction of stocks and commodities. The difference between a stockbroker and a bookie is becoming blurred.

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Right now, the financial risks to your money are enormous—rampant inflation, market volatility, potential bank failures, and much more...

But the truth is, the political risks to your money are even more significant.

That's why you must diversify politically by moving some of your money out of your home country and into a wealth-friendly jurisdiction.