The Blood Tax - When Unfunded Debts Demand a Human Price

When fiscal illusions stretch past their limits, we settle them with blood. Examining how unsound money and unfunded pensions manifest as premature death, abstention from birth, and war.

Prerequisites before you read

For those who had followed me for long enough, you will know what I'm talking about, and how much work I've been putting towards resisting the idea of central banks.

For the argument of why someone should be wary of the "Banks of banks", the best book I can recommend is "The Creature of Jekyll Island" that explains the mechanism of how it works.

My article here aims to add a new perspective that tries to connect the present with history and to show that humanity, after thousands of years, has never got out of the barbaric ways of sacrificing children and old.

Certain mechanisms that look very "classy and sophisticated" like interest rates manipulation, fractional banking, high taxations, actually yield similar results equivalent of putting childrens on an altar, or to send seniors into the jungle.

The dramatic tone is intentional.

Many of us will believe we are incapable of evil. Yet, time and time again it is shown that real evil is a result of inaction towards a creeping structural problem, and an unwavering support towards a belief system that supports an individual selfish needs at the expense of the long term collective.

Why I know what I'm talking about

I've been working in quantitative finance in my early part of the career. I've been exposed to the inner workings of banking and debts.

I have the opportunity to make the kind of money that lets me escape poverty. However, after seeing the implications, history, and damage it could cause, I think the way to make a difference in this lifetime is to "outgrow bureaucratic spending" (DOGE has shown it to be impossible), or to encourage independence from my audience from the "tentacles" of modern banking system.

That is not to say my previous profession is not a moral one -- quantitative trading provides liquidity that lowers cost of transaction and due diligence.

However, IMO the value is insufficient relative to using my skills to build software, and to write critically about modern banking (that most people either ignore or are underexposed to really understand what we are getting into)

EDIT: Predictive History also starts talking about this

The Price of Unsound Money

"There is no such thing as a free lunch"

Disclaimer

If you cannot understand basic accounting, it is futile to speak sense and you should quit reading before the article offends you.

If you wonder if you fall into such category, check the footnotes. 1

For those who understand, you will learn every economic transaction has a price, and every debt must eventually be settled.

The current global fiscal reality -- marked by historically high national debts and massive unfunded liabilities like pensions and healthcare -- suggests that this reckoning may be approaching a terrifying conclusion.

The most reliable indicator so far is "debt-to-GDP" ratio, 2 which most of the developed economis (G20) have d2gdp of about or greater than 100% 3

We often presume the price of unsound money is merely inflation, stagnation, or lost purchasing power.

However, most of us do not stop to think what happens when these fiscal illusions stretch past their elastic limit, and what we will later use to settle them.

The answer is simple -- historically we settled it with blood -- either through wars, famine, neglecting old people to deaths, or choosing a child as sacrifice on an altar.

The terrifying thing is that perhaps we are already using blood to settle them, it's just that it is still carefully hidden away from us that we don't think about it until it is too late.

Yet, it should be called for what it is -- the "blood tax."

Unfunded Pensions: A Contract with the Unborn

The welfare state, particularly the generous, pay-as-you-go pension systems introduced in the West (like the one pioneered by Otto von Bismarck in Germany), created a financial contract between generations.

More relatably, it is the Social Security we all know about. This is the story that is told to the public:

  • Pay N% of your income as SS tax
  • The accumulated savings is managed by your government
  • The government promises to return that accumulated savings as your "deserved" pension upon reaching retirement age.

However, those smart enough to understand how Social Security work would have already recognized the theft mechanism:

  • Worker pays N% of income as SS tax
  • Politician hires his friends to manage the pension funds for a fee (that's why pension funds underperform general markets. Every underperformance gap goes directly into their pockets)
  • Politician spends some more of those tax on "free government spending" that gets them elected by the naive who believes in free lunches.
  • Politician pays off seniors pension using taxes raised by "present workers" to show the system is working
  • Pray the new generation will create more wealth to pay off the pension "contributions" (that was already spent) made by present workers.

This means in practice, a Social Security is effectively a Ponzi scheme -- the whole structure of it depends on future generation cohort size to be greater than past generations.

This isn't even the worst part. Since the majority of pensioners do not understand that it is today's workers that pays for today's retirees, they are often encouraged to vote for policies that benefit their generations more without understanding who pays for the burden.

In effect, we have heavily subsidized the elderly (removing the economic necessity of relying on one's own children) while simultaneously placing a crushing tax burden on the young, effectively taxing and disincentivizing procreation.

The result is predictable: a demographic crash, illustrated by historical fertility figures that plummeted after the introduction of such schemes. (see 1950 and 1970 fertility trendbreaks)

Unsound money -- specifically the mechanism that allows governments to issue debt far beyond their means 4 -- has merely prolonged the illusion of solvency, buying time for more institutional capture to occur and increasing the final price we have to pay as a civilization.

The Three Forms of the Blood Tax

When a country reaches the point where it has "more claims than assets" (debt-to-GDP exceeding sustainable levels, unfunded pensions that cannot be paid), the system requires a reduction in the number of claimants or an increase in the number of assets (youth labor).

Since increasing births is slow and difficult, the system defaults to the fastest solution: reducing population claims.

This payment in "blood" manifests in three tragic forms:

1. The Tax on the Elderly (Premature Death)

When pensions cannot be funded by youth labor, the pressure mounts on the net fiscal consumers (the elderly) to vacate their claim.

  • Institutional MAID: In jurisdictions with rapidly aging populations and strained federal budgets (eg: Canada), programs like Medical Assistance in Dying (MAID) for non-terminal conditions expand. While framed in terms of compassion and autonomy, the state-sponsored facilitation of death for those who are considered a fiscal burden is a dark outcome.
  • Private Suicides (The "Burden" Rationale): As observed in places like South Korea, elderly citizens take their own lives out of a profound sense of shame or a conviction that they "don't want to be a burden." This honorable but tragic cultural sacrifice effectively privatizes the national debt by reducing the number of pension claims and happen to conveniently suit the bureaucrat's interest.

2. The Tax on the Unborn (Abstention and Abortion)

Even low birth rate itself (reflected in TFR) is a form of blood tax -- the voluntary abstention from giving new life due to impossible economic conditions.

  • The youth is squeezed by taxes (to pay for the elder generation's debt) and must delay or forgo children because they cannot afford the upkeep.
  • The "blood tax" is paid by the beings who are never conceived or are aborted because the state's generous promises to the elderly have made providing for the young financially unviable.

The lack of new blood, ironically, ensures that the seniors' poverty will ultimately worsen, as there will be no one left to run the economy and care for them. 5

3. The Traditional Blood Tax (War)

Historically, debt crises that cannot be resolved peacefully often lead to conflict.

War is the ultimate blood tax -- a mechanism that efficiently kills off large portions of the population, thereby reducing the number of people who can claim against the national assets, clearing the slate for the next cycle of debt.

The Social Vampires: Bureaucrats and Totalitarianism

Who benefits from this system?

Unsound money -- money created outside the constraints of market supply and demand -- is effectively a fuel for institutional capture.

  • Bureaucrats and Central Planners: They are the first beneficiaries. Unsound money allows them to buy more political power, expand their departments, and fund unsustainable programs without immediate fiscal accountability. They are paid to administer the unsustainable debt until it collapses, acting as social parasites or vampires whose existence is subsidized by a promise that can never be fulfilled, either through their ignorance, incompetence, or malice.
  • Totalitarianism: The ultimate power is the power over life and death. The state's financial collapse, driven by unsound money, can provide the justification for implementing severe, totalitarian measures -- including life-ending programs -- in the name of "necessity" or "compassion."

For those who still have compassion

If saving civilization is your lifetime project, the first step is to recognize that economic policy is not separate from human welfare.

Yet, one must also be aware that historically, tragedies are often not a result of a specific cabal. Often it is the entire village or city who votes for the sacrifice of an innocent baby.

You think you will never be complicit to the evils created by modern bureaucracy, think again. If you were ever part of the group here 1, you are already part of the crowd that earns resentment.

The price of unsound money is not paid in paper -- it is paid in blood.

Footnotes

  1. It is easy for people to say they don't believe in free lunches. In practice, their behavior betrays what they say. Examples include: seniors voting for more pension entitlements, young women who spends like they are going to marry rich, students who believe they are entitled to an office job after graduating, voters who vote for governments that give out handouts, traders or homeowners who demand lower interest rates, special interests who think certain groups deserve more "rights" funded either by government or by taxation of locals, or anyone who doesn't understand inflation. ↩ ↩2

  2. This is because raw debts can still be paid off if growth rates exceed the growth of debt (IE: income higher than credit interest). ↩

  3. There is no magic number of what d2gdp is "too high", but the consensus is around 70%. The implication of a d2gdp >100% means the government is borrowing more than the income generated by the country. A net interest outlay greater than government revenue NIO / Tax revenue (theoretical highest debt limit) implies a country has been "economically enslaved" -- 100% of their taxes still cannot pay off the interest of the loan. In practice, we will never get to this ratio because defaults would have happened much earlier. However, recent recordings for USA suggests 25% NIO/Tax revenue, so don't think we are too far away. ↩

  4. Basically the central bank that gets to print infinite money to buy people into working for corporates and government. ↩

  5. There is actually a way to manage or delay this problem, that is to import young immigrants. Depending on who you ask, it can either be a solution or a problem. I've built a simulation for this ↩