How American Capitalism Really Works

I think finally figured out the American system of wealth accumulation and it’s variables. Like any other operating system, it’s many parts and sub parts aren’t always shown to the masses and many intricacies are de facto hidden for whatever the reason. I will do my best to demystify this system to you, as I understand.

We live in a 18th century style, wild capitalist system based on the writings of Adam Smith’s wealth of the nation’s book.

“All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters.” Adam Smith.

It seems to me that we live in a society guided by this former principle. The reason why I suspect it is the case is because I’m yet to find a person who loves to pay income taxes! Or any taxes.

If we could, most (if not all of us) wouldn’t pay them. “All for ourselves… nothing for other people.” Right? If a person, or a group of people, advocates for tax dollars to be allocated to social programs of any kind, many are labeled socialists or even communists.

The system encourages its citizens to give, making America a pretty generous country. However, most people donate to pay less taxes to the government and choose where their money goes to. The system allows for individual liberties.

Good. Now, how do people living in the US accumulate wealth and play the game to his advantage? This is what I’ve found and what I think.


People either need to have a good paying job or the ability to self govern and create a business that bring lots of profits each month. The jobs that pay more and/or are the most prestigious, e.g., working for Coca Cola, Goldman Sacks, or Amazon aren’t safe even if employees perform their duties well because a corporate board is constantly monitoring a public company’s stock and expecting increases in valuation. If speculators believe an industry will do poorly in the 4th quarter, for example, the board along with the president wouldn’t think twice before letting thousands of employees go to satisfy stakeholder trust and welcome investments.

No wonder why unions aren’t very popular in the corporate world… especially in places where the industrial part is smaller like in the southern states of America. The system is too risky for laborers making workers in America very stressed out.

Fortunate are those who leverage job insecurity and position themselves to have the capacity to move to a new opportunity short term. The true wealthy person is safer from such conditions and can afford to build their wealth in one or many places.


Debt is an instrument of wealth. Credit is the foundation of debt. The more the credit, the more the debt, the more the wealth, if used wisely. No wonder why your credit score can either make it or break you. Next time you drive around town, count how many banks your town has. Of course. We need banks in order to lend us credit so we can buy products and services and hopefully make money doing it… Hopefully wisely.

Every eight or so years, the system experiences a crash, right at the moment when debt must be paid back to creditors. Those who spent well (used their debt wisely) profit from the system. Those who didn’t, get into more debt and eventually file for bankruptcy.

Once bankrupt, only trust or the trustworthy brings the broke back to being able to reasonably trade fairly again. The wise learns that in the US, being credit poor means living In poverty…

A wise way to use debt is to leverage credit to trade stocks at margin in bull markets to bring big profits and lose little to none in bear market times. A poor way to use debt is to buy toys, clothes, cloth and depreciating assets like an expensive car or a house in times of available credit. It leads to bankruptcy in bad times.

Another quick thought…

Credit is also capable of turning big losers into big winners in the system. This is perhaps why many billionaires of today were once bankrupt before. The system protects itself by enabling big money to profit big.

If you aren’t borrowing, trading, investing, and leveraging your position in the workforce to have the ability to move quickly, it will be tremendously difficult to accumulate wealth overtime unless you are really wealthy. Financial intelligence must be learned in order to survive working in the major league American economic system.

Being a white belt in a black belt environment can prove to be quite humiliating for many. Every system can be broken down by pieces when we understand it’s interconnections and interdependencies. Are you playing the game according to how the system functions or are you living blindly with the hopes that the “economy will pick up?”

A system, like a model, is only as good as the system or the model. Your goal, my goal… our goal is to better understand how the system works so we can play the game according to its rules. Playing the game unprepared can have disastrous consequences.

Never forget that.

What do you think?