Lynn Johannson, Advisor, Sustainability and ESG
January 4th, 2024
Lynn Johannson, President of E2 Management Corporation and Catalyst for THE Collaboration
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Elon Musk’s “Magic Money” Discovery and What It Means
Finance | March 20, 2025
Image: Freepik/catalyststuff
Musk Calls U.S. Financial System 'Magic Money Computers'
As reported in various outlets, Elon Musk was recently asked on a podcast with Senator Ted Cruz about what he's learned during his time at Washington to which he dramatically described that the U.S. financial system has 14 computers at the Treasury that can print money out of thin air. But why is the world’s richest person acting surprised, given that anyone paying attention knows that the Federal Reserve has been digitally expanding the U.S. dollar money supply for decades, especially during crises?
It’s possible he’s just explaining it in a way that makes people stop and think. Or maybe he’s pointing out the problem for a reason like highlighting the massive debt-ridden and inflationary risks with the current system of 'printing magic money' and debt addiction. However Musk isn't just an observer here, as he has alternative finance investments in digital assets, fintech, and AI, all of which could stand to benefit if people start questioning traditional finance.
See: Decentralization and Resilience are Key to Bitcoin’s Value
But Musk also uncovered something else, that is banks can also effectively create new money in the form of credit when a bank issues a loan. Now this might sound confusing but when you take out a loan the bank adds money to your account digitally while creating a corresponding deposit at the same time. It doesn't move existing cash around, it digitally generates new money in the banking system. So in this way, commercial banks also have 'magic money computers'. The catch is banks don't have unlimited freedom to do this as they are highly regulated and constrained by capital requirements, regulatory limits, and risk assessments, but banks
Theatrical Delivery But Real Issues
Although Musk's delivery about 'magic money' on the podcast was likely for theatre, the consequences of the current debt and U.S. financial system of printing money to stay afloat has resulted in the U.S. government being over $36 trillion in debt and counting.
As more money enters circulation, the value of the U.S. dollar declines as inflation reduces buying power (and eats away at savings) making everything more expensive. Then as the economy slows because consumers pullback on spending, the government tries to stimulate the economy by lowering interest rates, making access to capital cheaper...but that also makes the overall financial system more fragile, potentially forming a market bubble longer term.
See: The dream of a low-friction financial system is just the beginning
Musk also discovered that the government doesn't track its own spending well. He pointed out that the Treasury’s magic money computers don’t always sync up, and that many payments aren’t clearly labelled for what they fund, and estimates that 80% of this gap is incompetence, 20% is intentional. The idea that trillions of dollars flow through a system that isn’t properly tracked raises serious concerns about government waste and inefficiency - enter DOGE slashing and cutting here.
Crypto is Being Absorbed into Traditional Finance
Bitcoin was meant to challenge the currently broken U.S. financial system with an alternative that government's couldn't manipulate but instead of replacing traditional finance, even though there's been significant innovations in decentralized finance, CBDCs and tokenization of real world assets, crypto is being absorbed into the traditional system, since Wall Street embraced Bitcoin/crypto ETFs. Financial institutional giants like BlackRock and Fidelity are turning Bitcoin into just another institutional asset.
- Central banks are launching digital currencies (CBDCs, Note Trump Banned CBDCs) and governments are integrating blockchain tech while keeping full control.
- Fintech giants dominate stablecoins. PayPal’s PYUSD and Visa’s USDC payments blur the lines between crypto and traditional money.
- Stocks, real estate, and other assets are being tokenized and moving to blockchain but under the control of major financial institutions.
See: A New Era: Financial Stability Board Releases Final Recommendations for Cryptoasset Activities and Markets
Meanwhile, Musk is pointing out broken anomalies of the current system but is he advocating for real change or just positioning himself to benefit in the next round of crypto's integration into traditional finance?
Closing Thought
Think about it. The U.S. government prints money. Now, institutions are doing the same thing with digital assets. Bitcoin was supposed to be independent but that narrative didn't fly with Wall Street, and now early crypto players are being upgraded to play the same game of control. So although the financial game is being digitized and some ways modernized, the winners are largely the same barring the new names being added to the list. So will the future of money ever be decentralized as envisioned? One where fintech and blockchain innovations are shifting control to individuals. Or will it be a digital evolution of the same system, just with a different look and largely the same players.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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