Australia is changing the rules around property investment and capital gains tax. The current system has two important features.

First, Australia taxes capital gains when an asset is sold. Individuals currently receive a 50 per cent capital gains tax discount if they have held the asset for more than 12 months. That means only half the gain is included in taxable income.

Second, Australia has a practice known as negative gearing. An investor can borrow to buy an investment property and, if the rent does not cover interest and other costs, deduct that loss against other income, such as wages. This has allowed investors to borrow heavily into housing, absorb short term losses, and rely on long term capital gains.

The Government is now proposing to restrict negative gearing and replace the 50 per cent capital gains tax discount with CPI indexation, the official measure of consumer price inflation. Under the proposed system, the purchase value of an asset would be adjusted by CPI, and tax would apply to the gain above that indexed value. A 30 per cent minimum tax rate would then apply to those gains.

The argument is simple enough: wealthy investors have used debt, negative gearing and concessional capital gains tax to profit from rising house prices. Reforming that looks like a correction.

But it is not a correction. It is a transfer of the privilege.

The deeper problem is not negative gearing. The deeper problem is the monetary system that allows asset prices to inflate without proper correction.

Modern money is created largely through debt. When banks issue loans, new money is effectively created. If that credit funds productive investment, such as factories, infrastructure, energy systems or new productive capacity, there is at least an economic case for it. But when credit flows mainly into existing assets, especially housing, it does not make the country more productive. It just bids up the price of what already exists.

That creates the loop.

Credit expands. Asset prices rise. Higher prices create more collateral. More collateral supports more lending. Those with access to credit ride the cycle upward. Those without access are locked out and pay through higher rents, higher purchase prices and a weaker currency.

In a real market, this should eventually correct. Overpriced assets should fall. Bad leverage should be punished. Capital should be reallocated.

But the correction is not allowed to happen. When the asset cycle threatens the financial system, central banks and governments step in. Liquidity is provided. Rates are cut. Balance sheets are protected. The market is stabilised.

So the losses are not cleared. They are diluted.

That is the moral hazard.

Under the old system, wealthy investors and government both benefited from the racket. Investors captured the upside through leverage, deductions and discounted capital gains. Government benefited through stamp duty, income tax, consumption taxes flowing through the economy, and eventually capital gains tax.

The proposed reforms do not dismantle that system. They narrow the private investor’s cut and increase the government’s claim. Private investors are told they can no longer extract from asset inflation in the same way. But government keeps the larger power. It can spend, borrow, stimulate, inflate, avoid correction, define the inflation measure, and then tax the paper gain.

That is not fixing the Ponzi like structure. It is nationalising the privilege.

This is why CPI matters. The Government says it will only tax “real” capital gains because the asset’s cost base will be indexed to CPI. But CPI is not the same as the cost of maintaining the same standard of living.

CPI measures price changes across a weighted basket of household expenditure. That basket is updated over time to reflect what households actually spend. But households under pressure do not simply keep buying the same goods at higher prices. They buy less. They switch to cheaper substitutes. They accept lower quality. They give things up.

When that happens, the CPI basket can adjust to the reduced life people can afford, rather than measuring the cost of preserving the life they had.

For example between 2011 and 2025 the spending share on beef and veal stays broadly in the same range. But the implied quantity falls from about 0.25 kg to about 0.17 kg per $1,000 of CPI weighted expenditure. That is roughly a one third reduction.

This is how inflation can be hidden in plain sight. The statistic still records beef and veal in the basket. But the basket now represents less meat, cheaper meat, or lower quality consumption.

That matters when CPI becomes the dividing line between “inflation” and “real gain”.

Suppose someone owns an asset worth $500,000. CPI rises 20 per cent, so the tax system indexes the cost base to $600,000. The asset sells for $650,000. On paper, that is a $50,000 real gain.

But suppose the actual cost of maintaining the same standard of living has risen 35 per cent. The owner would need $675,000 just to stand still. In real life, they are $25,000 worse off. In tax law, they have made a gain.

That is the core problem.

The Government can inflate the currency, prevent asset prices from correcting, use CPI to understate the real loss of purchasing power, and then tax the difference as if it were wealth.

This does not strengthen private property. It weakens it.

Ownership becomes conditional. You may hold the title, but the state keeps an expanding claim over the asset. It can debase the unit of account, protect the nominal value, and then tax the nominal increase.

At that point, government is no longer merely providing public services funded by taxation. It becomes a silent owner of the population’s productive output. People work, borrow, save and build. The monetary system erodes the value of their money. The tax system then claims part of the paper gain created by that erosion. The political danger is obvious. Whoever is most willing to exploit this mechanism can buy support with spending, inflate the system, avoid correction, and recover power through taxation. The public sees rebates, fairness language and housing reform. The real transfer is harder to see.

The wealthy investor loses part of his loophole. But the loophole itself remains. It is simply reserved for government.

That is the real criticism of these reforms. They do not end the asset inflation machine. They centralise control over it.

The result is not fairer capitalism. It is a stronger state claim over private property, savings and productive labour.

The danger is that the government’s answer to a broken monetary system is more control over the same system.

Private capital can exploit credit creation and asset inflation, but it is at least constrained by the political consequences. If housing becomes unaffordable enough, the public eventually turns on investors, banks and asset holders. The crisis becomes visible.

Government is different. Government can present the same extraction as public service. It can spend in the name of relief, inflate in the name of stability, tax in the name of fairness, and expand control in the name of reform.

That is far more dangerous.

Private investors may have exploited the loophole, but government can institutionalise it. It can create the inflation, prevent the correction, define the statistic, tax the paper gain, and claim moral authority while doing it.

This is how freedom is lost without people recognising the mechanism. Not through open confiscation, but through managed currency debasement, controlled asset inflation, statistical understatement and tax policy that turns nominal survival into taxable gain.

The result is not private property in any meaningful sense. It is conditional possession. The citizen may hold legal title, but the state retains an expanding claim over the asset, the income used to maintain it, and the labour that created it.

That changes the role of government. It is no longer merely a provider of public services funded by limited taxation. It becomes the superior claimant over the productive output of the people.

History shows that when those in power become too extractive, peaceful correction becomes harder. People may not immediately see the transfer. They only feel that wages buy less, assets become harder to acquire, savings lose value, and government claims more of the nominal gains created by the system itself.

When faith in peaceful reform collapses, correction can come through disorder, collapse or violence. That path is catastrophic. It brings poverty, repression and misery. It should be avoided.

But avoiding it requires confronting the root problem. It is not enough to shift the advantage from private investors to government. A fairer monetary system must limit both: the power of the state to debase money, and the power of private capital to exploit credit creation, asset inflation and political privilege.

The danger is not money itself. The danger is concentrated power over money.

When governments and central banks can expand the money supply, prevent correction, define inflation, tax paper gains and surveil transactions, extraction becomes subtle enough to survive politically. It does not look like confiscation. It looks like policy. It looks like stability. It looks like fairness.

That is what makes it so dangerous.

That was the original promise of Bitcoin: peer to peer electronic cash without the need for a trusted third party. The early Bitcoin movement was not just about speculation. It was about ending central bank dominance over money. “End the Fed” referred to the US Federal Reserve, but the principle was broader. Money should not be controlled by institutions that can expand it, dilute savings, protect insiders and push the cost onto everyone else.

But Bitcoin has a serious weakness. Without strong privacy, a public ledger becomes a surveillance tool. It may resist some forms of monetary debasement, but it also exposes transactions to governments, corporations and hostile actors.

That is why the real power of cryptocurrency is not merely scarcity. It is sovereignty. It gives ordinary people, whose productive output needs protection, the ability to align around a fairer, harder and more secure form of money.

Privacy is essential to that.

Cash has always been private. That is the natural condition of money. People exchanged value without every transaction being recorded, inspected and profiled. Privacy is not a loophole. It is a condition of free exchange.

Without privacy, money becomes a control system.

That is why privacy preserving cryptocurrency matters. Not as a way to avoid tax. Not as a way to gain unfair personal advantage. But as a peaceful reserve option. A form of power held by citizens, not only by states, banks and financial institutions.

If lawful reform fails, people need the practical ability to resist extraction without asking permission from the institutions doing the extracting. Civil disobedience, if ever necessary, should be peaceful and principled. But peaceful resistance still requires tools. It requires the ability to coordinate, transact and preserve value outside systems designed to punish dissent.

The logic of power is to acquire more power. Rights are not preserved because governments benevolently grant them. They are preserved because people retain the practical means to assert and defend them.

If the state controls the money, defines inflation, taxes the paper gains, surveils transactions and prevents correction, then freedom becomes administrative. Private property becomes conditional. Productive output becomes collateral for government power.

The answer is not blind faith in politicians, central banks, private capital or public blockchains. The answer is money that limits all of them.

That is why privacy preserving cryptocurrency matters. Not to escape civic responsibility. Not to avoid lawful obligations. But to preserve the possibility of genuine economic sovereignty.

A free people need money that cannot be quietly debased, easily censored, or turned into a surveillance ledger.

That brings the issue back to capital gains tax.

If government can debase the currency, prevent asset prices from correcting, define inflation through CPI, and then tax the paper gain above that measure, the citizen is not being taxed because they became wealthier. They are being taxed because the state controls the unit of account.

The negative gearing and CGT reforms may reduce one unfair advantage for leveraged investors. But they do not fix the mechanism that created the advantage. They leave the inflation machine intact and give government a larger claim over its proceeds.

That is why this is not simply a housing policy debate. It is a property rights debate, a monetary sovereignty debate, and ultimately a question of who owns the productive output of the people.

The public is told the private investor’s loophole is being closed. But the deeper loophole remains: the power to inflate, prevent correction, define the measure of inflation, and tax the resulting paper gains. That power is not being abolished. It is being centralised.

The problem is not corrected. It is stabalised and centralised… Unless people choose better money.