Last week we marinated the idea that both banks and governments play a completely different game than the one the consumer plays. This discussion instilled in us the concept of the accumulation of money and gave us the foundation to understand the cost of money.
The idea that money is finite has been accepted unquestionably in the past because that’s the way we have been educated for as long as we can remember. Quite the contrary, money is infinite. Every time a good or a service is exchanged for it, it is used again.
That same dollar that was used to pay your salary or mine, we use it to pay someone else, and whoever receives it uses it to pay their employees who will also eventually use it to pay for goods or services. Over and over and over again, and the more it is exchanged, the more money there will be and the more valuable it becomes.
So, if we lived in a utopia (which is impossible) currencies would not exist, since nothing would be something more valuable than everything else: Any good or any service that we provide would have the same value as the rest.
But as we do not live in a utopia and currencies exist, the cost of money is found in its circulation. Moving is the concept completely opposed to the idea of accumulation which consists of keeping our capital static.
So, when banks and governments understand this value, both the Federal Reserve (in the United States), the Central Banks (in other countries) among other financial entities set interest rates on their loans based solely on how much money they want to make. And every time you deposit your money in the bank, it legally becomes theirs.
This is where you start to see how the system is rigged. The banks not only have access to loans from the Federal Reserve, but they are also allowed to fractionalize their loans. They only need to retain 3% of that money so they can lend the remaining 97%.
And the sad part is that you end up paying interest on your own money. Because you have already declared it to the treasury and to whomever you have paid taxes, your money then goes to the bank (becomes fractionalized) and then the bank lends it back to you with interest, which you then declare and pay taxes on and the cycle repeats.
Of this 3% of the money that the banks retain, they really only need a tenth of it in their vaults throughout the nation. That translates into 0.3% , while that remaining 2.7% remains invested in whole life insurance. These entities insure their executives and key employees and, if any of these were to die, their families will collect it, but then they will deposit it back into the bank.
Remember: Every time you deposit your money in the bank, it legally becomes theirs.
And if there is something certain in life, it is that we will all die at some point. So this investment guarantees a much greater return that will allow the banks to hire a new intelligent person, educated, younger and start the cycle over again.So it is a fairly safe investment, especially if the death occurs while the employee is still working for the bank.
What are the biggest assets of companies? Any good that produces money and their human resources. Now, all the money they pay into this counts toward the assets they need to have in reserve, so essentially, every time they pay their employees (because they have to anyway) they’re also increasing the reserves they have and allowing them to lend more money with interest, receiving higher cash flow.
This seems to be a much better game than the one the rest of us play as end consumers.
Banks are responsible for keeping more than 90% of their money in motion, using the knowledge that it is an infinite resource, which allows them to multiply it over time through loans and insurance, among other investments. And while you accumulate all, or almost all, of your money, they barely do so with only 0.3% of theirs.
And this is why we tell our investors that we prepare them for the structure of investing like banks, since the key is in the cash flow. But we also take care of the finances of those who will be the final consumers for our Philanthroinvestors: the families who buy their homes.
Next week we will go into detail explaining how you can achieve this through the Equity & Help model. See you soon!