Understanding the Money

For the past three weeks, I have consumed documentaries on finances, the global economy, the global money system, etc.  Some of my favorites where the Inside Job, Abacus: Small Enough to Go to Jail, and 97% Owned.  Even though, I haven’t incorporated all of the knowledge in to my thought process.  The surface level knowledge has shifted my framework.

The idea that shifted me the most was this “Money is made by banks when they lend”.  Banks increase the amount of money in accounts using 1’s and 0’s.  So, money is simply 1’s and 0’s.  When a company pays bank the loan, the bank erases the 1’s and 0’s but keeps the interest.  The interest is deposited in to the banks account as 1’s and 0’s.  But the reality is it’s not backed by gold, notes, paper money, or collateral.

The global economy is a cyclical process grounded in debt. So, those with the power in this process decide who is worthy of a loan.  They decide the standards. They decide the priorities. They decide which entities receive loans.

In the US, many define success according to their income, their saving or investment accounts balances, and/or their credit score.  Of these three, the only one that is mildly important is the credit score.  This is because so many businesses use the credit score to make decisions. Most miss the importance of being a lender.

In order to be wealthy and to have financial independence, you have to be a lender as well; you need people or entities to be indebted to you.  Lend someone one of your properties, a portion of your time, or a product.  Regular payments from someone who owes you is ideal.  Particularly, when their indebtedness happen as a result of one action or event.

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