Growing Money on Tress
If I had a dollar for every time someone told me “money doesn’t grow on trees,” I could probably oﬀset our national debt. All my life I have wanted to prove that statement wrong and here is my chance. First, we have to define money. “A current medium of exchange in the form of coins and banknotes collectively.”-Dictionary Now, aside from the obvious banknotes being paper and paper coming from trees thing, I am going to tell you, money multiplies way more rapidly than a tree could ever produce leaves. Money is created all around you in a sort of flow. Like a current in the ocean.
Money is simply a form of currency. Currency is the actual value associated with the money. The reason currency is even called that, is because money is created by circulating and flowing through the system which we call our economy. Like a current, root word of currency. Our system is made up of Government (taxes), Banks (debt), and Businesses (stocks / investments). Those three parts of our economy are responsible for virtually every single dollar that is created.
Once upon a time people could only buy stuﬀ with pieces of metal, called coins. The reason people used the metal was because of the Real Value associated with it. That Real Value was based on how much of that metal was known to exist versus how many people want the metal. That time was way more simple, a time where a concept like capitalism could work. Now, is diﬀerent but before now, in 1913, two things happened. First thing, The Federal Reserve was formed. Number two, IRS opened its doors and paying income tax became a thing. Only one of those two organizations is a Government entity, did you know that? The Federal Reserve isn’t the government at all. It’s a private corporation with shareholders! Which means someone(s) owns The Federal Reserve but who? In 1913, shares of The Federal Reserve were given to the largest Banks at that time. Because of mergers and acquisitions there is really no telling as to exactly which Banks have ownership of these shares. Fun fact about The Federal Reserve bank account, it has a balance of $0.00. What does The Federal Reserve do for work? That’s right, they print money, i.e. write checks. Even though there is zero dollars in account, the checks they write don’t bounce. Why? The reason these trillion-dollar checks don’t bounce, even when there’s $0 is because the Government created these IOU’s called bonds. A bond is like a box, that has a promise inside, to pay whoever buys the box a dollar amount plus interest. So, once the government packages their bonds, they put em’ up for auction to The Banks. When the Banks buy those bonds, that brings The Fed account back to $0.00 so there’s no overdraft fee on all the checks they just wrote. Once the bonds are sold at auction and The Federal Reserve has brought their account back to $0 and all is great until it’s time to pay the IOU’s. Who pays oﬀ the IOU’s inside the bonds that were bought by the bank at the auction? Does the Federal Reserve pay these IOU’s that they packaged and sold? They have zero dollars, so that answer is no. Obviously we pay them. Taxpayers, who else? Matter of fact, that is what income tax was invented for. To pay back money today that was spent yesterday plus interest. Makes sense as to why both the IRS and The Federal Reserve opened their doors in the same year. They have been creating money ever since.
Now you understand how the government is able to literally print money and create it whenever they want. The second piece to this puzzle is The Banks. The Banks also get to create money whenever they want. This way might be even sneakier than how the government does it. Say you have $10. You take it to The Bank for “safe” keeping. Once you dropped each of those precious dollars oﬀ for daycare in a savings account, The Bank sent 9 of those 10 dollars out to work. Loaned 9 of your 10 dollars to God knows who. While your real $9 are out buying someone else’s house or car, The Bank replaces your Real Value with “Bank Credit,” which is code for actually worthless. In the meantime, the real money is collecting interest for The Bank. Interest rates range from 5% up to 36% for a personal loan. Do you know why you get .01% interest credits on your account every once in a while? It is your reward, your cut, your slice of the business deal where you let The Bank use your money to create seemingly unlimited new money. So, if The Bank is giving you .01%, then that means The Bank could be making potentially up to 36% on the same deal. That doesn’t seem fair because who’s money is ultimately at risk to get that 36% return? Yours, they replaced your Real Money with “bank credit,” remember? Who gets the reward? The Bank. What do you get? .01% plus monopoly money with a perceived value i.e. cash or “bank credit”. Banks can grow money way quicker than trees can leave. Real dollars setting out to flow through our economy only to wind up back where it started. Plus interest.
Finally, we have business. We can create money too! We can either start a business or invest in a few of them to help us create some money. The unfortunate reality is, to take advantage of creating money via business, you either have to have money, expertise or connections. It’s really kind of a luxury when you think about it. If you’re lucky enough to be able to invest that means you’re also risking. What happens if 2008 happens again? What about the Great Depression? What if the collapse of Japanese stock market index, Nikkei 225, happens here and the market never comes back and never sky rockets like your guy at Edward Jones said it would? Who has your back if that happens? The government maybe? No, the government is so broke that they have to take part of your income to pay the debt plus interest that they promised in the bonds. Maybe the Banks have us covered? Well, they’re already giving you .01%! Plus, there is FDIC which insures your money at The Bank. Bummer about the FDIC is that they only insure pennies on the dollar, there is no timeframe as to when they have to pay you back. AND Standard and Poor’s, company that rates companies, isn’t even allowed to rate the FDIC anymore because in the early 90’s, Standard and Poor’s rated the FDIC “Below F- “because they were “unable to pay their debts”. The government was so pissed they made sure Standard and Poor’s never rated them again and to this day there has not been an oﬃcial rating. That being said, I’d probably guess the banks are out if shit hits the fan.
There is plenty of upside for investing when it’s flowing and you’re in the current. The problem is it takes at least two to tango and balance out the flow in this creation of money and right now it is 2 vs 1. So, if your investments fall and your business falls there is nothing to balance it out. I’m not saying the answer is to run out and buy gold. The Gold Standard was a nice idea to help the rich get richer but in today’s day it is unrealistic and unsustainable. Today, we need to create our own system, be our own flow and structure our own freedom. Financial Optimization.