Financial geew-roos have you do dumb things like “debt-free screams” and yammer on and on about how debt is dumb and cash is king.
That makes about as much sense as teets on a bull.
Here’s why:
Where do most people put their money and savings?
A bank (or credit union), right?
I mean… is there some other secret place people put money for everyday transactions?
To pay their bills?
To save dinero for xmas and birfdays and whatnot?
And how do people perceive banks?
Safe, right? Probably the safest place to put your moolah.
And how do banks make money?
By BORROWING money from you (when you deposit money with them… which is why they pay you interest in a savings account and some checking accounts) and then lending it out to someone else.
In other words, they use debt. LOTS of debt.
You are their creditor when you deposit money with them.
Our entire financial system is based on using debt to make money (the technical term for this is “leverage”).
Some financial institutions use “secured leverage,” meaning their debts are fully covered by assets, like taking out a loan against a house or (more likely) a loan backed up with cash or some other stable asset.
In the 1960s-1980s banks used to advertise this sort of thing… they were called “passbook savings loans.”
And they worked really well IF you knew what you were doing with them.
Also…
Hard to get into trouble with that strategy since you always have the cashola to pay off the loan.
And then there’s “unsecured leverage.” Nothing (or very little) backs up the debt. It’s like going deep into credit card debt or taking out a huge unsecured personal loan.
Much riskier.
The biggest users of unsecured leverage?
Banks and investment firms.
And yet the geew-roos tell you, me, and everyone else that this is silly and dumb… and at the same time tell us to put all our money with institutions whose very survival depends on it.
Thing is… we put our money at risk just by being a bank customer and aren’t compensated very well for it.
Banks only keep 20-30% cash in reserve because this is how the Federal Reserve system works. It’s a feature, not a bug.
Oh but the FDIC.
Your checking and savings deposits are covered up to $250,000 but the FDIC publishes its reserves… it can only cover like 2% of deposits.
Promising to cover $250K but can only ACTUALLY cover 2% of that.
Hmmmm.
Sounds safe to me.
Anyway, my clients and I do something a little different.
We OWN part of the financial system… we make the interest and profits it makes… and buy into insurance companies that keep more than 100% in reserve.
And then use secured leverage to make EVEN MORE money.
Impossibru?
You’ll have to make that judgment for yourself and either way it’ll be fine (after all, you can never go wrong in the long-run using reason and your own judgment).
What this means is…
If you’re happy with the way you’re doing things now, or if you think I’m just blowing rainbows and unicorn farts up your arse, I suggest you float away from me and I bid thee farewell…
… because I have not yet begun to defile myself.
It’s ALL “downhill” from here…
Now… if, on the other hand, my way sounds yummy to you, here’s where you can get some num-nums for your dinero (oh, and peace of mind):