How You Go Into Debt to Make Others Rich
Who are you making rich when you are in debt? Suppose you buy a new home with 10% down. This means that you are paying for 90% of your home through a mortgage. When your mortgage is approved, the home builder immediately gets paid off. The builder has hopefully made a reasonable profit. I’m assuming of course that he or she built you a well-constructed home in a socially responsible way.
Meanwhile, you keep paying interest on your mortgage debt. Month after month. Perhaps for thirty years. Who benefits from your interest payments? Not the builder, who is now out of the picture. The debt industry. They are the ones who benefit from your interest payments. Your mortgage holder makes money off your debt.
But, that’s just the tip of the financial integrity deficit iceberg. Here are three huge ways you create huge profits for banks at your own expense:
- As a Depositor: The more money you place in a bank the more money they can legally invent, using a banking mechanism called fractionalizing. This strategy enables banks to loan 10 times to as much as 40 times the money you deposit. In turn, the bank generates huge monthly cash flow, in the form of loan interest. Depending on how you’ve deposited your money with them, the bank then might pay you a miniscule fraction of their profits through simple interest (if they pay anything at all). For instance, before the financial crash you might have made 5% interest on deposits you made into a particularly good money market savings account. In this example, for every $100 you deposited you would make $5 a year. Meanwhile, for every $100 you deposited the bank fractionalized it into between $1000 and $4000 worth of loans. They would then charge borrowers between 6% and 18% interest. Let’s say for this example that they made 10% interest. This would mean that for every $100 you deposited your bank would make between $100 and $400 in profits… and would then issue you a whopping $5 in interest for having used your money to do this.
- As a Carrier of Unprofitable Debt: The interest you pay on your credit card, home mortgage, and homeowner line of credit generates a negative cash flow for you while making banks huge profits. In other words, banks turn debt that is a financial liability for you into a profit that is a financial asset for them. Why do you participate in this? Because you bought the faulty happiness formula that set this in motion. (More about that further below.)
- As a Taxpayer: When banks go bust who bails them out? You the taxpayer. For instance, some huge banks manipulated the government into allowing them to fractionalize your money at unsustainable ratios of up to 40:1. These are the banks that went bust and that taxpayers then paid to bail out.
So, you make banks rich through the first two items above. And then when their financial irresponsibility causes them to fail, you rescue the banks from being accountable for their integrity deficits by making them finally whole again (the third item above). For a brief history of the United States banking system and its downfall, click HERE.
Now, you are perfectly free to pay someone for the opportunity to go into debt so you can have something you want. And you should be. This is one of the many freedoms we have in democracy-centered republics like the United States.
Here’s the problem. The vast majority of us have not been educated about the difference between profitable debt and dangerous debt. We have not been taught how to know when it serves our highest interests to pay someone to use their money to generate cash flow for ourselves, and when being in debt serves the debt collector more than it serves us. In other words, most of us don’t know the difference between a true asset and a true liability. We don’t know the difference between true capitalism (making profits from our efforts) and debtism (irresponsibly borrowing against an uncertain future to create the illusion of prosperity in the present).
The prosperity hijackers have seen to it that we don’t know these crucial pieces of information. They have done this through the Darth Vader-like marketing mechanism called “manufacturing consent.” (For examples of how the manufacturing of consent has been used to get you to buy the prosperity lie, click here.)
The prosperity hijackers have done this because their ability to make a living depends on two things:
- The amount of dangerous debt they can get you (and all of us) to accumulate.
- Pressure to invest in dangerous forms of derivatives. You know. The debt-multiplying slight-of-hand that helped create our financial meltdown. (A less-discussed example of a derivative is the fractionalizing mechanism banks use. Before the financial crash some banks were allowed to derive — invent — up to $4000 from every $100 you deposited. From that they then derived a monthly cash flow from the loans they made with this manufactured money.)
In other words, the more dangerous debt we are willing to accumulate, the richer we make the prosperity hijackers. Here’s how they got us to do this for them:
- The happiness hijackers first obtained our consent to equate happiness with excessive consumerism. This set us up to want more than we could afford. This, in turn, manipulated us into accumulating excessive amounts of dangerous debt.
- The health hijackers then obtained our consent to ignore our health until after we’ve become ill. This set us up to do two things:
- Over-work in an attempt to fulfill the faulty happiness formula at the expense of our life balance
- Cover up the symptoms of our growing stress as we accumulte more and more dangerous debt to cover what our over-work can’t buy us.
Your recipe for making the financial sector rich:
- Build up massive credit card debt
- Carry a bigger mortgage than serves your life balance
- Deplete the investment value of your home by over-using your home equity credit line
- Invest in capital gains instruments, which are highly sensitive to market fluctuations (like mutual funds and the stocks they include)
Consider the implications:
- Our unbridled pursuit of “stuff” in the name of happiness keeps our minds off what’s going on around us. This includes the government’s massively irresponsible uses of taxpayer money. It includes the general deterioration of our society’s integrity and social responsibility.
- Our unbridled consumption of fake foods laden with sugar, carbohydrates and a soup of other health-damaging chemicals quite literally keeps our brains numbed. Our numbed brains prevent us from noticing our growing stress. Pursuing unbridled consumerism in the name of prosperity compromises our life balance, health and relationships.
- Our unbridled accumulation of excessive debt blinds us to the fact that we have replaced capitalism with Debtism. This utterly unsustainable economic system was invented by the financial sector. It hijacked capitalism starting in the 1970s and 1980s. Again, debtism is borrowing against an uncertain future to create the illusion of prosperity in the present. Debtism creates so much stress and anxiety that we tend to numb out on illness-creating foods, symptom-hiding medications, and mind-altering drugs. This helps us tolerate the intolerable: remaining preoccupied on how to stay afloat so we can keep pursuing our faulty happiness formula, rather than on how to take our power back.
Is it any wonder that we have become a society of angry, depressed, over-anxious people? Is it any wonder that we have become a culture of helpless entitled victims who are waiting for the government to rescue us?
You can either continue to feel this way while waiting for the rescue that will never happen or you can free yourself from the hijackers by becoming the change you want to see.
Financial independence is not some pie-in-the-sky fantasy. It is a cold hard reality. Did you know that if you live long enough you will eventually become financially independent automatically?
Here’s why. If you live long enough you will reach a point when you can no longer pay your bills through working a job. Traditionally this condition has been called retirement. When you reach that point you will be paying your bills through whatever passive and semi-passive income sources are available to you.
Most people’s financial independence is a combination of their retirement account and Social Security. This is no longer a particularly wise financial independence formula. We really don’t know how much longer Social Security will last. Counting on Social Security to still exist when you retire is a crapshoot.
If you are like most people your retirement account is largely or completely invested in the stock market or derivatives of it, such as most mutual funds. This century’s stock market crash should have demonstrated to you how risky it is to depend primarily on the stock market for your financial independence. So, this too is not longer a particularly wise financial independence formula.
Other more stable sources of passive and semi-passive income exist then most people know about. A thorough financial education includes knowing what those sources are and knowing how to successfully develop them. In light of the current economic climate, your choice to not finally get a complete financial education is most likely your choice to place your financial stability and your financial independence in grave jeopardy.
For information about how to take back your prosperity from the hijackers, read the Changing the Game section on the main Hijacking of Prosperity page.