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  • Banks are the backbone of any economy. Even the fed is actually a bank, but unlike any

  • other bank, it creates money. But what if I told you that every bank has

  • the right to create money? Theoretically, you can start a bank and start

  • creating money, but there is an easier way. Why waste so much money first starting a bank

  • when you can start a cryptocurrency and become a crypto-billionaire overnight

  • At least that's what has been happening lately. If cryptocurrencies seem to you like a scam,

  • then you probably don't know much about the banks. So, here in this video, we are going

  • to take a look at 5 truths about money that banks don't want you to know because if everyone

  • would know that, that might be the end of the banking system. Or as Henry ford said:

  • It is well enough that people of the nation do not understand our banking and monetary

  • system, for if they did, I believe there would be a revolution before tomorrow morning.

  •  So if you are ready, give this video a thumbs up and make sure to checkout our secondly

  • channel called - bloom where we also post videos about investing and money but also

  • about other things that you will find interesting. If you enjoy this channel, you will definitely

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  • to the video.  


  • Keeping your money in a bank is a scam!

  • Let me ask you a question, how much interest would you earn if you deposit your savings

  • in a bank. At first glance, it seems like at least a few percent for it to make any

  • sense, right? However, if you look at the numbers, it's

  • far from that. The top banks, such as the City bank, offer

  • literally less than 0.5 percent. There are banks that offer a higher rate, but they are

  • still than 1 percent, especially since interest rates are at the bottom now.

  • Think about it. Your money grows by 0.5 percent while inflation is 2.5 percent. The intrinsic

  • value of your wealth is literally decreasing every single year. You are far better off

  • spending that money today than keep it in a bank. The purchasing power of your money

  • in a few years is going to be far less than it's now. And when inflation is skyrocketing

  • as it's now, for example, asset prices such as homes, stocks rise exponentially, as we

  • have seen happening in the last year or so. A bank is a place to park your money and not

  • to make money. 


  • Every bank has the right to create money out of thin air.

  • If i would tell you that banks do create money, you probably won't believe me because the

  • only bank that's allowed to create money is the fed. It's the source of the dollar and

  • the only institution that has the right to that printing machine. However, the banking

  • system works in such a way that every bank in the country or, in fact, the world is allowed

  • to create money to a certain degree based on how much money people have deposited in

  • that bank.

  • Let's say you deposit a thousand dollars in bank - A. what do you think that bank is going

  • to do that with money. There is no point in keeping it, they wouldn't even be able to

  • pay you your miserable 0.5 percent, so the bank lends your money to someone else who

  • wants to buy a car, for example, or a house and collects interest which is often much

  • higher than 0.5 percent that it pays you. An average credit card interest is 20 percent.

  • That's literally dozens of times higher than what the bank pays you. The point is that

  • the bank isn't going to tell you to whom it will lend your money. Whenever you check your

  • account, the bank is going to show you that your money is still there and you can withdraw

  • it whenever you want, so if your money is still there in the bank, where did the bank

  • take the money to lend to someone else? That's known as fractional reserve banking.

  • Banks are allowed to keep just 10 percent of the deposits and lend the rest. For every

  • one thousand dollars you despot in the bank, the bank creates another 900 dollars and lends

  • it to someone else, which brings the total amount to $1900. The bank created 900 dollars

  • out of thin air. It's not as difficult as you might think since there are just digits

  • in the computer. 


  • 3. You can make money by borrowing from banks and investing elsewhere 


  • In July 2012, Mark Zuckerberg financed his 5.95 million dollars Palo Alto home, that's

  • 3 miles away from facebook's headquarters with a 30-year Mortgage.

  • At that time, he was 28 years old and the world's 40th -wealthiest person, worth an

  • estimated $15.6 billion. The question is, why would you get into debt

  • when you have billions of dollars and can easily afford it? If he wanted, he could easily

  • buy a dozen $6 million homes, in cash, without batting an eye. So why get a mortgage?

  • The answer is - it's Free Money! Sounds unreal, I understand. Who would give

  • you free money when you are already a billionaire? I mean, why would anyone give anyone else

  • free money unless it's charity? It all has to do with interest rates. Remember

  • when we talked about banks giving such a low ROI that it doesn't worth keeping your money

  • there since it doesn't even beat inflation, so you are losing money? Well, in this scenario,

  • it's the other way around.

  • The inflation rate in the US is 2.5 to 3 percent, so any money you borrow that is below the

  • inflation rate is considered free money. Zuckerburger's mortgage rate was just a little

  • over 1.05 percent. If you do the math, the bank is the loser

  • since the mortgage rate is below the inflation. You don't have to be the genius to do the

  • math. For the sake of example, let's say you borrow 1 million dollars at the rate of 1.05

  • percent. The average rate of return on a savings account is 2.4 percent before the pandemic

  • and now less than 1 percent but lets just stick to 2.4 percent. Meaning that Even if

  • you deposit that million-dollar in another bank, you end up making 24 000 dollars a year

  • while you only have to make a monthly payment of 10500 (1.05%) to the bank that lent you

  • that money. Imagine if you do that with a hundred million

  • dollars, or how about a billion dollars!

  • When you can borrow for free, there's no point in tying up your own money when you can use

  • that money for more profitable things. Of course, when we are talking about small

  • amounts of money, this might not make sense because the difference isn't that big. However,

  • when it comes to large sums, playing around 1, 2, or half a percent could potentially

  • mean dozens of thousands of dollars if not hundreds.

  • 
 4. The richer you are, the lower the rate

  • you get

  • Remember that banks are not charity organisations but are businesses like any other who's job

  • is to maximise profit. They have shareholders to whom they are accountable. And if their

  • business model isn't profitable, they are not going to surviveThats why they are

  • much more comfortable lending money to a rich guy than a poor guy.

  • When you are a billionaire, for example, the bank can sleep peacefully because no one is

  • worried that you might default on your loan, and in case if something happens, in case

  • you can't make your monthly payments, you can easily sell part of your business to pay

  • back your mortgage, that makes loaning money to you almost risk-free.

  • In fact, that's how the banking system evolved over the centuries, where banks would only

  • work with nobility, with people who had money or assets that constantly generate income

  • such as land. Compare that to an average employee who could

  • get sick or might not be able to work or just lose his job. If you are barely making ends

  • meet, loaning money to you is extremely risky. I know that it's easy to criticize banks for

  • that but think about it. Would you feel comfortable loaning money to

  • a friend who barely makes any money or a friend who has a business? Probably the latter, no

  • matter how harsh does it sounds.

  • So if you want to get a lower mortgage rate, a lower credit card rate, just better terms

  • when borrowing money, you have to do better financially first.

  • Banks also offer such a low mortgage rate to establish strong relationships with rich

  • people s o that when they would need a bigger loan, they would come to them. It's a win-win

  • situation. Technologies such as blockchain or cryptocurrencies

  • are promising to change that and democratise banking, and they will probably to a certain

  • extend. In fact, banking has been democratised to the point where everyone has access to

  • financial services. Compare that to a hundred years ago!

  • 5. Credit Cards are bank's nuclear weapons

  • 70% of Americans with credit card debt admit they can't pay it off this year. Think for

  • a moment about what does that means! Your credit card debt isn't like your mortgage.

  • It isn't like 3.5 percent a year. It's probably like 20 percent!

  • If you can't pay your credit card debt on time now, what makes you think that you can

  • pay it a few months later when that debt has grown much bigger. In other words, 70 percent

  • of Americans are about to fall into the debt trap.

  • Over half of those surveyed, 56 percent, say they've had credit card debt for at least

  • a year. And most will continue to carry it for years to come. Almost 20 percent estimate

  • it will take them more than three years to pay off their debt, while roughly 8 percent

  • say they don't know when they'll be able to pay it down.

  • And that's how banks usually make fortunes because most people spend without thinking

  • about how they will pay it back. They are used to a certain standard of living, and

  • they are ready to keep it even if they can't afford it. That's why banks keep calling you

  • to sell you a brand new credit card. Don't get me wrong, using credit cards responsibly

  • is great to build your credit score, but if you are not financially responsible, then

  • you shouldn't get yourself into that debt trap.

  • 
 


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Banks are the backbone of any economy. Even the fed is actually a bank, but unlike any

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5 Truths About Money That Banks Don’t Want You To Know

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    Summer posted on 2021/05/09
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