You see, banks have a few secrets that they’d prefer you didn’t know about – and in this article, we’ll explore five of these truths.
Banks are the foundation of any stable economy, and The Federal Reserve is no different. Despite being a bank themselves, the Federal Reserve has exclusive power to create “money out of thin air” – but this authority isn’t unique only to them. Every bank has the potential to mint its own cash, if it had the resources to do so.
Starting a new bank from scratch can be expensive and time-consuming, however, there are other options available. In today’s world, every day people are becoming overnight millionaires or billionaires by taking advantage of cryptocurrencies. If this still seems like an impossible scam to you, it may be time to take a closer look at the banking system.
Hard truths about money that banks don’t want to hear
Money has been around for centuries and banks have long been at its core, but there is a lot that banks don’t want you to know about how money works. Beyond the doors of their vaults lay secrets that could spell doom for our entire banking system.
What if everyone knew these truths? Could this be the end of traditional banking?
This knowledge could change the way you manage your finances – or even lead to a revolution!
We take a look at 5 harsh truths about money that banks would rather keep hidden away. So if you’re ready to unlock some of banking’s best-kept secrets, keep reading…
1. Don’t keep your hard-earned money in a bank – it’s a trap!
Are you looking to make your money grow? Are you tired of seeing your hard-earned savings depreciate due to inflation? Do you wish you could use your money to purchase things while still keeping them safe? We have good news for you – the answer is simple: don’t keep it in a bank! Banks offer only a minuscule return on investment, and with inflation rates as high, that means your money is essentially going nowhere.
Think twice before depositing it in the bank. Even the “top” ones like City Bank are barely offering 0.5% interest rates – and low-interest rates will continue as long as inflation stays at 2.5%.
Keeping your money in a bank isn’t a good investment; rather, think of it as parking your car: You can’t just leave it anywhere and expect it to be safe. It needs to be somewhere secure and reliable – like a bank. But while it’s parked there, you don’t expect it to grow or fly away. If you keep money in the bank, not only does your money fail to grow, but its worth is decreasing every year.
Instead of being scammed by banks with low-interest rates that are barely above 0%, consider investing your money into something that will give you the returns you deserve! Or look for other investment opportunities with higher yields, or simply use your wealth to purchase items that are likely to maintain their worth over time.
Investing in stocks, mutual funds, real estate, luxury goods or other assets could get you far greater returns when you retire than you’d ever get from a bank, without even having to keep an eye on them 24/7.
The key is to research which options are right for you and start making smart decisions with your money – it’s time to break away from relying on banks with their outdated interest rates and start building your own financial future!
At the end of the day, banks are for storing cash – not for making money!
2. Each bank can make money out of nothing.
If I were to tell you that banks can create money, you might not believe me because the Federal Reserve is the only entity allowed to mint U.S. currency. But in reality, the banking system operates in such a way that every bank has access to a limited ability to generate money, proportional to its deposits. In other words, there are many ways to increase monetary supply without relying exclusively on the Fed’s printing press!
When you place a thousand dollars in a bank, what do you think they do with the money?
It would be pointless to keep it in the vault since they would not be able to give you a meager 0.5 percent interest. Generally, they will lend your funds to someone else who might be in search of a car or a home and collect a much higher rate of interest than what the bank offers you – for instance, the average APR for a credit card is 20 percent, which is around 40 times more than the rate paid to clients! The bank won’t communicate with who they are lending funds. But if you check your account balance it will still appear as though your money is there – this practice is known as fractional reserve banking.
Are you wondering how banks can turn a single-dollar deposit into nearly double the amount? It’s hard to understand; when you deposit one thousand dollars in the bank; the institution is permitted to keep 10% of that as its own and loan out the remaining 90%. This simple process enables them to create an additional $900 out of thin air, resulting in a total of $1900 total.
This means that by utilizing your money, they can generate an additional amount of capital which in effect increases the total pool of money to $1900. It might sound complicated, but it’s actually rather simple; all the bank has to do is add digits into their computer system.
3. Borrow money, invest elsewhere, and make profits.
In July 2012, Mark Zuckerberg secured a 30-year mortgage to finance the purchase of his 5.95 million dollar Palo Alto home, located 3 miles away from Facebook’s headquarters. At the time, he was 28 years old and counted among the world’s 40 wealthiest individuals, with an estimated net worth of $15.6 billion. This begs the question: why would someone who is so well-off financially choose to get into debt, instead of paying for such an acquisition in cash? It’s noteworthy that by doing so, if he desired, he could’ve easily purchased multiple properties of similar value without any financial strain.
So why get a mortgage?
The answer is, It’s Free Money! It sounds unbelievable, doesn’t it?
Who could offer a billionaire free money? After all, why would someone do that if it wasn’t for charity purposes? Seems that the act of taking out a loan may be a strategic financial move, instead of merely a show of prowess or power. It’s all tied to interest rates – recall when we discussed how the return on investment (ROI) from banks is so low that even surpassing inflation becomes next to impossible. So are you losing money?
It is quite simple: the current inflation rate of the United States stands at 2.5 to 3 percent, meaning any money you have obtained from a loan that is lower than this rate is essentially free money. Mark Zuckerberg’s mortgage rate was just over 1.05 percent, which upon calculation shows how the financial institution is losing out significantly here as the interest rate falls below the average inflation. Nevertheless, you don’t need a genius level of intellect to understand and compute such calculations.
If we take a million dollars loan as an example, with an interest rate of 1.05 percent, the average return rate on retirement savings accounts used to be 2.4 percent before the pandemic, but for this special case let’s use that figure. This means even if we deposit the million in another bank, we still make only 24,000 U.S. dollars annually. We would have to pay 10,500 (1.05%) back to the bank that lent us the money, every year.
For massive sums, leveraging other people’s money rather than tying up one’s own can bring massive rewards. A small difference of one or two percent interest on a hundred million or even a billion dollars could mean tens or hundreds of thousands of profits. However, when dealing with smaller amounts, this strategy may not make much financial sense in the short-term. Nevertheless, if investing for growth, employing this method could produce ample returns.
4. Wealthier people pay less.
It’s important to remember that banks are not charities, but rather, they are similar to other businesses trying to generate a profit. They have a responsibility to their investors and shareholders, and if their operations do not yield returns, they will cease to exist — explaining why it is much simpler for them to loan money to high-income people than to individuals of low income.
When you’re a billionaire, the bank can rest assured — no one fears you’ll default on your loan. In the eventuality of not being able to make monthly payments, you have the option of divesting assets to pay back the mortgage — making lending to you nearly risk-free.
Through the ages, financial institutions have traditionally focused their attention on those holding aristocratic status, or possessing continuous income-generating assets, such as property. On the other hand, the probability of a regular laborer facing illnesses, job loss, or incapability to perform work is much greater – thus lending money to these persons is an incredibly risky endeavor for any lender.
I understand that it might feel unpleasant to view banks in such a light. However, consider the consequences: Would you trust loaning money to an acquaintance who rarely earns enough or one who operates their own business? Chances are, the latter. If you desire to achieve a lower mortgage rate, credit card rate, or stronger lender terms, you must bolster your financial capabilities first – no matter how exacting it may appear.
Banks offer minuscule mortgage rates to build relationships with affluent individuals, so when the time comes for them to request larger sums of money, these individuals will come to them—resulting in a mutually beneficial arrangement. Technologies such as Blockchain and cryptocurrency are anticipated to revolutionize banking and grant democratization access—although, this probably will only be to a nominal degree.
In truth, banking has been thoroughly democratized–to the point that all people possess access to financial amenities. Comparatively speaking, when one considers a hundred years ago! it is an indisputable revolution.
5. Credit cards are a bank’s ultimate weapon.
Seven out of every ten Americans carrying credit card debt concede that they are unable to pay it off in the current year—stop and consider the ramifications! One’s credit card debt is not on par with their mortgage, which is estimated at only 3.5 percent annually; rather, the typical rate hovers near 20 percent!
If you find yourself unable to pay off your credit card debt within the allotted time frame, how can you expect that—in a few months, when the owing amount has increased drastically—you will be able to fulfill your payment? Put succinctly, 70 percent of Americans are rapidly headed for financial entanglement. Over fifty-six percent of those interviewed have had credit card debt for at least twelve months, and it doesn’t look like they intend to discharge their debts anytime soon.
Almost one-fifth of individuals calculate that they’ll require more than three years to settle their debt, with around 8% admitting they’re unsure when they shall be capable of doing so. Banks regularly amass vast fortunes because the majority spend without considering how they will pay it back—habitually accustoming themselves to a certain lifestyle, even when it might be beyond their financial means. –Such routines of overspending usually prove detrimental, yet are still driven by deep-seated desires.
That’s why banks keep ringing you—persistently trying to flog that definite-new credit card. Make no mistake, using credit cards shrewdly and judiciously is an admirable way to raise your credit rating, however, if you are not prudent with your funds, don’t get wrapped up in this financial bondage.
Conclusion
Banks have been deceiving us for decades, but now you know the truth. Don’t be fooled and be financially savvy by not keeping your money in a bank and finding other ways to make profits. Credit cards can help you with short-term financial needs but should be used sparingly since it’s a trap waiting to ensnare you. Make sure you are aware of the real power dynamics at play with personal finance; only then will you be able to gain true financial freedom.
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