Oh! if only it were true! If only we could think — or for that matter UNTHINK — things into existence. What a nicer place this world could be!
Here’s what is keeping me awake this tonight: banks and taxes.
Sigh. It’s a brain-full.
I’ll keep this simple, because it’s very complex-yet-simple stuff.
First, the banks. If you are like me, you have heard of the “fractional-reserve” banking system. The way I understood it was that banks could lend out the same amount of money ten (in a 1:10 system) or twenty (1:20) times. I understood it academically. Starting today, I actually began to grasp what it meant.
Let’s say I go into a bank and deposit $40,000.
(…and I haven’t yet wrapped my brain around the notion that banks write money into existence the instant you put your signature on to the promissory note to repay the loan, making this original $40,000 and the resulting $1,000,000 in profits even more insidious…)
The 10:1 fractional-reserve system requires the bank to hold on to 10% of it (1/10th) and it then allows the bank to lend out the other 90%, or $36,000.
So then the other borrow, the new owner of the $36,000 deposits that loan into their bank. Again, their bank is required to hold on to 10% or $3,600, and it loans out the remaining $32,400.
The next borrow takes their $32,400 loan, deposits it into their bank account, and that bank in turn holds onto $3,240 and lends out $29,160.
This is only the first three layers of transactions. Ultimately, this system of deposit-and-lend can happen about a hundred times. By the time the bank is done laundering my money, it has taken my $40K and churned out another $360,000 in loans.
And then, the magic happens. Yes, there’s more: it’s called Compound Interest. Get out your calculators or just go on basic trust here, but generally speaking, any 20 year loan on 5% interested compounded monthly produces an amount close to 2.5 the original amount. So $40K times 2.5 yields about $120K. And we know %5 is low-balling it.
So the bank, in lending out $360,000 instantaneously now receives a cool million in 20 years of repayments that include principal and interest. Yes, the magic of Compound Interest.
So where does this $960,000 of hard cold cash come from, especially since it doesn’t even exist in the first place? Why, we borrow it from the banks of course. Business loans. Mortgages. Lines of credit. Credit cards.
A self-perpetuating system destined to leave the individual poor and the banks rich.
And you might think it stops there. Well, no. Actually it doesn’t.
There’s the second layer of shit called “governments.” The biggest misconception out there is that governments tax “things” or stuff. In Canada, we have personal and corporate taxes, payroll taxes, excise taxes, liquor taxes, income taxes, gas taxes, sales taxes, estate taxes, and on and on the list grows.
But what it really boils down to is that “things” are NOT taxed. What is really taxed is the movement of money. If you have a $20 bill in your pocket that is 20 years old, stop and imagine for a moment the number of transactions this piece of paper has seen in its two decades. Consider how long it stays in your wallet. A week? Maybe two? If a $20 bill sees even just 10 transactions in a year, assuming a taxation rate of 15% (which it’s not, it’s more like 50%), it will have generated $15 for the government in taxes in one year. And $300 in twenty years.
(Consider just one transaction. You buy a thing for one dollar. Immediately, there’s sales tax. Let’s say 7%. Then with this one sale, the owner has earned an income. So there’s income tax. Let’s say 25%. So without even considering import/export and employee taxes, 33% of this dollar has immediately gone to the government.)
Again, it has generated more than it’s original value for the government.
It’s really quite depressing.
And how does this all lend (haha) itself to the law of attraction? Simple. One of the biggest mantras of the gurus is: It’s a sin to sit on money. As quick (!) as you earn it, so must you spend it. In fact, if you don’t have enough money it’s because you refuse to spend enough money. You are tight-fisted and obsessed with holding on. And as long as you hoard what you have you won’t be free to get more.
But really, this multi-billion dollar self-help industry keeps money in circulation; and this, my friends, means more loans,which in turn means more taxes.
Depositing the money in the bank means more loans, more debt. Which in turn puts more money into circulation which in turn means more taxes.
But here’s the real crime of hoarding: If you put $40,000 of bills under your mattress, you have “robbed” the banks of a million dollars AND “robbed” the governments of the taxes that they would have earned with this extra million in circulation. And yet, sadly, you yourself cannot transform this $40K into a million.
Do you get this? While each and every one of us (capable of reading this and comprehending it) will be dead in the next 100 years, the system will survive. Taxation is thousands of years old. Fractional-reserve banking is about 300 years old. And we, the individuals cranking out our debt-ridden lives to climb to the top of this mad pyramid scheme, are all enslaved to this.
So given even this scratch-the-surface level of economical understanding, do you really think we can think our way out of this?
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.
- Henry Ford
Problem is, who’s getting it? And of those who get it, what in hell can be done about it? Our national wealth — and indeed our entire economy — depends on this house of cards being upheld.
Is a storm is blowing our way?