Oct 22, 2023 2 min read

What Exactly is Money??

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."

Why did he say that? It's because he knew something which you do not know. What's crazy is that everyone collectively agrees that money equals value. We were made to believe it!

Hundreds of years ago, currency was backed by gold. This was known as the gold standard. It basically meant that you could take your money to the bank and get gold in return. Britain stopped using the gold standard in 1931 and the US stopped using it in 1933. Currently, no country uses the standard anymore. Wonder why?

Let's learn it with the help of an example of a guy named - John. John needs a $500,000 loan so he goes to the bank. The banker checks his profile, assesses the risk, and approves his loan. Do you really think the bank always has $500,000 sitting in a vault right there? Nope! The banker goes to John's profile and lists type $500,000 so John can see this amount.

Now John has to provide value and ensure his business does well so that he can return the loan + interest to the bank. On the other hand, what did the bank actually do? They basically just typed $500,000 in their system so John sees it in his account.

A famous financial writer, Rob Dix said - 'Having a banking license basically means having the license to print free money! The UK government needed 450 billion pounds to fight COVID-19, how did they get it suddenly? Well, the bank just printed it out of thin air. Then they increase the inflation rate which makes people spend because we think - OMG, I should buy an apartment now because later on, it would get more expensive.'

You might think inflation is inevitable, or that it is bound to happen. In reality, the more the government prints money, the more they have to increase the inflation to make up for it. For eg, Inflation in Poland right now is 7.7% because the government said so. They can also cause deflation but it is not good for them. If there's a deflation trend, you will not spend. You would think - 'Since there is a downward trend, I will not buy the car now. I will buy it next year as it would be cheaper.'

Your salary is taxed, your home loan has interest, the goods you buy are taxed, and the flight tickets you buy are taxed, even if you make a profit on your stock investments, you still have to pay a capital gains tax!

Why do politicians get richer? Because they're the closest to the printing of money.

What would happen if all of us went to the bank one day to cash out our deposits? The banking system will fail because the banks do not have our money!

The whole system is rigged against you, what are you going to do about it?