A hearty welcome to “Grandma’s Wealth Wisdom” with your neighborly hosts, Brandon and Amanda Neely. This is the only podcast that helps you take charge of your cash flow and leverage your assets, simply and sustainably, the way Grandma used to.
Brandon: Hey, I'm Brandon, and welcome to our Grandma's Wealth Wisdom, where we help you break through to a smart, stable financial future with the tried and true wisdom Grandma used.
Amanda: And, hey, I'm Amanda. This is Episode 72, titled “What if banks are the real scam?”
Now, if you’re subscribed to our YouTube channel, which if you aren't, what are you waiting for? And even if you think you are, click the link in the description to confirm that you're subscribed.
What we did on the YouTube channel recently was Dave Ramsey had published a video a while ago, titled “Why infinite banking is a SCAM!”, and then we publish a response to him titled “Our response to Ramsey's ‘Why infinite banking is a SCAM!’” There are a lot of charts and things, not really podcast friendly, so we just published it on YouTube. [01:08.7]
Please go check that out for more about how infinite banking works and you can decide for yourself whether you think it's a scam or not., but in today's episode, we want to ask the question, “What if banks are the real scam?”
Brandon: Uh-oh, you're going to go there?
Amanda: I mean, over the past year, banks have had a huge surge of cash deposits. According to a CNBC article from June, quote, “The wall of money flowing into banks has no precedent in history: in April alone, deposits grew by $865 billion, more than the previous record for an entire year.”
Let me say that again in a different language than what CNBC used. In one month of April 2020 in the midst of right when the pandemic started, cash deposits into banks were more in that month than in any entire year. Wow. Banks are having a heyday in 2020, but what does that really mean for you? [02:14.6]
Firstly, you want to share how you're already in the banking business. Then we'll discuss what that really means and you can decide if that's where you want your wealth to be within a bank or if maybe you want to look for an alternative.
Brandon: Full disclosure, I was on the actual payroll for two banks in my lifetime. They gave me a check that I probably deposited into their banks when I had them. I was in IT and one of those banks actually got shut down in 2008 because of poor lending decisions, and I remember I was already in another company whenever I found out that they were shut down. But I remember thinking in 2006, This is a little shady. There's a lot of craziness happening in this bank and I wouldn't be surprised if something were to take place. [03:11.7]
I didn't think it was going to be as big as the whole world going nuts about it, but they were one of the, quote-unquote, “casualties” of 2008 when they were shut down, and it was just a couple years later that we listened to the audible version of a book called The Creature from Jekyll Island. If you haven't read it, I strongly recommend it. It's a really long book, but it shares a lot about money and how money really works, and the creation of the Federal Reserve.
Now, this stuff isn't taught in schools, but it probably should be, in my opinion. The book changed our perspective about banks even more so, even after I had had all those crazy experiences with the bank. This actually gave me some reasons why I thought that. [04:06.6]
Amanda: Yeah, but before we start throwing too much shade on banks, we should acknowledge that banks in a lot of ways make our lives easier. I mean, can you imagine having to store all your money in your own home and carry it around with you when you think you might need it? It's pretty convenient that we have checkbooks and debit cards and credit cards to help us spend without carrying a lot of cash. It also makes us feel safer to not have huge piles of cash in our homes but instead locked away in a vault at a bank.
Yet when we deposit our funds in a bank, they don't actually go into a vault. You put $100 bill in, they're not taking the $100 and locking it away, and then when you come back to withdraw your $100, you're not getting that same $100 bill. And the banks don't give us very much interest on those deposits, but they sure do charge us a lot of interest when we take a loan.
Brandon: Yeah.
Amanda: So, yes, banks are convenient. Yes, banks seem safer. But what if the banks are why milk costs a few dollars instead of 25 cents? What if banks are why so many Americans are stuck in the paycheck-to-paycheck cycle? [05:07.8]
And we're not even talking about fees here. We're just going to talk about how the banking system works. I mean, what if the real scam is the banks and our banking system?
Brandon: Uh-oh. To understand that we're all in the banking business, you first have to understand the journey your money takes when you deposit it in a bank. Let's say you decide right now to move $100 into a savings account. It's all electronic, so there's no actual $100 bill moving, but for the sake of taking what's mostly an invisible process and making it more real for us, let's pretend it's a $100 bill.
What happens to that $100 bill depends on the bank's assets, but let's use the big banks for this example. They only need to keep 10% of your $100 on deposit. The other 90% they can and usually do lend out. [06:02.7]
Amanda: Yeah, so the bank can take your $100 and lend $90 of it to someone else only leaving $10 kind of in the vault, so to speak. Not that big of a deal until you think about how banks are connected. The person who receives the $90 might spend it at a business who then deposits into a different bank. Then that $90 can be leveraged by that bank and they can lend $81 out to another person who gives it to someone else and they deposit it in bank number 3. Then bank number 3 can take the $81 and lend it to another person for $72.90 or lend $72.90 of that 81 to someone else, and so on and so forth.
I did the math. I took it all the way out until I got to a penny and I found that that $100 could actually become almost $1,000 if enough banks and exchanges were involved. This is what's called fractional reserve banking. This is how the banking system in the United States works. [07:01.7]
Brandon: Those are big words right there. Fractional reserve banking.
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Brandon: Now, can you imagine what happened with the 250 billion with a B that was part of the bank bailout of 2008? The whole purpose behind those funds were to create, quote, “a cash infusion of 250 billion into the banking system to facilitate and encourage bank-to-bank loans and other types of lending,” end quote. [08:06.6]
Plus, can you imagine what's happening with the economic stimulus money that every taxpayer is receiving and many are simply putting their $600 into a savings account.
Amanda: Now, if every dollar creates many more dollars through this banking system, then that means we have a much larger supply of dollars than what's actually been officially issued. And what happens when there's more of anything in the economy? I mean, think about it. If a business owner has too much inventory, they slash prices. If an oil company has produced too much oil for the demand, gas prices go down. When there's more money in the economy, the value of that money goes down, and when the value of your money decreases, you have to pay more for the same product. The gallon of milk costs a few dollars rather than 25 cents. The fancy term for this is inflation. [09:01.8]
Brandon: Man, you're using some big words here, Amanda. Inflation.
Amanda: A lot of people like to think they know what inflation is, right? The cost of goods go up. But they don't understand the mechanism that's driving inflation.
Brandon: Yeah.
Amanda: It’s not because there's more demand. It's actually because, for a large part, there's more money.
Brandon: Yep, and I think, I mean, we can all agree that there has been a lot more money created since even the greatest generation, so that would be why prices have gone up.
So, if you're keeping money in the bank, it's like you're already in the banking business because you're allowing them to use your money to make money for themselves, maybe even to your detriment because you're having to pay more for everything you buy due to the increased inflation from the increased money supply.
That's the first way you're already in the banking business. Let's look at number two. [10:01.2]
Amanda: Yeah, so the business of banks is lending. That's really where they make their money, and if you owe money to a bank, you're helping the bank make money by paying them interest to use other people's money. Remember you're not actually using the bank's money. The bank is taking your neighbor's money or maybe even your own money to give you the loan, right? Whether it's a mortgage, a credit card, a car loan, a personal loan, a student loan, a business loan, a line of credit, all the things where you pay interest to a bank, you're helping them make money.
If you owe money to a bank and you're paying the bank interest, it's almost as if you're working for the bank. They're not sending you a W-2 or a paycheck, but you're still working for them. Data shows that for many Americans, a third of their income goes to servicing debt. That's like spending a third of your working day working for the bank, not for yourself.
That's a second way. You're likely already in the banking business. You're paying interest to a bank and helping them make money simply for the use of someone else's cash. [11:06.0]
Brandon: That was definitely a lot different than my W-2 job, for sure.
Amanda: Exactly.
Brandon: If you're already in the banking business, why not take control of the banking function in your life and/or your business? Why not set up a system where you pile up cash that's growing for you without participating in the fractional reserve system and making your purchases more expensive? Why make other people rich when you save? Wouldn't you want to make yourself rich by doing that? Why not use your cash as leverage to get funds when you need them for major purchases or retirement, or emergencies or opportunities, or whatever? People call this idea privatized banking or infinite banking, or banking yourself, to name a few other terms. [11:57.2]
Amanda: Yeah, the bottom line is this. The bank's mantra is to own nothing, but control everything. When you put your money into a bank, you become a liability to the bank, and when you take a loan, you become one of the bank's assets, but they don't really own anything and yet, by being in control of the money, they control everything. They're the most profitable businesses in the world by using other people's money. They use your dollar and they reap the rewards from it.
Now, if you want to reclaim control and put your money to work for you, please reach out to us at Grandma'sWealthWisdom.com. We help individuals and families every single day to reclaim the banking function within their lives and make all of our futures smarter and more stable.
Brandon: So, now you know enough about how banks really work. Decide for yourself if they are the real scam. Then act accordingly.
Amanda: And, of course, join us next time where we're going to take a controversial perspective on the question, “Should I pay off my mortgage early in 2021?” I mean, today, we talked about why you're already in the banking business and how to take control of your banking. Next time we're going to talk about what it could mean to use the banks in your favor. [13:14.7]
Brandon: Until next time, keep building your wealth simply and sustainably, so you can break through to a smart, stable financial future.
The topics presented in this podcast are for general information only and not for the purpose of providing legal, accounting or investment advice. On such matters, please consult a professional who knows your specific situation.
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