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Most people think they know what debt free means. As soon as all your loans are paid off, you’re debt-free, right?

Unfortunately, that’s not true. You can’t escape debt. It’s all around you and will always be a part of your life.

In this episode, you’ll find out why that doesn’t have to be a bad thing—and how to deal with debt in a responsible way that lets you build long-term wealth.

Want better financial health by finally understanding debt? Listen now!

Show highlights include: 

  • Why the difference between “good debt” and “bad debt” is an illusion (and how the responsible way to deal with debt anyways) (3:55)
  • Why many people in the U.S. can never pay off their debt (8:00)
  • 3 words on every dollar bill that tell you who owes you money (11:48)
  • One question that shows you if your bank accounts are leading to higher prices and more bankruptcies (16:21)

Remember to download Grandma’s Top Tips for an Independent Financial Future by dropping into https://grandmaswealthwisdom.com/free/. It's time for YOU to break through to a smart, stable, financial future.

If you’d like to see how Grandma’s timeless wealth strategies can work in your life, schedule your free 15-minute coffee chat with us by visiting www.grandmaswealthwisdom.com/call … just like Grandma would want us to do.

Links mentioned on the show: https://www.infogristle.com/federal-reserve/two-faces-of-debt/index.html

Read Full Transcript

(00:05): Ever heard these before the borrower is slave to the lender and neither a borrower or nor a lender be the borrower is slave to the lender. Neither a borrower, nor a lender. B if you agree with these phrases, we think you're asking the pronged questions. These phrases are commonly repeated as if they are time tested wealth wisdom, but could they mean something different than we think in their original context. And then you have other people who say you'll never build wealth. If you don't use O P M other people's money, we believe they're asking the wrong questions too. Here's the premise of today's episode. You're already a borrower or a lender. Even if you have no debt or if you've paid off all of your debt, you're still in the game. How might you embrace it and make sure that you quote unquote win.

(01:07): Hey, I'm Brandon and welcome to the wealth wisdom, financial podcast, episode one 10 debt free. Isn't what you think it is. And Hey, I'm Amanda Neely. If you're listening to the podcast version of this, it's still me. We've been under the weather, um, getting our voices back. Everything's okay. We don't have COVID no, don't worry about us. We're almost back to normal. Yeah. Mine's almost back. It's still me. Yours is yours coming

(01:33): Back. Yeah. Um, but let's talk about this debt thing. A big part of how people deal with attaches to money is to get out and stay out of debt. And that's really healthy. We don't wanna discourage you from pursuing becoming debt free because debt is a four letter word. Quite literally. We're gonna talk about that word literal a lot today, but could debt be moral or is it always imoral should debt be avoided at all costs or used wisely? It's a much debated question. Ramsey says to get outta debt as quickly as possible. Kiyosaki talks about leveraging debt to grow your wealth. Wherever you're currently land on debt. We think you need to hear today's story. It's a very little known story, but it illustrates that what you do with debt is actually more important than money as G Edward Griffin says it. What we think is money is, but a grand delusion. The reality is debt.

(02:30): Now, are you sick and tired of hearing the same old financial advice? We feel you we're fed up with the same old truisms that fall flat. When you get into the unique opportunities and challenges of these specific situations you're facing and we're facing today, this show is all about bringing you historic wisdom around building wealth, with practical insights on how to apply it to your journey. When conventional financial thinking, get you to where you wanna go. You need wealth wisdom, let's master wealth building together.

(03:05): First way to acknowledge that debt is often moralized. Those phrases that we used at the beginning are just the tip of the iceberg. We don't wanna pretend like any religion is homogenous here. For example, we know some Muslims who won't even use an interest savings account due to a religious conviction called Reba and other Muslims who participate in the money system in ways, identical to atheists and agnostic friends that we have. We wouldn't, you know, judge either or say one is more wholly than the other. They're just exercising their moral faith in different ways.

(03:39): Similar with some Christian friends, some will not use that or even a credit card and others that use them freely, maybe too freely, sometimes in, in my opinion, but you know, who knows? No judging Brandon. Yeah, no judgment. I'd venture to guess that the majority of Americans, even for those who wouldn't consider themselves religious or spiritual, there's still this nagging sense that being in debt is bad and not just mathematically bad, but morally bad. There might be this gray area between good debt and bad debt, but it's a slippery slope. And we don't necessarily feel like we're being bad when taking on some debt, but there's plenty of guilt and shame when we've taken on too much or things. Don't go according to the plan. And we're strapped with payments.

(04:37): What we believe is wealth. Wisdom is not trying to find the line between good and bad debt, nor is it avoiding debt entirely. If that's even possible, which it could be. We believe in order to find the wealth wisdom here, you have to change the entire frame of the consideration and ask totally different questions. Oh, and before we get to the story, here are those commonly repeated phrases in their original context. Cuz remember we said it the beginning, I want to say where they came from and their context because that's really important. So the rich rule over the poor and the borrower is slave to the lender. The rich rule over the poor and the borrower is slave to the lender comes from Proverbs 22 7.

(05:28): We ask you might this be a warning to the rich to remember that they rule over and the potential, uh, corruption, when one becomes the master of a poor borrower turned slave. How many of us are okay with being lenders? When we call being in debt, I moral for those who do read the Bible, you can go back and read Leviticus 25, 35 to 37 for more in the context of lending from this biblical perspective. And then come back and read the entire chapter of Proverbs 22 pay close attention to verses 22 and 23. What you'll notice is that a lot of who they're talking to are the rich and the lender, not the poor or the slave or point here to remember that there are two sides of debt, the borrow and the lender. If you won't be one, will you be the other?

(06:19): Or could you be both? Uh, oftentimes which brings us to the next phrase, neither a borrower nor a lender. B is a line from act one scene three of Shakespeare's play Hamlet, not the Bible, which people often quote it and say it's from the Bible and It's not. Yeah. And despite my voice, I'm gonna try to do some of the context here. It comes from this big long monologue. And uh, here's where we pick it up. Neither a bar over nor a lend B for loan off loses both itself and friend and borrowing dolls. The edge of husbandry this above all two nine own self be true. And it must follow as the night. The day though can not then be false to any men farewell my blessing season this in the, this is all said by this guy named polos in the, the Hamlet play. He's not a good guy. This whole monologue is supposed to come across as advice that his pump is hypocritical and empty. He's giving it to his son, but it's coming from not a, a good father, not a good guy, um, who is like very pompous and you know, saying, do the known self be true when he is not true to himself either.

(07:36): I think you should talk like that more often. You know? I think so too, especially with this voice, it kind of feels more authentic. Yeah. So let's move to the deeper questions beyond if debt is moral or I moral. The first question is this, what if everyone paid off their debt? What would happen if everyone paid off their debt? Well, Brandon, could everyone pay off their debt? Consider this. According to us, currency.gov, there was over $2 trillion in circulation at the end of 2020. That's how much actual currency there is in the us. $2 trillion.

(08:13): That's a lot of Money at the same marker. There was over 14 trillion in household debt. That's seven times more than the money supply and it doesn't count business debts, government debts, and other non-household debts. Yikes. If every household in America decided to become debt free, there wouldn't be enough money to pay off the debt. Holy can only Batman. Do you see why we have to reframe the question from is debt good or bad? So the second question to ask is who creates the money to lend and who creates the money to pay the interest? This seems easy on an individual web, the money to comes from the bank, your own efforts to earn money, creates the money to pay it back with interest. But where does the bank get the money? And where did those who pay you, your customers or your employers get the money. So

(09:12): Here's area get to one of my favorite stories. We're gonna get into our time travel machine and we're gonna travel back to September 30th, 1941. The world is at war, but in America, baseball just wrapped up at season. The manufacturing of weapons for our allies is bringing us out of the great depression. Things are looking positive in the house of representatives. The committee on banking and currency is hearing testimony to learn about what caused a great depression. We seem to be coming out of it, but we still need to understand what caused it so we can make sure it never happens again. Right? And being interviewed on this particular day is Mariner Elie, governor of the federal reserve system. He is a Republican from Utah and we enter the room to hear Congressman Wright, Patman, a Democrat from Texas drilling Elie, asking how the fed the federal reserve got the money to purchase 2 billion of government bonds in 1933, which I don't even wanna know how much 2 billion is worth today.

(10:16): What you know for that value in 1933. So we walk in, Patman has just asked, where did the fed get the money? And ley says this. We created it Patman out of what Eley out of the right to issue credit money Patman. And there is nothing behind it is there except our government's credit Eley. That is what our money system is. If there were no debts in our money system, there wouldn't be any money. Let's rewind 30 seconds repeat that this is what our money system is. If there were no debts in our money system, there wouldn't be any money. Now this isn't a show about the federal reserve, but I should mention that to understand what's happening here. You have to understand that the fed is not part of our government and it's not a bank. The fed is not part of the government and it's not a

(11:14): Bank. Yeah. And as much as the Fed's been in the news with raising interest rates and they have a lot of control despite kind of their precarious situation, which I don't know, I didn't put this in our notes for today. You know, the borrower is slave to the lender. If we're all borrowing from the federal reserve, who becomes the master in this situation. Because also if you pull a dollar out of your wallet could be a $1 bill, $20 bill. If you even use cash, people go and pull it out. Look at the top of it. And in the middle at the top, you're gonna see three words, federal reserve note. What do they mean by note? Surely the federal reserve hasn't passed you a note like they, like you do in middle school. There's no, you know, circle or X will you be my girlfriend kind of thing. That's short for bank note or a promissory note. It's a PROMIS to pay a stated sum to the bearer on demand. The bill you hold is a promissory note, quite literally a debt.

(12:16): And that's exactly what Eley is emitting to in this story. Money is created by debt. If you wanna go research, research, how the us treasury a government entity in the federal reserve, a private institution interact. I highly recommend you do that. We don't have time to go into that today, but it's the foundation for the entire financial system in the us. So it's kind of important. Yeah. And for the nerds out there, what you'll learn is that we've actually had a three national banks, the federal reserves, the third one, the first two failed. Yeah. They'll just watch Hamilton and think you've figured it out. Yeah. Like actually do some research.

(12:57): Yeah. Now we also have to throw this tidbit in there. We're no constitutional scholars, but as we understand it, the us constitution only gives our federal government the right to coin money. That's literally the word in the constitution coin, meaning they can't print money. They can't create a digital currency. So what Congress has done is authorized the federal reserve to do something the United States government isn't allowed to do itself. And actually, if you pull a coin out of your pocket, a quarter, a penny, you won't see the words federal reserve. You won't see a, you know, the reference to a note, those are created by the us mint. Our government is actually allowed to make those coins.

(13:38): Hmm. So let's take a step back from the federal reserve and how they created money out of thin air. Let's make this practical for you, the listener, what is the journey your money takes when you deposit it into the bank account and how does that impact everybody else? So let's say you decided right now to about a hundred dollars into a bank account, you might not have a actual, a hundred dollars bill to deposit. Everything is mostly done virtually these days, but let's imagine you put a hundred dollars bill in the bank. What happens to a hundred dollars? Bill depends on the bank's assets, but let's say, and in most cases they only need to keep about 10% of that, a hundred dollars on deposit. The other 90%, the other $90 they can lend out. And that that's what they usually do.

(14:27): So the bank can take my a hundred dollars and lend $90 of it to someone else only leaving $10 in the vault right now that's big, not that big of a deal until you think about how banks are connected, right? The person who received the $90 might spend it at the business who then deposits it into a different bank. Then that $90 can be leveraged by the bank. And then they can lend $81 out to another person who gives it to someone else and they deposit it in bank three bank, three can take the $81 and lend, uh, another 70, 2 90 to someone else and so on and so forth. So it just gets crazy.

(15:11): Yeah, I did the math and found that that $100 that you've deposited into the bank could actually become almost a thousand dollars. If enough banks and exchanges were involved. Can you imagine what happened to the 250 billion? That was part of the bank bailout in 2008, to create this cash infusion into the banking system to facilitate and encourage bank to bank loans and other types of lending 250 billion or the economic stimulus money that every taxpayer received during the pandemic. And many just put those into their bank accounts. And that same act also seems to have loosen the 10% reserve restriction, but you'll need to ask a well-versed attorney to translate that part for you. Yeah. Even worse than the constitution.

(15:59): It's crazy. Right. And, and that is why it's so important for us to kind of have a little bit of understanding about now that you see what happens to money deposited in a bank and the journey it goes on. Now you can start to ask some powerful questions. So here's some of those questions you might wanna write these down is the money, am my bank account facilitating risky lending? If there wasn't so much available and getting into debt were harder, might some people not take as much risk? Might we have fewer bankruptcies for example? Yeah. Yeah. Is here's the next question is the money in my bank account, creating higher prices. I mean, what would prices be like if we didn't have the system and there was only $2 trillion available for being in debt or owing or, or spending, you know, rather than 14 trillion being added, you know, to the NA the household debt.

(16:58): Another question to ask is who's profiting off the money that I deposited in the banks, or who's profiting off of the system that we contribute to. Now, I'm not against people being profitable, but I am concerned about how that profit is distributed within a company, to the wealthy stockholders and executives while the janitor and the teller struggled to see their wages increase. I think that's a problem that we are seeing all over the place. Here's another question. This one's big. You might wanna write this one down. Could the entire debt system be why we have such big boom and bust cycles?

(17:42): Yeah. I think that's a powerful one. And how safe is the money in the bank? Really, if that a hundred dollars has become almost a thousand dollars, there's no way everyone can get their money back at the same time. If there was like a run on the bank, like there was back in the like 1920s Or in Mary Poppins. That's what I was thinking about. So, and I, and actually that's some people say, well, Brandon, we have the F D I C, it's basically insurance for the banks in case everyone does want their money at the same time. But when you look at the F D I C's public reports actually right there on their homepage, I just looked at it this past week. You can read as of March 31st, 2022, they had 123 billion in their deposit insurance fund. That's how much they have available to bail out the banks,

(18:35): Which sounds like a lot. But, uh, when everybody's, you know, kind of together and you think about it from a bigger grand of stream of things, 123 billion, isn't that much, right? Well, be, especially when you look at their quarterly reports in the last quarterly report says that they only have 1.2, 3% of their funds that they're ensuring. So that 123 billion represents 1.2, 3% of the money that people think that is insured in bank accounts. Now, I don't know about you, but that doesn't seem very safe to me. Maybe they should call them risk accounts rather than savings and checking accounts.

(19:15): So is there any other options we've run out of time for today, but join us next time for an overview on how you might become better than debt free. That's gonna be our next episode cause we open up a whole can of worms here, but we wanted to kind of have a, an episode specifically on, you know, what, what we, how we're building our system and how you can become better than debt Free. So to wrap up today, I have to share what I found in a booklet from the federal reserve called the two faces of debt. I'll put the link in the show notes. Here are two sentences that I think summarize pretty well. What we've talked about today, everyone at sometime or another has seen the disastrous consequences of excessive accumulation of debt by a person or business. Conversely growth and prosperity have flourished at times when overall indebtedness was rising rapidly and some economic slowdowns of coincided with periods of debt reduction, thus debt appears to be both good and bad, a paradox that has challenged philosophers for centuries

(20:25): As the same book that puts it. Debt is here to stay. But what about you? Do you need to stay in debt or, you know, in that place, The likely response, if you were to ask the federal reserve, what you should do would be something like, well, if you want the economy to keep growing, if you want the stock market to continue to grow, you know, go up into the right or recover when it goes down, then yeah, you need to stay in debt. And what's your reaction to that statement? If you're like me, it's one of disgusted. My reaction is I don't want my money to go to interest just to keep the economy growing in the stock market soaring and likely make other people more money than I can keep myself. Right. And I, and I, I don't like that after all who owns the majority of the stock market and where did they get the money to purchase their shares is another big question that we're not gonna go into, but it's the question to ask,

(21:25): Well, what about this? Would you pay 20% interest in the credit card to keep your retirement funds growing at say 10%? Probably not, but would you pay you a 4% on a mortgage for the rest of your life to possibly make 10% in that same retirement account? Most people would probably say, Yeah. Yeah. And only you can answer those questions for yourself, but I think there are some of the most important questions that you can

(21:53): Ask. And here's my last question for today. When I think of the words, financial freedom for me, that doesn't mean debt free per se. It actually means more like being free from the entire monetary system where I don't use money. Anytime you touch money, you're using debt either as a lender or a borrower. Financial freedom is more literally there's that word again, literally freedom from finance in this definition, the hippie living in an eco village, growing all their own food, living off the grid, not having to ever touch money, they have more financial freedom than Elon Musk. So here's my final question for you today. How might your financial freedom journey change if your idol, the person you were looking up to was the eco village living hippie instead of a business Hyon

(22:49): Yeah, that's a definitely a different person, right? Um, and a totally different trajectory of how I might go toward financial freedom. Yep. And attainable where, you know, maybe as, and as you're learning new information or coming up with fresh ideas, it's difficult to decide what to carry through with. And when, so we've developed a filter to use when deciding how to move forward towards your goals and dreams, financial, and otherwise it's a free gift to you waiting@stillmethod.com go. So go download still method.com. It's a great resource and a framework we use every month to go through our goals plans, where we're heading, where we wanna go in the future. So go download it today@stillmethod.com.

(23:41): And if you can't tell yet wealth system goes so much deeper than pithy phrases taken out of context, hit that subscribe button and join the next episode where we'll dive into how we might move from a, to a way of financial life. That's better than debt free. So until next time, keep building your wealth simply and sustainably. So you can break through to a smart, stable, financial future. And we hope you live long and profit, not just for yourself and not just for, or not just for the banks, but for yourself. We don't want these big bank tycoons to be making all the quote unquote, big returns. We want you guys to be, be making a bigger impact.

(24:26): Oh. And if you do, if you do work for a bank, we love you. You're awesome. Um, keep up your good work. We, we can't live without banks either. Yeah. Right? Uh, that's the challenge. That's the problem sometimes. So the topics presented in this podcast. So 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.

(24:53): This is the podcast factory.com.

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