Why You Should Not Trust Money

Why You Should Not Trust Money

Money bills are worth nothing!

Wuuaaa, that was a tough one….

There is one single mission with this blog post:

In the end you will view money from another perspective.

Going back thousands of years in the history when people were producing whatever needed for their survival, certain skills were developed among certain groups of the population. Some became good hunters, others on cultivating vegetables and other products from the agriculture sector and some people became really good fishermen.

Quite soon people saw that if my friend next door is a good fisher and I’m a good hunter, let’s stick to what we are doing well and start trading products among the families. This kind of product trading was the first known tendency of trading or commercialization of products.

It took hundreds of years until people recognized this trading procedure to be quite unpractical. To bring over 200kgs of meat to bring back 50kgs of fish and some kilos of potatoes, was a quite difficult way of doing commerce.

When suddenly the humans invented the value of certain metals, a price model was created where all food had a price in gold or silver and even copper and iron. From this point, the money was born. With a system to buy food for a certain amount of metal with a determined value, the start of the real commerce was a fact.

The use of coins can be traced back to 600-700 B.C.

Some people with the necessary skills started to manufacture shoes, clothes, and similar demanded products not necessarily eatable. It could all be traded for gold or silver. The monetary system had come to stay. Later on these metals were more formally shaped into coins.

By that time all money available were only coins, but with a real value, the value of the metal. In today’s world there is not a single coin out there, no matter which currency, which has its real value. It would be a catastrophe trying to re-establish the real value, and we should all turn into truly poor people.

However, the craziness doesn’t stop there. When the bankers started to appear in the arena, they came to the conclusion that coins that were quite heavy by that time was not a very practical system. They invented the bills, which in fact only is a piece of paper promising the holder to get the corresponding value in gold when he or she so claims.

If you take a close look at a dollar bill, it says: Federal Reserve Note and further down it says:

“This Note Is Legal Tender For All Debts Public And Private”.

All other currencies have the same set-up.

All was good when you had a guarantee that the bill really was backed up by something with a real value. In today’s economy, it is known in some cases and very doubtful in the rest of nations if there is a real value back up of all these paper bills.

There is no country in the world today having a backup of currency in gold, and a good question would then be:

What is the money worth?

 

What is the money worth?

What is the money worth?

After the introduction of the monetary system, the world has faced deep recessions several times. The background histories have been different but the common trigger to fall into recessions has always been caused by a monetary policy without proper control, where the money printers normally start to produce more bills than what can be backed-up by real values.

In other words, more worthless papers are produced. A financial crisis normally starts with an inflation reaching such levels that it can impossibly be controlled, more worthless paper bills to be printed….and the circus is rolling.

The recession we all lived back in 2009 is a good example of an irresponsible monetary policy, where it all started with an unsustainable mortgage borrowing “circus” in the U.S. real estate segment. Literally houses were constructed by money that didn’t exist. When it all took place and the domino effect started, the financial tsunami pulled down everything on its way.

With the financial system we are living in today, there are very few nations in the world having tools to defend their nation and their nations’ economy, if a new serious recession “snowball” will be set in movement.

 

The middle class will always suffer the most

When a nation suffers from a recession, the middle class of the society always suffers the most. To understand how this is possible, we first have to go through how broken people, middle-class people, and rich people behave.

We need four simple financial terms to understand and to view the three different categories in a fair way.

Cash flow – Money coming in to your pocket

Expenses – Money going out from your pocket

AssetsSomething you own; Something that pays you

Liabilities – Something that costs you

Until the middle of the decade of the 90th an asset was generally seen as something you owned, but with the book Rich Dad, Poor Dad by Robert Kiyosaki the definition changed completely. In the book he added that an asset has to pay you something. Otherwise, it is a liability.

The Broken People Behavior

The broken people (to distinguish from poor people which is something completely different) get a monthly payment and all of it goes to expenses. They buy stuff. They live from paycheck to paycheck, no assets and no liabilities. In case of recession, they just stop buying stuff and look after that their monthly paycheck covers the most essential such as food and similar “survival” products.

Maslow's Hierarchy Of Needs

Maslow’s Hierarchy Of Needs

Among people having some kind of income, you can say that this group of people positions themselves on the lowest steps in Maslow’s Hierarchy of Needs. Survival and spend the rest of the available cash on material stuff is their jargon.

 

The Middle-Class People Behavior

This group of people has a higher monthly cash-flow and besides buying stuff for the month, the make down payments for a new car, maybe a new house with the help of a mortgage loan, perhaps a boat and first installment to be paid for the upcoming vacation trip to the Caribbean. Month after month all these purchases of assets with loans and credits will pop up on the liability side.

In case of a recession and the monthly cash flow to be lower, the first thing that will hit hard will be the difficulty to pay the liabilities. The banks and other credit institutions will immediately make embargos and sooner than you can imagine all your “rich attributes” are gone.

These people are forced to charge their monthly salary to pay off on all their self-created liabilities. In one sentence you can say that these people are like:

Broken people with a rich surface.

The Rich People Behavior

The question of how to become rich is a question that has fascinated people for years. A lot of people have made it to something mysterious, and in some cases even argued that it is a genetic heritage.

The glamour around the question disappears when the truth comes up to the surface.

 

To become Rich – No Rocket Science

The formula to become rich is no rocket science,

but an awareness of how to optimize the usage of the resources at you disposal.

Rich people before being rich also needed to buy things, but the consumption pattern is more on a survival level. The rich people’s “secret” to become rich is to invest as much as possible in assets that pay you. The main part of the profit generated from the assets are re-invested in new assets, and the wealth will increase step by step.

You may be arguing that you have a house, and that is an asset to you. That is correct as long as you have no loans. Otherwise, it is an asset for the bank who gave you the loan and, you are only the “owner” of the corresponding liabilities.

Classical assets that will return money to you are:

Stocks, Bonds, Real Estate…..and…

In today’s world and especially with the fast-growing Internet involvement in the daily life,

Education…..

has become an important and very fast growing and important asset.

Not so many years ago we view the education as something necessary to get a profession, get a job and start trading time for money. Today the education in many different environments is more seen as a tool to get the necessary skill set to generate a rich life.

The online marketing is absolutely a skill set that will help many people to escape the rat race they are into right now. To generate a lifestyle of freedom many different income streams coming from your assets will be the engine to create such rich life.

Forget about the money as a thermometer of you wealth. The money, these worthless pieces of papers, are simple vehicles or bridges to a rich life such as travelling to where you want and when you want to do it, being with your loved ones when you want and not when the circumstances will allow you and to develop the different passions you have in life.

A rich life is much more than money!

You can buy a bed – but not the sleep

You can buy a watch – but not the time

You can buy a book – but not the intelligence

You can buy a position – but not the respect

You can buy medicine – but not the health

You can buy sex – but not love

You are not rich until you have something that money can’t buy!

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