Private Money Printing Is Illegal
By: Nev Kraguljevic
Tags: Money, Macroeconomics, Finance, Money Mindset

Private Money Printing Is Illegal

Last night I watched a movie about illegal money printing, where the group was going to great lengths to re-create $100 bill, by sourcing the printing machine, the paper, creating the plates, and of course a whole lot of blowing stuff up along the way.

That got me thinking!

Many of us think that money is created by actually printing it!

The movies tell the stories (whether the legal or illegal way), the news show the printing press whenever they talk about the central banks money creation, and the rest of the media follows suit.

Many also think that money is backed by something, typically gold in some sort of vault, sitting somewhere.

But this is not true!

How Is Money Created?

While yes, some paper notes are printed and in circulation, vast majority of money is in digital form; just numbers in a computer.

When we swipe our debit cards or write checks, digits are exchanged between banks.

Money is borrowed into existence!

When a country need money, it simply borrows it into existence and then issues bonds as a way to balance their books.

So if they create $1M in currency, they also issue $1M in bonds to sell to investors.

When we swipe a credit card, we are creating money… printing it, in a way!

Of course, attempting to re-create a legal note, like a $100 bill is illegal!

But we create many 100’s of dollars all the time, by borrowing!

Banks no longer have all this money in their vaults. Those are filled with papers, not currency.

Because of the fractional reserve policy, banks are required to keep about 10% of the money in reserve. The remaining 90% they can lend. That is how they make money.

This is how the system works:

You get paid and deposit $1,000 in the bank.

I come in to borrow money.

Following the 90/10 rule, they must keep $100 and can lend me $900.

Now I have $900 in borrowed money and you have $1,000 “in the bank”. Together, we have magically turned you $1,000 into $1,900!

I then go out and use my borrowed money to get a project done and pay Bob the builder.

Bob deposits that $900 in the bank and again, bank my keep $90, but can lend out $810.

If Sue now borrows that $810, total money in the system is now $1,900 from you and I + $1,710 from Bob and Sue, or a grand total of $3,610!

Wow!

We went from mere $1,000 to $3,610 in four swift moves! The bank only has $1,000, but together we have nearly 4x-ed the money supply!

This process continues perpetually, as people deposit and borrow money and nearly $10,000 can be created from the original $1,000!

But it gets even better!

How did you come up with $1,000 to deposit?

Perhaps you earned it! And the person that paid you may have also have earned it, but going back in history, originally that money was borrowed!

It’s Called A Note

If you look at your money, you will notice that it says “note” on it!

Note is a term used for debt!

All time time, trading these papers back and forth, you have thought you are trading money, right?

It turns out, all we are doing is trading debt, exchanging it for goods and services!

And some of us even save this debt in savings accounts or under the mattress, thinking we are saving money!

Inflation

You might have heard the term and in your mind it may mean “the price going up”.

While to a degree true, that is only the effect of the inflation.

Inflation is a force that devalues the value of “money”, it simply eats it, and the result we see is that our dollar buys less stuff.

Inflation is sort of like a wind, force of air mixing and we can only see it by looking at the trees. But trees moving do not cause the wind. They are only the effect or the visual of what’s happening in the air.

If the inflation eats money and money is debt, then inflation must also devalue the debt, yes?!

Yes!

This is the simple logic, we learned early in school, that is applied above:

If A=B and B=C then A=C!

What Does This All Mean To You & I?

Great! I did not know this before and I’m glad I know it now! But what does this actually mean for me? How do I use this?

This was my original thought when I first learned this! And you may have the exact same questions I did.

For years, I racked my brain:

If money is debt, how do I use it to benefit me?

This simple question led me down the rabbit hole again, to discover that debt can be used to create money.

In homeopathic medicine, they cure “like with the like”. By inserting the small dose of the problem, the solution is discovered.

The same principle is used in modern medicine through the vaccination.

I am not a doctor nor medical practitioner and I am sure that some of you who are and are reading this will have a whole lot to say about how it all works. But the most basic principle is what I have described above.

And if we know that debt is calculated through different methodologies, simple and compounding, and it can be constructive or destructive, then it’s easy to realize that:

Simple debt can be used to reduce and eliminate compounding debt, especially if that compounding debt is destructive

And creating constructive debt can be used to create wealth, faster than saving it

Many people will work extremely hard to earn money and pay off their destructive debt:

Car loans

Credit cards

Student loans

Mortgages

These are destructive as they bleed money from you and do absolutely nothing to generate wealth.

The easier way is to utilize simple debt to eliminate these and then create productive debt that will grow your wealth.

Productive debt is utilization of borrowed money to acquire assets that generate wealth for you, through appreciation of the asset and more importantly income, that comes through the asset ownership.

For many, this is a completely new paradigm, a shift that the brain will fight to comprehend.

But understanding it, holds power. Utilizing it, generates wealth.

We’ve all heard of millionaires who got there through debt. We’ve all watched rich talk about amassing a lot of debt to get and stay rich. But we’ve also experienced the burden of debt through financing liabilities.

Because of this, conflict arises, doubt and fear ensue. And struggle becomes real!

Tomorrow, I will share with you more how this all works, as I am certain that this is plenty to chew on.