What Are The Elites Holding Over Us?
by Bill Sardi
Recently by Bill Sardi: What If There Really Were an Anti-Aging Pill?
What is it that the elites hold over the average American citizen?
Answer: financial literacy
The elite class in America knows the language of finance, banking, currency and economics. Because American schools leave students financially illiterate, even after graduating from college, they cannot properly manage their money and must rely upon the often self-interested misdirection of financial advisors, stock brokers, and bankers.
For example, most financial counselors recently advised their clients against withdrawal of funds from their 401(k) tax-deferred accounts, given that there are penalties for early withdrawal. The result: most 401(k) accounts lost 30% or more of their money. Now withdraw your money from those tax-deferred accounts, taking a 10—20% penalty, and you have sliced your retirement fund in half.
Halt financial anxiety
Most investors have little gumption to stand up to their financial advisors because they feel they don't understand how money management works. There is anxiety in the process of making an investment. One survey showed that investors often feel a level of anxiety equivalent to going to the dentist.
If young adults are being advised to invest in the stock market, they will not likely hear that stock markets are massively manipulated and represent nothing more than gambling parlor. The same goes for markets selling precious metals such as gold and silver, only the manipulation has served to vastly undervalue these shiny metals.
Financial advisors may recommend a certain stock, but may not inform you they are dumping that particular stock from their own portfolio and pushing it on you in a game of financial musical chairs. Certain mutual funds have taken management fees that are larger than what their investors made. In fact, counting for inflation and taxes, many mutual fund participants have lost money while the fund managers have made a killing.
Students graduating from high school, or even college, may have never learned how to balance a checkbook, estimate the erosion of their banked money due to inflation, calculate total interest on a loan rather than the monthly or annual interest (total interest on a 30-year home loan is about ~48%), know whether they should rent or buy a home, or have ever even read a home mortgage document prior to the day they signed one. (Notice how home buyers are not allowed a few days to read over their mortgage document before signing it.)
Interest on bank accounts: it's a shell game
If only young Americans were educated how banks make money. For example, let's say a bank offers 2% interest on banked money (it's less than 1% today). So on a $1000 deposit the depositor will receive $20 a year in interest, while a 4% rate of inflation would have resulted in a $40 loss of purchasing power of that money, for a net gain of $20, less any taxes on that small gain.
At the Federal Reserve website they even have the gall to display a chart which pretends to show how 1¢ can turn into $5,368,709.12 after 30 years of compound interest, without ever calculating for inflation and taxes. How absurd. Thanks to designed-in inflation by the Federal Reserve, the true value of a 1913-dollar today is just 3¢.
On the surface it doesn't appear that banks are gaining excessive profits off of their depositors' money. In this example, depositors receive 2% interest, and the bank lends out that money at around 5% interest.
But that isn't how the shell game works in banking. Unknown to most Americans, banks have the privilege of fractional banking — they make up 10-fold more money out thin air than the deposits they hold. So your $1000 bank deposit becomes $10,000 and the bank is supposed to keep your $1000 in reserve (they don't even do that!) and loan out the remaining $9000. At 5% interest, the bank would make $450 profit, while the depositor makes just $20, and loses money after taxes and inflation are calculated.
Chart provided by the Federal Reserve showing how interest on banked money can produce a profit (notice the 10% interest rate, which is far greater than current interest rates offered by banks). The Federal Reserve doesn't want to reveal to you how little you make on your banked money.
What is strikingly misleading is that the Federal Reserve Bank of the United States (the central bank that distributes the money supply to smaller banks), suggests American citizens follow a saving plan that would result in the enlargement of their banked money to hundreds of thousands if not millions of dollars over a lifetime. The problem is that the Federal Reserve (not a branch of the U.S. government, actually a group of private bankers that masquerade as a federal agency and even uses dot.gov on their URL) never mentions that depositors are capitalizing the banks for free and losing purchasing power on their banked money, while the banksters make huge profits! It's a wonderful shell game practiced under false cover of an American government-backed institution.
How much did you say lenders make on a home loan?
Home buyers cannot fathom how much banks make on home loans. For example, a $270,000 home loan only requires a bank to come up with about $30,000 of their depositors' money, held in reserve, which is the amount of money temporarily put at risk. The lender then turns that $30,000 into $300,000 via its fractional banking privilege (money made out of thin air), keeps the $30,000 in reserve, and loans out the remaining $270,000 @ 4.5% interest. The monthly interest payment plus property insurance and taxes is about $12,000 a year or about $1000 a month. It only takes the bank about 30 months to be made whole on its true investment ($30,000), and the remaining 27.5 years of a 30-year mortgage is pure profit. The only risk the bank holds is if the home buyer cannot make monthly mortgage payments, so the banks often sell these mortgages to other parties, completely negating risk. None dare call this usury, which is what it is. Usury was forbidden even in the Bible.
To make matters worse, most homes being sold today are overvalued and new home buyers are likely to hold a mortgage on a property that is underwater (more is owed than the house is really worth) from the outset. Naïve home buyers are still being sucked into these deceitful purchases.
Learn the language of finance
Your children need to learn about money at an early age. They can begin to be taught the language of finance and banking. Some simple definitions (make up your own) are:
- Fiat money — printing money out of thin air, or what is actually counterfeiting.
- Fractional banking — a privilege given to banks and lenders to make money out of thin air.
- Derivatives — also known as swaps, futures or options, which are a financial instrument or agreement between two parties, which has a value based on its expected future price.
- Assets — tangible valuables that can be converted to cash.
- Mark-to-market accounting — true value of property rather than its value when purchased.
- Money supply — there are three measures of money supply: M1 = currency, traveler's check, demand deposits; M2 = M1 + demand deposits and savings accounts M3 = M2 + large time deposits, currency substitutes (stocks, bonds, etc.)
- National debt — the amount of money the federal government, over and above taxes collected, that it had to loan from other parties or even print out of thin air.
Many parents, particularly immigrant parents, want their children to get an education they never had an opportunity to acquire, and to get a college degree. But, regardless of the grades that child achieves in school and the diplomas earned, if he or she is financially illiterate they will surely be another victim of the financial system. They will blindly sign home mortgage papers, start checking accounts, apply for credit cards, and never catch on to the many tricks of modern banking and finance. Since the government oversees and insures bank accounts and currency, naïve Americans cannot believe how closely politicians work with banksters to commit what amounts to hidden fraud.
Don't trust financial literacy programs
There are a number of financial literacy programs for children and adults, but they are often sponsored by banking organizations or agencies or quasi-agencies of the U.S. government that deliver information that leads to the financial ruin of those who follow their advice. Most of these programs are designed to aid individuals who mired themselves in unpayable debt. In other words, how to keep making their bankers rich, making payments on loans they never should have qualified for.
Unless the next generation of young Americans becomes financially literate, they will see their earned money vanish, as their parents and grandparents are now experiencing. In the current scenario, Americans banked their money, had it loaned out to provide homes to people who were not creditworthy, and have not been told their banked money has vanished. The trillions of dollars of wealth that Americans worked to accumulate over their lifetimes as evaporated in an unprecedented collapse of banking and lending. The Federal Reserve, in its bailout program, has only replaced the lost 10% reserves, not the whole amount Americans had on deposit with U.S. banks.
Lack of oversight
Under the watchful eyes of the Federal Deposit Insurance Corporation (FDIC), Securities Exchange Commission (SEC), the Federal Reserve bank, and the Department of Treasury, lenders were allowed to keep less than their required reserves, allowed to pass risky mortgages off to quasi-government agencies that, in the end, shifted the risk back onto the public, allowed lenders to conduct phony foreclosures to free-up even more money to lend out, and then allowed banks to "cook their books" and declare the value of their real estate assets at more-than-market prices. Somebody should have gone to jail here, but politicians are largely above the law and are too close to the banking and finance industry to invoke adequate discipline and penalties.
Don't allow your children to be as financially uninformed as you have been. Your children are lambs among wolves. Make them aware of the hidden fraud in banking, lending, and currency before they become financially impoverished.
Combating financial illiteracy: build a home library
There are good resources for parents to become financially literate first before they teach their children. When books by Ludwig von Mises, Henry Hazlitt, Murray Rothbard, Lew Rockwell and Ron Paul fill our family bookshelf, the banksters will not be able to get away with their crookedness.
Also there are online aids to help Americans to:
- Estimate the difference between renting and buying
- Calculate the total mortgage costs over the lifetime of a mortgage
- How much income you need to be able to pay back a home loan
The American people are gullible. Even a university economics professor may have been deceived. Americans cannot rely upon government institutions to educate them out of their financial ignorance. Agents of American government and the financial community are far too chummy to begin a campaign that would essentially indict themselves of all this chicanery. Don't let this go on for even one more generation. Begin now to teach your children how to wisely manage their money. Stop this ongoing "banks win, depositors lose" game that is now being practiced.
November 13, 2010
Bill Sardi [send him mail] is a frequent writer on health and political topics. His health writings can be found at www.naturalhealthlibrarian.com. He is the author of You Don't Have To Be Afraid Of Cancer Anymore. His latest book is Downsizing Your Body.
Copyright © 2010 Bill Sardi Word of Knowledge Agency, San Dimas, California. This article has been written exclusively for www.LewRockwell.com and other parties who wish to refer to it should link rather than post at other URLs.