Henry Ford once said, “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
If you have no clue on how money is created and comes about into existence, then you may be in for a whirlwind of a video. Several years ago, I dove into the creation of money and what money really is. After that, my entire life changed, and my perception of money and how the system is clearly gauged against us. But fortunately, there are ways to combat the malpractices of central banking. Without further ado, let’s get straight to it. Welcome if you’re new to the channel; my name is Matt Jimenez. I’m an entrepreneur who has worked with the greatest minds in finance over the last several years, and I’m here to pour into you guys everything that they poured into me.
In this video, I want to go over one of the most pivotal moments in my life, which is when I dove into understanding what the monetary system is and how it works. I want to go over three things.
The first thing I want to cover is how money is created because I feel like once you understand how money is created, you may become a bit more proactive on how important it is to preserve the money you have and also grow the money you have. Secondly, I’m going to go over why this actually impacts us, whether we do or do nothing about it. Bitcoin rainbow chart. It’s unfortunate, but it is what it is. And I believe life isn’t about getting dealt a good hand of cards but rather playing the hand that you have, regardless of how good it is. And the last thing I’m going to touch on is what I’m doing to combat the malpractices that are against not only me but every single one of us watching this video. Let’s talk on how money is created.
The US Treasury, which is a government entity, will issue a bond. And if you don’t know what a bond is, it is a promise to pay back a certain amount of money with x amount of interest in x amount of time. It’s basically an IOU. Now, these bonds are sold to financial institutions at an auction, but the largest buyer of the bonds is our central bank, which is the Federal Reserve. And to give you guys a quick scoop on what the Federal Reserve is, it is essentially our nation’s bank, and it is 100% unrelated to the government. Ethereum rainbow chart. In fact, there’s nothing federal about it. Our central bank, known as the Federal Reserve, and our government are two separate entities. I just want you to keep that in mind as you watch through the rest of this explanation because the Federal Reserve is privately owned by a select few individuals, which seem to not have our best interest at hand.
The largest buyer of these bonds on the US Treasury is the Federal Reserve, and they buy it through something called open market operations. And this is how it goes, step by step: the Federal Reserve will buy bonds from commercial banks, issuing a check in its own name. There are no savings in the Fed’s account. After purchasing these bonds via a check that they wrote to themselves, they will then report these bonds on an equation. And there are two sides of this equation: there’s an asset and a liability. These bonds will then get accounted for on the asset side of things, on the assets account. Then, on the liability side of the account, they will go ahead and report new money equals the value of the amount on the check that they just wrote. And when the check gets received by the bank, it now becomes new money that the bank will go ahead and loan out and use for whatever it is they may need, which often gets lent out to people on behalf of a loan or businesses or corporations, whatever it is. It often will get lent out and hopes for a return on its interest because the bank needs to pay interest that they just got from the Federal Reserve. Remember, they sold a bond, and they have to pay back that bond with more money involved. That’s the whole point of a bond.
Now you could see the direct correlation with the creation of money and debt. In fact, there will never ever be enough money in circulation to pay off all debts that are current because the whole creation of money is tied to a debt. The bank gives a bond saying they’ll pay them back in x amount of time with more money. The Fed then creates a check and gives it to the bank, and the bank goes ahead and lends it out. It’s a constant cycle of accumulating more debt in order to accumulate more money. This is simply called rolling over debt. Money exists because debt exists. If there was no debt, there would be no money.
And a fun fact: each time you, as an issuer, deposits money into a bank account, they go ahead and loan it out and invest it in hopes to get yield. That is why banks are often illiquid and do not have a large portion of the money, hence FDIC insured, which means they can only cover you to x amount if the bank was to go under. It’s because they really do not have your money just sitting there waiting for you to come grab it. They are strategically loaning it out with interest and trying to put it in some type of yielding accounts.
Now to point two: why this is terrible for us. This practice of money creation is absolutely catastrophic to the purchasing power of every single dollar in existence. See, the problem is when you have money tied to debt, you now have to continuously create more and more debt in order to create more and more money. But if the debt comes first, then you would never be able to pay off the amount of debt because money is only created through the debt, so the debt must come first. And often, times the debt is far and far larger than the amount of money because it has interest tied to it.
Each time the Federal Reserve prints up a check to give to a bank to create more money, the US gets more and more debt with the Federal Reserve. But not only that, this is where it really sucks, and this is why inflation happens. Each time they print more and more money, every single dollar that is out in circulation loses its value and declines in its purchasing power. And there are various charts to illustrate how far the US dollar has declined since it got off the gold standard because back then, the dollar used to be backed by gold. Now it’s backed by debt essentially. As you can see, this is catastrophic because we are losing money, whether we spend it or not. But we’re not really losing money; we’re losing the value of the money that we have. This is why everything seems to be more and more expensive. And when you go to the grocery store, you end up spending $500 on a gallon of milk and a pack of beef. I know that’s a bit exaggerated, but you get the gist.
And on to the last point, which is what I am doing about it. As you could see, whether you take action or no action, you’re still essentially in a position. If you leave money in your bank account, it’s being lent out. But it’s also saying that you believe you’re going to have more value in your dollars in x amount of time than you would in a different asset class. So, let’s say you leave $50,000 in the bank account and you do not touch it it’s getting eroded by inflation regardless so that same $50,000 even though the numbers look the same on the screen they buy less by the end of the year whether we do or don’t do anything about it this is why we’re almost forced in this environment currently to become an investor or find ways to park money this is why rich people are constantly looking for ways that they can put their money somewhere other than a bank account because they have to protect what they have but not only protect it because…
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