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Empowering Families and Individuals with the Whole Story about Money


Quote of the Month "By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some....The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose." - Economic Consequences of the Peace, 1919 by John Maynard Keynes, economist

Life Without Credit

Greetings,

No, I have not entirely lost my mind. I know many people use credit responsibly; bank loans, credit cards, home-equity lines of credit, etc. I saw statistics as regards credit cards that upwards of 50% of those using credit cards pay off their balance every month. I imagine these statistics are still close to true even with the continuation of the recession.

That said, I believe having the goal of “life without credit” makes a whole lot of sense in these times. Why? Anyone who has challenged their brains to untangle the details of how the global monetary system works has learned something of great personal significance: The monetary system as we know it rolls-out from a man-made mathematical formula.

This formula, called fractional-reserve banking, extracts wealth from most people via the hidden tax of inflation and, at an accelerating pace over the course of time. Documentation that attests to these facts is easily found in the public-domain but by reasons of protecting those who do benefit from this scheme, such data has been overlooked and under-reported.

Fractional-reserve banking is the automated mechanism by which currency in the world is issued. The process begins at the governmental level when a country’s government borrows money from its central bank. That money then trickles down to commercial banks and continues down to local banks making consumer loans. Of course all of this money is to be repaid plus interest charges.

Money is the banking industry’s product and the fractional-reserve formula serves as their profit multiplier. In the Federal Reserve’s own document called Modern Money Mechanics they refer to such multiplication as “the expansion process”. (See Modern Mechanics video on menu for more detail.)

“The expansion process” waxes fantastic for the architects of the system, their cronies and large corporations. When a business repays a loan plus interest (a.k.a. the debt-service on a loan) they pass on their bank-loan charges to their customers as increases to the price of their goods and services. Over time, what began as “simple” interest becomes “compound” interest which in-turn increases prices at a faster pace. Today, everyday people experience this exponential rise in the cost-of-living as per energy, food, higher education and housing costs to name a few. According to an online-inflation calculator, what cost $1 in 1913 in 2009 costs $20 dollars!

Now back to the responsible credit-user. Reasons may be simply habit, for convenience, for frequent-flier miles or to make their lives run smoothly. Whatever the reason, what may not be realized is how the loss of purchasing power can affect those using credit differently than those who “pay as they go”. Those who pay as they go know they cannot spend more than they have. Those who use credit, albeit responsibility, are largely still of the mindset that they will continue to be able to pay off their debt-balance as they always have because they are disciplined.

What most responsible credit users rarely factor-in to the equation, however, is something they cannot control; unexpected circumstances and/or a rising cost-of-living that erode their capital leaving them unable to wipe out their debt on a routine basis. At this point responsible credit users can unwittingly fall prey to the predatory credit industry to makes ends meet. What’s more, because they may have been caught off-guard, they may not have a financial back-up plan in place.

Life without credit and paying as you go….even for large purchases means you are planning ahead. Not only do you live within your means; you also save for a rainy day, live frugally, and find additional ways to bring in money to counter the cost-of-living. Most importantly, your expanded knowledge-base provides a context that increases your financial intelligence and empowers your financial decision-making process for the long term.

Check out this month's links on the left menu.

* Modern Money Mechanics video contains foundational information about how money works.

* Acceleration of unemployment figures from 2007-09. Incredible interactive graph mirrors how purchasing power is going down the toilet.

* Retirement pensions at risk of government takeover.

* Brief, excellent CSPAN video regarding dollar devaluation and Bernake.

I look forward to hearing from you. No-charge initial consultation available to anyone interested.

Truth and Peace,

Susan Boskey
Author and Alternative Financial Consultant
360-566-2634
Susan@AlternativeFinancialNow.com