Two sides of the same coin
Why you’re so confused by money
Years ago, I ran a boutique architectural-design-build-contracting firm. The seasonal nature of the business meant that you procured all the materials you would need for the coming season, during the off-season months. All winter we’d buy the masonry and landscape materials that would be installed in the projects that were contracted for the coming year. Clients would pay for their projects on an installment basis — meaning that cash flow was always tied up in inventory at the beginning of the season. But when the season started, that’s when the payroll and subcontractor expenses skyrocketed. This meant that each year we relied on an injection of cash flow from the bank.
Now I want to say that the bank we worked with was local, and privately owned by a family for generations. They were helpful to us in the low times, and eager for us to grow in the good times. They extracted their fee, of course. But they participated as partners or stakeholders. Each year our contact from the bank — the “vice president” that serviced our community would take us out to lunch and I would show him the projections for the coming year. We would sign a contract and the loan was established. One year we were waiting for our tables at the restaurant bar and the banker said, as he took out a wad of cash “let me give you some samples from out inventory.” It was a clever joke but something in me changed, bigly.
I realized that when you sit on the other side of the coin — the lenders side, the banker’s side — that money was a different kind of “thing” than when you sit on the consumer or borrowers side. For the consumer or borrower, debt is a liability. But for the lender, debt is an asset. A lender with a truckload of money is the same as a vendor with a truckload of inventory that they cannot sell.
The function of local banks used to be to safe-hold their depositors money, and to lend it out to borrowers, while keeping track of risk. The interest that was charged to borrowers was insurance to the depositors that their money was safe. The banker had a fiduciary responsibility to both depositors and borrowers. Banks functioned as an exchange commons.
At some point, this public service function shifted toward profit-on-profit extraction model. The fiduciary responsibility of banks was replaced by pure wall street greed. And here is how it works.
Money is like inventory that the banks hold. They sell you inventory at a profit. Let’s imagine they are selling couches instead. They sell you a couch and then after a certain amount of time, you owe the couch back to them. Which means, they are really renting you the couch. But you owe more than the couch back to them. You owe them the couch plus a chair (the interest). But where do you get the chair? Well, that’s got to come from the chair-producers too! Which are, of course, the banks. Now money is a perfect thing to sell in this way, because the couch comes back in exactly the same shape it went out in. There is no wear and tear. The color hasn’t gone out of season. In addition, unlike the couch there is literally NO COST TO THE BANKS TO PRODUCE THEIR INVENTORY. It is produced out of thin air, by fiat. In fact, it is even more perfect than that. The banks produce money at the tax payers’ expense, so they actually pay less than zero to produce their inventory of dollars to rent to you at a profit, after which you have to return everything you buy.
This, people, is not a parable, a story, or a metaphor. It is how the money system works and it is why, no matter how hard you work to get ahead, to pay your debts, to act like a responsible adult, you will never understand how to get ahead of money. You are simply on the wrong side of the coin.
And now you know why some people have a billion dollars and you only have debt. The more debt that is held by people on your side of the coin, the more wealthy the people on the other side of the coin. They are literally, two sides of the same coin.
