Traditional financial recommendations typically ignore the risk factor represented by how money works in context of its monetary system. Same as with health issues; without knowledge of the cause of symptoms, treatments generally lack full effectiveness.
When it come to personal-finance success, responsibility for how we earn, spend, save and invest is obviously essential. However, financial objectives can easily elude us if we lack the whole story about money. The missing piece is systemic in nature. Overlooked and under reported, impersonal monetary-system mechanics grind away to leave families vulnerable; undermining goals of stability and wealth-building.
Also known as a hidden tax. Who benefits?
Central banks worldwide (Federal Reserve for the U.S.) issue currency at the precise moment it is borrowed via an automated procedure called fractional-reserve banking. Therefore, money is actually a debt instrument (Federal Reserve Note). This private profit, interest-delivering system was designed centuries ago.
Over time debt grows per compounding interest and purchasing power diminishes with increased cost of living. The cost of living rises as businesses add their interest cost from bank loans to the cost of the goods and services we purchase.
And so grows the gap between the haves and have-nots.
That brings me to the pivotal issue of how much purchasing power $1.00 has in the marketplace today. One dollar is only worth 4.5 cents and an online inflation calculator proves my point. An item purchased for $1.00 in 1913 (when the Federal Reserve System was created) would cost $22.10 in 2010; a 2000% increase in inflation!
It's a fact: Skilled advisers are definitely helping families lower their debt-loads and modify their budgets. That said, the "good-debt, bad-debt" conversation remains as conventional truth; leading individuals and families to believe they can tweak their budget and lifestyle here and there to make it through to better days.
Unfortunately, such household gains may not last. Without a working knowledge of money as debt, even the most sincere efforts may falter as a rising cost of living erodes hard-won forward movement. When following conventional financial wisdom, the solution to keeping up and making ends meet could well end up, once again, as participation in the vicious cycle of credit and debt. Who benefits?
More choices with the big picture.
When we add the missing-piece about money to our knowledge-base and decision-making process we also gain additional financial strategies. Those who set out to explore alternatives outside-the-traditional-personal-finance-box tend to develop a new part of their brain.They uncover a world of possibilities (perhaps previously under-valued) along with the thousands of others on the very same mission!
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