Hello,
I have been studying the banking system, in my quest for freedom and I ran across some interesting information about banking and consumer interest. It seems that your average person in the USA and possibly other countries, spends a large percentage of their income on consumer products like a home, car, clothing, vacations and most of these things are financed. Which means the money to buy these things is borrowed at high interests rates and usually the type of interest is compound interest. Thus the $25,000 car ends up costing $40,000, the $100,000 dollar house costs 225,000 and things like 100$ gifts or 1000$ vacations end up cost 200$ or 2000$! This startlingly difference between the purchase price of these items and the total paid to the bank over time is collectively called Consumer Debt Interest or consumer debt for short.
Consumer Debt
This has an amazing effect on a consumers finances as paying the minimal payment is the norm for most consumer debt and it results in the consumer paying the bank over an extended period of time, paying payments which mostly interest and very little goes towards reducing the original amount owed, the principle, so over time the consumer ends up paying 150-200% of the original cost of the item and in the case of your average American home mortgage 200% of the homes cost over 30 years.
Bank Profits
This results in big profits for the banks, which are the backers of most consumer credit cards. And the provider of most auto loans and home mortgages. The banks are in the enviable position of borrowing money from the central or federal bank in America at 2% and loaning it out at 4% to 25% depending on your “credit worthiness”. Your credit worthiness is determined by the credit bureaus, whose main customers are banks. The lower your credit score, the the more justified the bank feels to charge you higher interest rates. There seems to be a conflict of interest there, but remember the golden rule (he who has the gold, makes the rules). A quick look at Consumer Debt education websites reveal that most credit cards are 16-25% interest and they charge compound interest, which results in large amounts of interest being charged monthly, the payments are mostly interest, the interest continues to be generated by the large principle balance, so it takes a long time to pay off the original amount owed. This method, called compound interest, generates the most interest charges for the bank and the most debt for the consumer.
Consumer Debt
The average consumer has so much consumer debt, they can only make the minimum payments on most of their debt. It takes them a long time to pay off their first debts. Unfortunately, they continue to encounter things in life they need, but can’t afford, like car repairs, medical bills and late payments, so they take on more debt until they reach a point, that the majority of their paycheck goes to service their debt. They now work for their debt and their paycheck provides nothing but debt services. They don’t have enough money for investments that pay dividends or a small business that has profits. All they can do is work more hours for more pay. They literal trade their time, which is the currency of life, for money and then spend the money on debt service, not living. They are now chained to this debt and they are officially a wage slave. And we wonder why people call it a “rat race” and the majority of people look sad and despondent as they trudge off to work each day.
Reverse Umbilical Cord Money Flow
After studying thus I was struck with this thought. Many bank commercials indicate that they want to be your bank and provide you all the services you need to grow your business or manage your household finances. These commercials give you the impression that the banks want to mentor you and help you grow financially. A sort of nurturing relationship.
In my mind, most young adults come out of high school, trade school or college as baby adults, who don’t yet understand credit cards, car loans or mortgages, and most of them learn about finances by asking their friends, their parents or their coworkers, how to navigate this financial maze, which is modern finance. And into this knowledge void steps your friendly bank, which says it’s here to help and nurture you. But unlike the umbilical cord connecting the mother and child where everything flowing from the mom brings to child, the umbilical cord connecting bank to consumer seems to drain the lifeblood of the consumer, their income, flows from consumer to bank. And it also doesn’t end after nine months, it can last a lifetime.
I know that these statements seem harsh, but I can not describe thus relationship in rosey 🌹 terms. It’s at best a dead rose 🥀. But I must admit, it’s not the banks fault most young adults are financially illiterate. They graduated from school that way, from schools teaching wonderful things about the heavens and the earth, but very little if anything about finance. The banks are like everything else in nature, the strong prey on the weak. But don’t get angry, get educated. The best way to deal with this is to grow your financial knowledge and develop your financial muscles.
Knowledge is power, power is wealth and wealth is freedom. If you want to be free, educate yourself or chances are you will spend all of your days a wage slave.
✍🏼 by Shortsegments