The Financial Matrix part 2: Inflation and Education

Posted: February 2, 2017 in Economics, Finances, Freedom
Tags: , , , , ,

If we don’t understand the full ramifications of the financial matrix, our future is in jeopardy.

In my first post on the financial matrix, I went through how it was a system of control, and talked in terms of freedom. But we should understand that even if we don’t care about freedom, it is still important to understand the consequences of this system on our lives, and what we can do about it.

I HIGHLY recommend watching the video at the end of this post, as it explains in great detail what we need to understand.

What I want to focus on now is WHY we need to understand.

Almost 2 years ago I went through the process of becoming a financial security adviser and got my certification. What I learned made me realize the scope of the problem we face.

Let me rephrase that; what I DIDN’T learn made me realize the scope of the problem!

I learned everything I needed to about financial products like mutual funds, segregated funds, insurance, taxes, the various investment plans, and so on. What I did NOT learn was how to help people learn anything about finances; other than give their money to someone else to invest or buy insurance to protect their assets (Which is important by the way!)

We get the title of financial adviser, which leads people to believe we understand finances and can help them, but in reality all it means is that we are allowed to sell financial products.

We still have need of financial advisers however, and some of them are really good; those that understand the tools of the trade, understand good financial principles, and truly have your best interests in mind.

Since we can’t guarantee that, the next best option is to educate ourselves.

Understand what the financial matrix is doing to our money in terms of inflation for starters.

For example, let us say you have $1000, and you put it in the bank for safe keeping. How much of that $1000, which is yours, do you think the bank will lend out to others?

I can’t actually give you an exact answer. The matrix has made it extremely complicated, but you can look at this page to try and figure it out. This CTV article from 2014 says the capital requirement was going from 5% to 3%.

What does this mean? lets use the 5% example to make this easier to understand (3% is worse for us)

This means that if you put $1000 into the bank for safe keeping, keeping 5% on its ledger, it would be able to lend out $20000 to other people! That is multiplying the money you put in there by 20, creating it from nothing. The bank will lend this money out at a high interest rate, but giving you almost nothing in return (have you looked at what you get in a savings account?)

Does anyone remember taking economics and learning about supply and demand? With all this extra money going out into society, you have more money bidding for the same products, which causes prices to go up. So if you put your money in a savings account, it won’t have the same purchasing power as when you deposited it. What cost $1000 when you put it in, might cost $1100 or even $2000 and up when you take it out, depending on how much time has passed. That’s inflation for you! Note that the government has a target for inflation; which is above 0…

Needless to say, a savings account is not the best place to hold your savings long term. Other than 3-6 months worth of income, put the rest of your money somewhere else that beats inflation. Gold is one of the safest things and it’s a great hedge of protection against inflation, and many other things, which I’ll write about more in a later post.

Inflation also explains why it’s so important to go on the offense, and not just stay on the defense getting out of debt. If we don’t start earning more money than the rising cost of living, we will end up with fewer and fewer choices, and end up going in debt in the end if we don’t buy less and less each year.

We need to understand the offense and the defense of finance if we are to be free from the matrix. Orrin Woodward wrote a great article, using the graph below to explain this. I highly recommend you take read it.

fin-matrix-graph

Obviously, if both our offense and defense is bad, we are broke and in trouble. But if only our defense is good, we are still a tightwad; not being very free to spend on the things we wish.

If our offense is good, but not our defense, we are living to look good and going in debt. This can be VERY dangerous if something happens to our offense; if it stops increasing or stops completely for some reason. This quadrant can very easily lead you to the broke quadrant..

The other reason you want to go on the offense is because of the graph below. The typical 45 year plan for most people.

45_year_plan

It shows our income vs our age. First, take note that when we retire our income drops; this is partly because most people don’t save for their retirement and rely on a government pension. It’s also because these days we need to save a lot to keep the same standard of living. It’s also because most people have a hard time saving & investing when they are in debt and busy paying interest.

Now let’s look at the graph, but include our spending and our choices.

45_year_plan_plus

If we are a tightwad, our spending will really go down in relation to our income because of inflation, and thus so do our choices since we are knowledgeable to not go in debt.

If we are living in the broke quadrant, we go in debt, and it starts to limit our spending since we can only go so much into debt before we are cut off.Our spending then flat lines with our income since we can’t burrow any more money. Our choices start to drop almost immediately since part of our income goes toward paying the interest, and it drops down to almost 0 as our debts and interest payments build up; until we have no room left to do anything but pay for the essentials to live and the interest on our debts.

Learn about the offense and defense. Don’t stay stuck in the financial matrix!

I saw Orrin Woodward give a talk at a conference I was at in January, and this talk has now been released on his YouTube channel. You NEED to watch this. it was amazing!

Even if you don’t have the time to watch it all now, at least start. watch it in 5 minute increments if need be… but watch it! He explains the subject matter of this post in great detail; and he is the real expert on this subject!

FinancialFitness

The Green Box

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