How The Economy Really Works

May 12, 2016 by Coach Corey Wayne
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Photo by iStock.com/peshkov

The importance of understanding how the economy really works, what makes it boom and go bust, what money is, where it comes from, how it’s created, how it circulates and how unbalanced monetary circulation is the root cause of most of the world’s economic problems that can negatively impact your business, job, wealth and income earning potential.

In this video coaching newsletter, I discuss the importance of understanding how the world’s economic engine really works, what the purpose of money really is and how being ignorant of how the system really works can ruin you financially, cause unnecessary financial setbacks and negatively impact your ability to reach your full potential and live the life of your dreams.

I highly recommend you take a look at my article and video, “What Is Money Really?” and also Bill Still’s documentary, “The Secret Of Oz,” (see video below), where he goes into great detail about the history of money and where it came from. I also recommend Ellen Hodgson Brown’s book, “Web of Debt,” as well as “The Creature From Jekyll Island” by G. Edward Griffin, which discusses the history of monetary policy and the banking industry. We all need to know and understand this stuff, because if you have a knowledge gap in this area, you open yourself up to get manipulated or blindsided when the economy tanks.

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“Everything most people think they understand about money, economics, wealth building and financial security is totally wrong. Money exists for two reasons: 1) to be a medium of financial exchange that makes commerce and sale or purchase transactions easy and, 2) to be a store of value, where you literally translate your gifts, skills, talents, time and assets into easily tradable and exchangeable paper, coin or digital money receipts. Most people think when they borrow money, they are borrowing money the bank has from its other customers. This is a myth. A bank’s purpose is to facilitate stable money circulation by expanding the money supply, via creating loans out of thin air. Banks use fractional reserve banking, which enables them to create up to ten times the total amount of their customers’ money in their bank accounts out of thin air and lending it at interest. For example, if a bank’s cumulative amount of all of their depositors’ bank accounts is ten million dollars, then the bank can create up to one hundred million dollars out of thin air and lend it at interest. The economy expands when banks create money out of thin air by creating loans and lending it at interest. Every time you use your credit card, borrow money, get a car or home loan, you are borrowing money that did not exist until you got the loan or spent it into existence by swiping your credit card. When the banks stop lending or reduce their lending during an economic downturn, the money supply in circulation will shrink. This causes the economy to contract. Who suffers the most when this happens? The people who are living paycheck to paycheck are the first to stop paying their bills. This creates a domino effect. Economic recoveries can often take five to ten years to recover from the worst monetary circulation contractions. The economy tends to boom and expand until the banks get too reckless with whom they lend money to, which creates bubbles and loans that borrowers start defaulting on. Economic contractions bring foreclosures, repossessions, unemployment and governments being unable to pay their bills. This is known as the boom and bust cycle. As long as the world’s banking system uses elastic currencies, the up/down boom/bust cycle will be a fact of life. Therefore, as a sovereign, free and self-reliant human being, you should always know your downside financial risk if the economy does not do what you expect it to when making financial commitments.” ~ Coach Corey Wayne

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Published on May 12, 2016

Reader Interactions

Comments

  1. Your economics analysis is more consistent with the theories of Keynes than the more credible theories of Mises. I note that when fractional reserves are permitted (banks can lend more than they borrow from depositors), inflation and eventual economic collapse can result. Prosperity results when many people work and the machinery to assist productivity (factories, etc.) that has been built by previous work is used at or near full capacity. When fewer people work and factories are used at partial capacity or not at all, then total productivity is less and prosperity can vanish.

    Using consumer loans to facilitate spending, thereby allowing people to buy things having not already done the work to earn them, makes for attractive income statements in consumer-oriented businesses. It does, however, hide the fact that productivity does not keep up with consumption and consumer debt goes up. Eventually, bank failures and bailouts must occur when bank deposits are insufficient to permit the loans. Inflation can result, Note Germany after World War 1 and Venezuela today.

    The USA today has several parasitic subcultures, in which people are trained by parents, peers, and/or schools to, without guilt, wheedle or extort material goods including housing from others. You note in your excellent presentations and your outstanding book (I have read it at least 10 times and lost count) that when people don’t treat you the viewer or reader properly, walk away without apology. Taxpayers cannot.

    The parasitic subcultures include voters. When ordinary means such as emotional fraud, welfare applications, and reckless borrowing do not get them their way, they vote for bank bailouts and mandated high-risk loans, or they riot.

    With interest rates approaching zero, and bank regulations and deposit seizures becoming a non-negligible risk (only overseas for now), we may be approaching a scenario in which bank depositors insist on keeping their money in warehouse strongboxes instead of on deposit in banks. A credit crunch will follow.

    Without fractional reserves, better yet without fiat money also, consumption will be tied clearly to productivity. No exceptions. Such a reform will upset the lazy, but it will make the economy secure.

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