Money Changers, Part 2

Since this is a series, one will have to keep abreast of the other parts to fully understand the topic. Last time I mentioned one of the many resources, Modern Money Mechanics, that reveal our modern money changers and their deceptions. When loans are made, one is led to believe that he is borrowing other peoples' money and the interest charged is payment for the use of that money.

Without getting into the technical details of accounting procedures, let's examine the money changer's scheme. How would you imagine the results of a loan would appear on the lender's balance sheets? There are two logical possibilities. First, I would naturally think that if I borrowed money, the lender would have less money. For example, if I borrowed a dollar, my assets would increase by a dollar; and, the lender's assets would decrease by a dollar. Sound ok so far? Second, what would happen if I deposited that dollar into an account with the same lender? Well, my assets wouldn't change at all, however, the lender's assets would gain a dollar or be in the same position before the loan was made.

In summary, when loans are made, the lender's assets should either go down or remain the same. Guess what? Neither happens! Stay tuned.

Gary Ellis, MBA, CFP
Association Stewardship Director