Financial Independence and Security Part 1

I'm writing an article for you guys on a subject I feel pretty confident in talking about. I think that many of us in America are very financially illiterate and ignorant. We know how to make money and spend it. That's about it. We have the education system to blame. I might even go so far as to say that it is INTENTIONAL. To keep people dumbed down and make them well behaved, dependent, ignorant workers.

Our parents had no financial education either. The only financial education the baby boomer generation received was, "Go to school, get a good job with a company that will take care of you (retirement/benefits etc), and don't worry about the rest."

I've noticed that a great deal of guys in the community are very entrepreneurial and self-improvement minded and you may know everything that I'm saying already. Great. This is mostly for those of us who haven't had much exposure. I've spent hours and hours reading books and articles and talks on this subject and boiling it down in simple terms so that you don't have to!

This is, Your Finances 101.
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Let me paint a possible scenario for you.

Credit meltdown. Almost every single business runs on some form of credit, usually referred to as 30 days same as cash. What that means is that one business (wholesaler) provides their goods/services to another business (retailer) as if they paid cash for it, then allows them 30 days to pay it, interest free.

Lets take your local grocery store as an example. They are a retailer who purchases goods from a wholesaler who purchases goods from producers.

Bank > Producers > wholesaler > retailer > consumer

1. The bank takes it's deposits and "leverages" them (fractional reserve) meaning they take $1 and lend out much more... say $10, $20. Or they borrow money from another bank (ie Federal Reserve)
2 The bank takes that imaginary money and lends it as operating capital to the producer so that they have money to operate the farm or factory.
2. The producer sells its product to the wholesaler on credit
3. The wholesaler sells the product to the retailer on credit
4. The retailer sells the product to the consumer for cash, then pays the wholesaler, who pays the producer, who pays the bank.

Credit will always be necessary. The problem is, the whole system is dependent on DEBT/THE BANK. If there is a problem with the bank, the whole system breaks down and groceries are not available at the store. Since the typical grocery store only has about 3 days of food in stock, after three days you'll have a state of panic on your hands. This is the reason why, while I hated that we were in that position, I think that the Bush Administration did the necessary thing with the bank bailouts in 2008.

When you hear left-wing complaints about the uneven distibution of wealth (the top 1%) etc, what they don't take into account is that most of that wealth is MADE UP. This is exactly what the Federal Reserve does with "Quantitative Easing." They write magic money in their accounts and then lend it out. It only exists on paper (or computer) and is backed up by YOUR faith that it exists... It doesn't.

This is creating a more and more tangled web of complications that will eventually cause collapse. Bank Bailouts are just a bandaid for a system that has cancer. Yes. I said it. IT WILL EVENTUALLY COLLAPSE.

If you're working as an employee, while this is honorable in it's own right, you will never be financially independent. You will always rely on the success of your employer, who in turn is most likely relying on the security of the debt-based system. Which, in my mind will never provide security, let alone prosperity.
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So In this part, I tried to sum up the WHY of why you need to be financially independent. In the next parts I'll go into practical means to become independent.

In part 2 I'll explain practical ways to unplug from the debt system to build a solid foundation.