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What About This…? 9.21.2014

By Wayne William Cipriano

Janet Yellen, chairperson of the Federal Reserve, has once again announced they will continue to loan banks OUR money from the United States Treasury and charge those banks no interest. The banks will loan OUR money to us charging us the interest rates they deem appropriate so we can buy homes, cars, boats, land, etc.

A person could get pretty steamed at this process of borrowing our own money and paying for the privilege. We might even complain that this magnificent benefit accorded to banks hurts us.

So, besides complaining, what to do? One strategy is to buy and/or open a bank of our own and get on the gravy train. It wouldn’t correct the problem, merely allow us to profit from it, and that profit would come at the expense of our neighbors who send taxes and fees to the Treasury.

You say you find that distasteful? Well, there is another more ethical and certainly much easier way to avoid participating in that profiteering –– don’t borrow money from banks.

Easy to say? Difficult to do? Yes, it is pretty hared to buy a home that costs tens of thousands even hundreds of thousands of dollars without borrowing, so set that aside.

What about cars, boats, land, etc.? You know you are going to pay whatever the price is plus all the fees, costs, insurance, interest that will be tacked on. Why not be your own bank? Why not do what our grandparents did when they needed something? They saved up for it. And, how often have we saved up for something we really needed or wanted, then decided when we had the price we didn’t need or want whatever it was all that much? At the very least, saving up almost always inhibits impulse buying.

A home? Yes, that’s a tough one, especially when borrowing money at very low interest rates is now so easy. And don’t they say buying an appreciating asset like a home is a “good” debt? I agree, of course, it is better than a purchase that loses value, but what did our grandparents say? Something about the best debt is no debt. And all this easy money is driving up and holding high home prices isn’t it? But it is not either / or.

Why not save up a lot for that home and borrow as little as possible? Makes it all the more valuable when you buy it. Pay it off as quickly as possible and lose the home purchase interest deduction on your taxes? Sure. Then invest what used to be that monthly mortgage payment and earn back much more than that tax deduction every provided. Be as much of your own bank as you can.

What will happen to the banks, interest rates, home sales, and the economy if we reduce borrowing from banks to a minimum? I’m not sure, but it seems to me banks have always taken pretty good care of themselves, their officers and shareholders. It is up to us to take care of ourselves, right?

Now, what about those pesky credit cards?