By Jack Carlson | Unbridled Wealth
The business of banks is money. We all use banks. But are we benefiting by storing money with them, or are they? How do banks make money?
Consider this example based on recent numbers from Bank of America. Let’s say you deposit $1,000 with them and they pay you 0.2% interest for storing your money. Due to the fractional reserve system in our country, they only need to keep 10% of your money on hand at any time. So, they loan out $900 at an average of 5.2% to people buying homes, cars, or using credit cards. You might be thinking, okay they make 5%, that’s not bad, I can probably get that in the stock market.
But because they never use their own money, they pay you $2 to make $46.80. That’s a 2,340% return on investment! That’s like you buying a share of a company when it was worth $2 and then it grows to $46.80. The total deposits Bank of America had at the start of 2023 was $1.93 Trillion! This should tell you that banking is a very profitable activity and that banks are masters at controlling money. Where it gets even more interesting though, is when you look at banks’ balance sheets and where they are actually storing our money when they aren’t loaning it out for profit. Let’s stick with Bank of America for this example. At the end of 2021, they owned $24,068,000,000 of permanent life insurance. That number is almost double their real estate holdings. If you are like I was 3 years ago, all you’ve heard about whole life insurance to this point in your life is that it is a BAD place to store money.
But now you have a conundrum. Why is not only Bank of America, but every major bank in our country putting as much money as the federal government will allow into permanent life insurance policies? Do they have access to things that you and I don’t? Or are they using financial tools and assets differently than you and I have been taught?
Here’s a final quote to leave you from financial expert Ed Slott, “The single biggest benefit in the US tax code and the most UNUSED is the income tax exemption on whole life insurance.” So, what is whole life insurance? And why should it matter to you?
Schedule a free educational call today to learn more about how you can create your own banking system. Email us at:
Jack Carlson: firstname.lastname@example.org
Olivia McGraw: email@example.com
Jason K. Powers: firstname.lastname@example.org