Breaking Up with Banks – Episode 599

This transcript was auto-generated and may contain errors.

[00:01] Welcome to the Prosperity Podcast. Prosperity thinkers, we’re talking about relationship breakups. This is sad. This is really sad. I think it’s time that more and more people realize that banks aren’t any good. We got to get rid of them. We got to break up. It’s time to divorce that bank. What does that look like, Kim? Well, it is so interesting. There’s a very little known fact about banks that supports something called civil forfeiture, which is just flat out scary. And it’s that the banking system can come in and take all of your money away and then figure out what the problem is later. And I’ve heard of this happening to businesses and individuals through absolutely no apparent fault of their own.

[00:48] And it was months later that their dollars got restored to them. So that’s not okay. And it’s certainly very un-American. So I think there are a lot of people that are turning to other places to store wealth. Now, I think most people still need a bank for their bills, like paying the grocery bill and the electric bill. But holy cow, I don’t use Venmo a lot, but I just was on it the other day because that’s the way that I needed to pay somebody. And just looking through the few that were on the top five of the feed, you have money moving all over this country that gets results done immediately and without a fee. And that’s just one of many platforms that do that kind of thing. And so we also have the bank as a service arena that’s showing its head a little

[01:40] bit more. And maybe that will be valuable. But I think we’re going to see a day where maybe the banks become the next blockbuster. One could hope. I was reading a recent study from Australia of what the banking industry has done there. And it was really fascinating. What the banks did, many of them, is they started having cashless branches. So they did this in Australia. And so a person would come in and they’d want to make a deposit. And the people at the bank would say, I’m sorry, this is a cashless branch. So this became more and more common. Well what’s the reason for this? The banks don’t want to pay for those locations. They don’t need to. So if they make themselves unavailable or useless, they no longer need to do that.

[02:38] And so in many ways, they’re forcing themselves out. And you mentioned Venmo. We’ve got crypto. We’ve got other things that can happen. But there are, as we’ve talked about on this podcast many times over, the tried and true foundational vehicles. So let’s talk about those. And then let’s talk about what could potentially happen if banks exit the main stage. I also want to interject another space that a lot of people store cash. And it’s the money market accounts that are at brokerages. And people tend to think that these are safe environments. Of course, with the bank, we have FDIC insurance. With the brokerages, we have some of their money markets are FDIC insured. Some are SIPC insured. Nevertheless, there is a little known fact about money markets that I’ve seen happen one

[03:30] time in my life. And who knows, it could happen again. And it’s called breaking the buck. And it’s where the net asset value of the money market is less than a dollar. So typically, if you put $10 in a money market account, you expect it to be maybe $10.03, because it earned a little bit of interest. But if that net asset value is not equal to $1, your $10 will be worth $9.30, or $0.70, or whatever the number is at the time. And so when we become aware of that, we start seeking a third alternative. And that truly is the oldest financial industry in America. It was actually formed in Europe originally, so it’s got history even beyond the couple hundred years that it’s been in America. And that’s the life insurance industry.

[04:24] And specifically, the mutual life insurance companies, so Guardian, New York Life, MassMutual, Northwestern Mutual, Penn Mutual, Lafayette, Mutual Trust, there’s about 20 of them, I believe, are in an arena where they have a legal requirement to reserve a dollar for every dollar that they have, unlike the banks, which are basically reserving about 7 to 10 cents on the dollar, and whereby these dollars are available and liquid for individuals to withdraw if they want, borrow against if they want, et cetera. Now, of course, the life insurance companies still use a bank. There is a space that a checking account is still valuable. And I think potentially its days are limited. So here’s a question I’ve never asked on the podcast.

[05:17] And this is a total speculative question, which is, do you think the day could arrive that these life insurance companies go blockchain and tokenize themselves so that they can be used that way? I do. And I think it’s something that we can all look forward to. I really feel like blockchain is the solution to an awful lot of problems. And so while I don’t know what that looks like for the life insurance companies, the actuarial tables, the statistics that life insurance companies have, the very secure space that they operate in with an awful lot of certainty is perfect for the blockchain. So what it does next in terms of the tokenization, for example, or other aspects of it, time will tell. Nevertheless, I think this is a really fun space to pay attention to.

[06:14] Yeah, absolutely. You know, we’ve got Bitcoin that just hit in the month of November, it hit $99,000 almost crossed 100,000 point. We’ve got other platforms out there that are popping up, Polymarket, which is the platform where you can, I’m not going to use the word bet. We’re going to say predict and put money towards predictions. So we’re seeing these technologies try and pierce the traditional and the typical institutions. I’m using your language correctly. Both of them. You are correct. Yes. And we are going to see as that armor gets pierced, probably some of the banking industry has to change. So for us in this wrap up of the episode, what are some of the few things that our listeners can do

[07:13] to, you know, prepare themselves that they can break up their relationship with the banks and put themselves in the right step forward so they’re innovative? Well, always I believe that this arena has to begin with an open mind. It’s often the first question I’ll ask somebody if they come to me and they’re pretty determined to do something. I will say, are you open minded about that? So it is an open mind. That’s a learning mind. That’s a growth oriented mind that’s on the lookout for solutions. So maybe it’s you just start using Venmo or cash app or whatever one you want to choose. If you haven’t ever done that before for the younger generation, they’re like, well, yeah, I have all three of them.

[07:58] You know, that’s a piece of cake. The third being whatever their favorite choice is. Maybe it’s learning a little bit more about blockchain. I think for a long time there were people that were confused. Is Bitcoin, blockchain, vice versa? And so getting clarity around that. I think also very important to learn about the life insurance industry. Some people know some about it. Some people know nothing about it. The life insurance industry, unfortunately, went through a period of time where they had a very negative reputation in the marketplace for really unknown reasons. Nevertheless, they did. I believe that’s correcting as it should. So again, be open minded, do some learning about that. And then as you continue to progress,

[08:45] the ability to apply wisdom to pick up on our conversations from earlier, you’ve got information, you have knowledge. Applying wisdom often enables you to put two things together and seek that one plus one equals 11 exponential relationship. So what is that for you? Well, maybe it’s putting blockchain insurance companies together. Maybe it’s putting Venmo and your cash value of your life insurance policy together. I don’t know what it is for you, but I guarantee you you can’t put one and one together if you’re close minded about it. So being open minded, it avoids being a blockbuster and lets you be a Netflix. I love it. So good. For all of you listeners, that is decades of wisdom packed into a few seconds.

[09:35] It doesn’t mean you have to reinvent everything, just take a step into it and you’ll learn so much. Kim, thank you for sharing that wisdom with us today. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit ProsperityThinkers.com