30 money lies
Money lies, what is this going to be about? In fact, money is a big deal in our lives, and it often makes headlines. This book money lies talks about 30 common ideas people have about money, both in the economy and daily life. The author helps us understand how money really works and guides us to a better way of thinking about it. By the end, there’s a vision for having a healthy relationship with money.
30 money lies By Peter Koenig, 2008, 165 pages.
Full title: 30 money lies – liberating your life, liberating your money.
Chronicle and summary of “30 money lies”
In the beginning of the book, the author shares that he started thinking about money in the 1980s when he was running a small training and consulting company, having previously worked in big companies and holding an MBA.
The author noticed two things:
- He didn’t always have enough money for the first time in his career,
- And CEOs he advised struggled to keep commitments due to financial problems. Trying to understand and seek help, he had a hard time finding resources on money.
So, he formed groups to discuss it and realized money comes with strong emotions and many definitions. He began to think that what he learned in his MBA might be hiding the true complexity of the system. This book reflects over 20 years of his research and experience. The author of money lies, Peter Koenig, doesn’t want to judge these “lies” but aims to help us rethink ideas that most people, including the media, consider obvious.
Before diving into the list of “money lies,” the author suggests (and so do I through this article) that readers grab a sheet of paper. Keep it with you until you finish the book 30 money lies (or this article about the book), and jot down your thoughts in response to the question: What does money mean to you? Write down everything that comes to mind without holding back. Afterward, set the paper aside for later reflection.
Lie no 1: The lie of “many happy returns”
Let’s consider an example: You save $100 in your bank, and the bank gives you a 2% interest, earning $2. The bank then lends your $100 to another customer at a 5% interest, and they repay $5 at the end of the year. The bank doesn’t charge you a $1 administrative fee.
Now, how much money did the bank make?
If you thought 3%, the actual answer is different:
Bank profits from the transaction = $3
Minus administrative costs = $1
Equals Bank net profit = $2
The return on investment is calculated as Net profit divided by Administrative fee, which is 2/1 *100%, equaling 200%!
In reality, measuring the return on investment for banks is tricky because experts disagree on whether the bank lends money from savings account holders or creates money from nothing (which could lead to unlimited returns). Also, there is a lack of information about all the “off-balance sheet” operations related to financial speculations.
Lie no 2: Money is power
There are many money lies. Many of us believe a common idea that’s not entirely true, and it’s because we’ve accepted it. This belief comes from two misleading images often portrayed in the media:
- a) The idea that wealthy individuals own a lot of things, and big companies, being resource-intensive, hold significant power in the economy. This suggests that they have control over their lives and possibly the lives of others.
- b) The notion that poor people lack control over their destinies due to their deprivation.
In 30 money lies, Peter Koenig argues that while extreme poverty is regrettable, the root cause isn’t necessarily a lack of money but rather our relationship with money. Whether rich or poor, it doesn’t necessarily determine our ability to control our destinies.
Lie no 3: Debt is bad
In society, there’s a common belief that taking on debt is okay for certain things like buying a house or for solvent companies. However, for other purposes, debt gets a bad reputation, often linked with financial strain.
It’s crucial to realize that debt and money are interconnected. The money you have is essentially a promise from your central bank, making them your debtor, and you the creditor.
Debt isn’t inherently good or bad; it’s a natural part of accounting systems worldwide. The relationship between debtor and creditor is fundamental to global financial and monetary systems.
When new agreements are made between creditors and debtors, taking the form of signed promises to pay, they add to the overall volume of money. This leads to the creation of derivative products.
Here’s a daily-life example: You borrow $10 from your neighbor, and later, when he buys $10 worth of apples, he asks you to pay the grocer instead of him. Your promise to your neighbor becomes a valuable instrument, similar to derivative instruments in the financial world.
The problem arises when the person who made the promise can’t keep it. The main misconception highlighted in this chapter is that everyone aims to be on the creditor side because there’s a common belief that “getting into debt is bad.” This creates an imbalance. The solution lies in accepting that debt is a necessary counterpart to a credit situation, and we transition between the two based on our preferences: whether we want to be a creditor or a debtor at a given time.
Lie no 4: You need a certain minimum amount of money to be happy
The author suggests that most of the time, when we set a minimum amount to achieve a goal, the minimum tends to double by the time we reach the initial sum. This tendency is influenced by the fear of future scarcity, leading us to secure minimal amounts. However, this fear isn’t eased by any amount of money because its origins are elsewhere.
When programs aim to reduce poverty in developing countries by raising minimum income (lie number 4), they often overlook the country’s material and creative resources. Instead, the focus is on increasing income without tapping into the country’s inherent capabilities, resulting in a greater dependence on external contributors and factors.
Lie no 5: The best products and services make the most money
Just being honest, selling good products, having great staff, and serving customers well doesn’t guarantee making a lot of money! The market we’re in pushes consumers to always look for the lowest price, and as Oscar Wilde said, “People know the price of everything and the value of nothing.”
Company owners often face a dilemma: focus on making money or provide products and services with real value. Trying to balance both, many companies end up prioritizing financial results over values.
The author highlights that until we have a society where every business is built on values, where consumer choices, investment decisions, and company operations consider human dignity and the environment, prices won’t truly reflect those values.
Lie no 6: With money you secure and provide for your existence
Whether you have money or not, you exist! Life doesn’t provide constant protection; it’s not always a secure cocoon.
Lie no 7: Money is security
Inner security can never be attained by any amount of money. Consider this alongside lies number 2 and 4, which revolve around power and happiness.
Lie no 8: Money is created by governments and central banks
In a regular democracy, citizens give the government the authority to create and issue money. This delegation may seem distant, and many of us have forgotten about it, assuming it’s a legal fact. The government usually doesn’t create the national currency directly; it delegates this task to the central bank at no cost.
Central banks can be public institutions or commercial enterprises, like the U.S. Federal Reserve, whose shareholders are major U.S. commercial banks. The central bank’s role is to ensure there’s enough money and stability in the system to foster economic activity.
Although physical money (banknotes and coins) represents a small fraction of the total money in circulation, commercial banks and financial institutions create the majority through credit and the accounting system. Barter systems, local currencies from individuals and towns (like SEL), also contribute to money creation.
So, who actually holds power, authority, and responsibility in the currency creation process, considering that commercial banks and credit companies create 90% of the world’s money, and their accounts don’t fully disclose their activities (as mentioned in lie number 1)? Is it the commercial banks, credit companies, significant savers, behind-the-scenes influencers, those operating outside the conventional system, or perhaps, you?
Lie no 9: The money in circulation is created through minting coins and printing notes
There are at least four ways to create money:
- Issuing coins and notes: Making physical money like coins and paper notes.
- Spending: Money is created through the cycle of exchanging goods and services.
- Lending: When a financial institution allows a client to take on debt for a specific purpose, such as buying a property, money is created from nothing in the form of the client’s debt to the institution. Banking and financial institutions also create “derivatives,” which are like playing chips and aren’t very useful in the real economy for trading goods and services.
- Compound interest: To avoid obvious use of the newly created money in the real economy, banks employ more subtle means, often relying on compound interest. As interest is a first-level debt (immediately payable), over time, with the compound interest mechanism, amounts can grow significantly. To secure a loan, customers must offer personal property as collateral, which is valuable to these institutions.
Lie no 10: Money is backed by gold or some other valuable commodity
We find out that the term “bank” originates from the word “banc,” used at the goldsmith’s. The gold that backed the notes was stacked on this banc, revealing that a little knowledge of Latin can help understand today’s language!
Originally, money had real value in a community, often tied to precious metals like gold or silver. Over time, money evolved into tokens with a face value higher than their actual worth, or banks issued more receipts than the gold they possessed. For instance, a 50-cent coin is worth more than its melted base metals. If everyone demanded their money back at once, the bank might not have enough gold to fulfill its promise to all holders (us, the citizens).
This setup seems to boost prosperity as the community appears wealthier than it truly is. However, the risk is forgetting that money doesn’t come with a guarantee. The entire system relies on confidence in the issuing institution and the unlikely event of a massive simultaneous demand to exchange banknotes or coins.
This is called fiduciary currency (from the Latin word “Fiducia,” meaning Trust)
Nowadays, there’s no direct connection between issuing money and any physical product (like gold or silver) that has real value. New financial instruments are regularly created, even though we’re aware there’s nothing concrete backing them up.
As a result, interactions have become so complicated that it’s challenging for anyone to fully understand the situation. Those with the privilege to create money become a smaller percentage of the population, accumulating more money, while the majority sinks deeper into debt.
This cycle might only end when there’s just one player left who owns everything, and nobody else wants to engage with them. The big question is, when will this happen?
Lie no 11: The health of a country may be accurately judged by looking at its GNP and other economic statistics
This measure doesn’t consider the “black” economy, volunteer work, bartering, or other exchange systems. It seldom shows the true quality of life and well-being in a country. There are talks about including environmental and social factors in future indicators.
Lie no 12: The lie of where money is It is…
Whether it’s in my pocket or my bank account, as we discussed earlier, cash money is just paper and metal, and we’re unsure about what banks do with our money. So, where is your money? A suggested answer: it’s in your capital, which comes from the Latin word “Caput,” meaning head! Your money is in your head!
Lie No 13: The love of money is the root of all evil
Loving money so much that it turns into greed (or foolishness) might be a way to fill an emotional gap. Feeling like there’s never enough for oneself can lead to a constant desire for more money, similar to cravings for food or sex.
What can we do? We can try to understand what’s missing inside and give generously with love, whether it’s money or anything else, and observe the positive impact of such actions.
Lie No 14: The lie of the rich and the poor
Peter Koenig suggests changing our usual view that says “rich people are greedy, poor people are needy” to “truly rich people feel richness with any amount of money,” and the same applies to the poor. This shifts the discussion towards understanding each person’s inner resources.
Redistributing money forcefully might only work temporarily. However, when donations come from the heart, the impact on the recipient can be significant and might trigger a positive cycle of movement and money redistribution.
Lie no 15: Money is freedom
Consider those who organize their lives to earn a lot of money for future freedom—they might never truly be free! Freedom is experienced in the present, it’s about living in the now.
Lie no 16: Work and earn money, to do what you want
People who do what they want have chosen to do it, regardless of having money. Their desires and dreams are more important to them than money. Olivier’s blog inspires us to adopt this mindset and learn as we go along!
Lie no 17: You need money, a business plan, capital and a budget to start a project
Successful people didn’t necessarily begin with money and a detailed business plan. Instead, they directed all their attention toward achieving a clear project, regardless of having initial resources. The challenge arises when finances become the primary concern instead of serving the project’s objective.
Lie no 18: Everyone can make a profit
In the financial world, when someone gains money, someone else loses money – that’s just how the math works. It’s neither good nor bad; it’s just a fact. Adopting a mindset where everyone worldwide can profit simultaneously wrongly stigmatizes losses. Loss is a natural part of the cycle. We can’t all be in the same position at the same time without causing significant imbalance.
Lie no 19: To sustain itself a business needs to make a profit
Lots of companies can keep going for a while without making a profit. For instance, Amazon didn’t turn a profit from 1994 to 2003. In 30 money lies, Peter Koenig also talks about the hotel industry in Austria, which wasn’t making money for many years. Still, the banks supported it because the hotel complexes played a vital role in the economy of the whole region.
Lie no 20: The price of goods and services is mainly composed of the costs of providing them
Peter Koenig talks about a theory from Margrit Kennedy, an American, proposing that we should consider interest when figuring out prices. In the production chain, every supplier pays interest (on loans, rent, mortgages) and adds it to the prices for the next link in the chain. Ultimately, the end of the chain (you and I) pays the total interest. Additionally, a small group of people, the richest 20% by this economist’s calculations, receives as much or more in interest than they pay.
Lie no 21: Money is independence
It might seem simple, but life isn’t necessarily better or worse when you have your own business, knowing you’re the one in control and taking responsibility for it all. Independence has nothing to do with money; it’s a mindset. Many readers of my blog seem to agree with this. Thanks for your comments below!
Lie no 22: Money is dependence
Being dependent is not the opposite of being independent. It’s a reality woven into our lives, where we rely on each other in what we do. Money plays a role in our interactions, but what we contribute to the relationship is what determines dependence or independence.
Lie no 23: Your pensions and savings will guarantee you a peaceful old age
In this chapter of 30 money lies, Peter Koenig talks about what he sees as deception by the Pensions and Insurance sector when they assure us that our purchasing power will be secured. However, this sector might struggle to generate the returns needed to maintain purchasing power due to various reasons:
- Demographics: There’s a decrease in assets, an increase in pensioners, and longer life expectancy. Governments are aware of these factors but continue to overlook them, introducing an additional mandatory contribution to a capitalization scheme. Unfortunately, this scheme might not be able to fulfill its promise to pay your pension.
- Rapid impact of compound interest redistribution: The income you currently sacrifice to ensure your future retirement represents significant promises. Fund managers use these promises to create large volumes of financial instruments, benefiting from the interest now, while you might only receive your pension in several years.
- Most fund managers don’t create real wealth: They often speculate on existing investments rather than generating genuine wealth.
So, what can we do about it?
Most importantly, your mindset, physical health, and social connections play a significant role in guaranteeing a peaceful retirement. If you have some money saved up, consider using it to enhance these aspects of your life. In any case, be sure you know where you’re putting your money to build your retirement fund.
Lie no 24: The monetary reformers’ lie no. 1: Speculative transactions
…90% of the trillions of dollars exchanged on the currency markets are considered speculation and have no connection to the actual economy (trading goods and services).
To illustrate that this argument is somewhat false, P. Koenig uses the analogy of a casino. In this comparison, speculative activity occurs inside the casino, and the real economy is represented by the outside world. The connections between the casino and the outside world are crucial because without them, the casino would be a closed-off world with no repercussions.
- Interest-related costs: If you run out of money, the casino lends you chips, and you pay interest in real currency. This interest is a primary debt, the first to be paid if your assets are sold due to insolvency. With the interest you promise to pay, the casino can immediately purchase goods and services in the real economy. As long as you keep playing, this interest keeps growing.
- Broker’s fees: These fees are collected on each transaction based on the amount, volume, and speed of exchanges. They generate substantial income for the casino. Similar to interest, they represent a primary debt and are payable in real currency. The casino’s ability to create unlimited chips and lend them with interest encourages players to bet significant amounts.
- Becoming the center of interest and attention: The casino games attract individuals and businesses with the promise of quick potential earnings. Businesses, enticed by the chance for rapid and substantial returns, gradually shift their focus from their core activities to financial outcomes. In doing so, they contribute to the financial markets’ major casinos’ prosperity, while commissions and interest costs continue to rise.
As we immerse ourselves in the game, the systemic effect of these three connections strengthens the mechanism that automatically funnels money to those already among the wealthiest. Meanwhile, who is looking after the real economy?
Lie no 25: The monetary reformers’ lie no. 2: Income from work is better than unearned income
If we take this idea to the extreme, it’s like splitting the world into those who work and those who don’t. Now, the big question is: how do we determine if someone deserves their income? The author offers a few ways to judge: time spent working, performance, business turnover, effectiveness, qualifications, level of commitment, family situation, being true to oneself, and the joy one brings to those around them.
Lie no 26: Money comes when you give it away
If we give with the expectation that it will come back to us, it’s not worth it. There’s no assurance that the money we give will return, and, in any case, linking generosity to an expectation takes away its true meaning. What matters is how genuine and sincere our donation is.
Lie no 27: The lies about abundance
These days, there are many books, courses, and techniques promising abundance. Does it really work? Well, that depends!
According to the author, it’s crucial to understand that abundance is our inherent right and is a part of our life, encompassing both positive and negative aspects. The idea is that our world contains both beauty and ugliness, ease and difficulty in equal measure.
Recognizing that everything pleasant and beautiful is within our reach also means acknowledging the existence of unpleasant and ugly things. This full acceptance of the universe leads to happiness. The Ying-Yang circle is a perfect illustration of this concept, where Ying (female) is within Yang (male) and vice versa.
Today, our world often emphasizes the fear of scarcity, putting us in a survival mode with hopes for a better future. Many economic theories are built upon this foundation. If you tell someone, “You have the right to abundance,” it might seem too fantastic or overwhelming, and their first reaction could be to reject the idea as too extraordinary to grasp. This is the perspective that Peter Koenig suggests in 30 money lies, using money as a medium.
Lie no 28: Money is the problem, money is the solution
Money is sometimes seen as the cause of all our issues, but also as the potential fix for them. However, that’s not really the case. If you take a moment to observe and understand what causes a problem, it’s usually the quality of the relationship between the parties involved.
Lie no 29: Money is not important… but makes life easier
Just like freedom, independence, security, and happiness, life’s “ease” isn’t found in money. The author suggests that the significance of money lies in its ability to precisely show us the individual and collective paths we’re on, including the pitfalls mentioned in lie number 30.
Lie no 30: Money is… whatever you think it is
Let’s revisit the list you wrote at the beginning—“Money is…” The experience of money is shaped by your thoughts. Your thoughts create the experience, reinforcing your initial idea, and the cycle continues.
However, the illusion is that money itself isn’t the value or thing you might have believed. Money is like a blank screen where you project your thoughts, values, or something else onto it. So, if you say money is a medium of exchange, then money takes on that role at your service, but it’s just one function among others.
You are the real medium of exchange, with or without money. Often, we forget that we are the source of our projections. We start to see the “medium of exchange” function of money as a fundamental characteristic of its nature, forgetting that our relationship with money changes when we were the source of the projected value.
In practice, you pursue money because it serves as a “medium of exchange.” You strive to earn it, compete for it, or even fight for it. But you forget that you are the real medium of exchange. The chase for money is essentially a manifestation of losing connection with the value you inherently possess.
The antidote to this projection mechanism
Here’s a straightforward antidote to this projection mechanism. Take a look at your list again. If, for instance, you wrote “Money is the root of all evil” and “Money is freedom,” replace “money” with “I” to get “I am the root of all evil” and “I am freedom.”
For the process of reappropriation, try to refrain from passing judgment or reacting. Simply let these thoughts exist and find their way inside you. The process may take some time, depending on how many layers are affected, so be patient and kind to yourself.
30 money lies conclusion
This 30 money lies book is really interesting because you can read it whether you know about economics or not. It’s divided into chapters, so you can read it in small pieces or all at once. I learned a lot about interest, how it’s calculated, and its impact on the real economy.
I had to make an effort to understand some of the calculations, but for some, it might be basic. The book covers various themes related to money, from reflections on the economy to everyday beliefs. It’s a good introduction to our relationship with money.
It gently guides us toward a revolution in how we see the role of money in our lives. Although the author provides a practical tool at the end, using it alone might be challenging because it challenges deeply ingrained beliefs. Having a third party involved is beneficial for those diving into the proposed reappropriation at the end.
This reappropriation proposal changed my approach to work and guiding people in consultations. Working on the relationship with money acts like a laser beam, quickly reaching the core of what’s not working inside us, be it emotions or beliefs. Saying statements like “I am freedom” or “I am dirty” becomes a powerful tool in identifying and releasing resistance, especially when combined with body-based approaches.
And also
A big “A-ha” and often a laugh indicate that the body has understood and integrated the release before the mind does. For more details on economic questions, the recommendation is to watch the documentary “Inside Job,” which breaks down the mechanisms behind the 2008 subprime crisis.
One complaint is that sometimes the arguments and lies feel indirectly related, and the logic might seem manipulated to prove the author’s point. Regardless, it’s a book that will elicit reactions, and I’m curious to know what your thoughts are.
The book’s division into chapters allows for both bite-sized reading and comprehensive exploration. It delves into a variety of themes, making it accessible for beginners and more knowledgeable readers alike. It serves as an excellent entry point to understand our relationship with money and the world around us. While informative, some arguments may seem a bit weak. For readers not well-versed in economics, there might be a desire to verify the solidity of explanations. The book’s coverage of economic approaches may leave readers wanting more, but this can also be seen as a positive aspect.
Some drawbacks include the occasional weakness in the presented arguments. If you’re not well-versed in economics, like myself, you might feel inclined to double-check the solidity of the explanations. Additionally, there may be a desire for more in-depth exploration of certain economic approaches, although this could also be seen as a positive aspect.
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