One sentence summary of “30 lies about money”: Money holds an important place in our lives, whether we have some or not, and financial issues regularly makes the front pages of the papers. In this book, the author breaks down 30 commonly held preconceptions about money, whether in the field of economics or in everyday life. He goes on to lead us gently towards better awareness of how money works, as well as towards a vision, developed at the end, that allows us to restore a healthy relationship with money.
By Peter Koenig, 2008, 165 pages.
Full title: 30 lies about money – liberating your life, liberating your money.
Chronicle and summary of “30 lies about money”
Note: this guest chronicle was written by Alexandra from the website La sphère humaine. She is a psychotherapist with a special interest in everything that touches on our relationship with money.
In his preface, the author tells us that his reflections on money began in the 1980s, when he was at the head of a small training and consulting company after initially working in major firms (he also holds an MBA).
He made two observations:
- He consistently lacked ready cash for the first time in his professional life
- The CEOs he advised were at pains to stick to the carefully crafted commitments they had made during his period of guidance because they were encountering financial difficulties.
While attempting to understand and to get some help himself, he encountered huge difficulties finding people or books that dealt with the topic of money. Further to his research, he began to set up groups to talk about the subject and he became aware of the strong emotional load associated with money, along with the many definitions, concepts and ideas that surrounded the subject.
He then began to suspect that perhaps what he had learned during his MBA studies was simply masking the fact that the system had become so complex that nobody could guarantee with certainty why something was working or why it failed!
This book about money is therefore the quintessence of more than 20 years of research and experience. Peter Koenig points out that he does not want to pass judgement on these “lies” but simply help us to take a step back and better understand a certain number of notions that most of us (including the media) tend to consider self-evident.
Before starting with the list of “lies”, the author (and therefore me too via this chronicle) invites the reader to take a sheet of paper that you will keep until you get to the end of the book (or this chronicle of the book) and write down what comes to you as an answer to the question:
What is money to you?
Write down everything that comes to you without censoring your thoughts. Now put the piece of paper aside.
Lie no 1: The lie of “many happy returns”
Let’s start with an example: you save $100 to your bank account and the bank pays 2% interest per year, making $2. It takes your $100 and loans it to another customer at a rate of 5%, who then pays back $5 at the end of the year. The bank does not bill you for the administrative fees of $1.
Question: How much money did the bank make?
If (like me) you answered 3%, the real answer is as follows:
Bank profits from the transaction = $3
Minus administrative costs = $1
Equals Bank net profit = $2
Return on investment: Net profit / Administrative fee = 2/1 *100% = 200%!
In reality, it is difficult to measure the return on investment for banks because the experts are not in agreement with each other about how to determine whether the bank lends the money that belongs to savings account holders or money created from nothing (which makes the sky the limit in terms of return on investment). Furthermore, there are no details about all of the “off-balance sheet” operations relating to financial speculations.
Lie no 2: Money is power
This is a very widespread belief that exists largely because we believe in it! This belief is based on two false images (widely supported by the media):
- a) Rich people own lots of things, or if I am a big company I am resource intensive and I take up space in the economy. Therefore, I have power over my life (and possibly those of others).
- b) Poor people have no control over their destiny because of their deprivation.
According to Peter Koenig, while deprivation and extreme poverty are something to deplore, their causes do not lie in a lack of money but in the relationship that we have with money. Being rich or poor does not change our ability to control our destiny.
Lie no 3: Debt is bad
Society generally accepts that an individual only gets into debt to buy a house, a company only if it is solvent, and takes a dim view of a local or national authority that gets into debt. For everything else, debt has a bad reputation and is quickly associated with debt overhang.
It is important to understand that debt and money are two sides of the same coin. The money that you have in your wallet or in your bank account is a promise from your central bank to give you money in exchange for the face value of your bank note. The bank becomes your debtor and you are the creditor.
The existence of debt is neither good nor bad but constitutes an automatic phenomenon in an accounting system. The debtor/creditor relationship is at the heart of the financial and monetary systems of the entire world.
When money already exists, a new agreement is created between creditor and debtor, taking the form of a signed promise to pay. This creation is added to all the promises that swell the volume of money. Now we come to derivative products.
Let’s take an example from daily life: you borrow $10 from your neighbour and one day, when he buys $10 worth of apples at the grocery store, he asks you to pay the grocer instead of paying him back. The promise that you made to your neighbour acts as an instrument of value and it is at the heart of the business of derivative instruments that have developed over recent years.
The problem therefore arises when Peter Koenig who made the promise cannot keep it! But the main “lie” in this chapter resides in the fact that everyone tries to be on the creditor side at the same time because “getting into debt is bad”! This automatically creates an imbalance. The solution therefore lies in the simple acceptance that debt is an essential complement to a credit situation and that we go from one situation to the other depending on whether we want to be in one or other position at all costs: creditor (or debtor).
Lie no 4: You need a certain minimum amount of money to be happy
In which the author indicates that, most of the time, when we set ourselves a minimum amount to achieve a qualitative objective, the minimum will have doubled by the time we reach the initial sum of money.
The mental diagram in the background is the fear of a future lack that makes us secure minimal amounts but this fear cannot be assuaged by any sum of money because its roots are elsewhere.
Programmes of assistance to developing countries often rely on lie number 4 when they try to alleviate poverty by increasing the minimum income. But this increase in income takes place without relying on the material and creative resources of the country or its inhabitants, and it results in greater reliance on contributors and external factors.
Lie no 5: The best products and services make the most money
It’s not because you are honest, sell good products, employ good staff and serve good customers in a satisfactory manner that you will make (a lot of) money!
The market in which we operate encourages the consumer to seek out the lowest price at all costs. And the author quotes Oscar Wilde: “People know the price of everything and the value of nothing”.
Company owners often end up facing two options: concentrate on earning money or provide products and services that offer genuine value. When they try to combine the two, many companies often find themselves choosing financial results over values.
Until we live in a society in which every business is based on values, in which consumer purchases, the choice of investments and the business of a company take human dignity and the environment into account, prices will not reflect the values in question.
Lie no 6: With money you secure and provide for your existence
You exist with or without money! As for protection, life is not a permanent cocoon.
Lie no 7: Money is security
No amount of money will ever offer you inner security. Put this with lies no. 2 and 4 about power and happiness.
Lie no 8: Money is created by governments and central banks
In a normal democracy, the citizens delegate the power to create and issue money to their government. This delegation feels so distant that most of us have already forgotten about it and think that it is a fact of law. The government does not issue the national currency and in turn delegates this right to the central bank, at no expense.
Central banks are either public institutions or commercial enterprises (such as the Federal Reserve of the United States whose shareholders are the large U.S. commercial banks). The role of the central bank is to ensure that there is enough money in the system and enough stability to create a climate that is conducive to economic activity.
Money created in the form of banknotes and coins only represents a tiny part of the money created and put into circulation. The rest is done by commercial banks and financial institutions through credit and the accounting system.
But barter systems (like SEL), individuals and towns with their own local currency are also creators of money.
So this begs the question: since commercial banks and credit companies create 90% of the money in the world and since their accounts and financial reports do not present the totality of their activities (see lie n°1), WHO actually holds power, authority and responsibility in the process of creating currency?
The commercial banks, credit companies, big savers, invisible eminences grises, those who are off the grid or you?
Lie no 9: The money in circulation is created through minting coins and printing notes
There are at least 4 ways to create money:
- By issuing coins and notes.
- By spending – these two methods are part of the cycle of exchanges of goods and services.
- And by lending; an institution gives a client permission to get into debt (with a specific goal, such as buying a property for example). Every time a loan is granted, money is created from nothing in the form of a client’s debt towards the financial institution. In addition to this, banking and financial institutions create a hierarchy of instruments called “derivatives” which resemble playing chips and are of little use in the “real” economy for exchanging goods and services.
- If the banks used the money created “from nothing” for the real economy in a too obvious way, they would run the risk of a citizens’ uprising. That is why they use slightly more subtle means by relying on the mechanism of compound interest. As interest is a 1st level debt (and therefore immediately payable), with the compound interest mechanism amounts can become considerable over time. In order to obtain a loan, the customer must provide personal property as a pledge, which is potentially worth a lot to these institutions.
Lie no 10: Money is backed by gold or some other valuable commodity
In which we learn that the word bank comes from the word “banc”, found at the goldsmith’s. The gold used to guarantee the notes was stacked on it, which goes to show that having a few words of Latin can be useful when it comes to decoding the language of today!
Initially, money had intrinsic value within a community. It went on take the shape of manufactured tokens, guaranteed by a product of value such as gold or silver.
At the next step, the money issued had a face value that was higher than its intrinsic value or else the goldsmiths (now the banks) issued more receipts than they had gold in their coffers. For example, a 50 cent coin is worth more than that if you melt the base metals which are used to make it and sell them on. If all the people with money brought in their coins or their receipts at the same time, the issuer (bank) would not be able to honour its promise/debt to those holders (we, the citizens).
This mechanism stimulates growth because the community appears to be richer than it actually is. The danger is when we forget that money does not come with a guarantee.
The system therefore relies entirely on confidence in the issuing institution and on the unlikelihood of massive and simultaneous demand to exchange banknotes/coins.
This is known as fiduciary currency (from the Latin Fiducia= Trust).
In the current situation, there is no longer any link between issuing currency and any product (gold, silver…) that represents real value. New financial instruments are created regularly, even though we know perfectly well that there is nothing to back them up.
The consequences of this are that interactions have become so complex that nobody can really grasp a full idea of the situation. In addition, those who have the privilege to create money end up becoming an increasingly small percentage of the population, regularly increasing their money mass, while the majority gradually sink deeper and deeper into debt.
This situation will only stop when there is just one player left who owns everything and nobody else will want to play with him. The question is when?
Lie no 11: The health of a country may be accurately judged by looking at its GNP and other economic statistics
This indicator does not take into account either the “black” economy or voluntary work, nor bartering or any system of exchanges. It rarely reflects the quality of life and well-being of a country.
Discussions are taking place to take indicators such as environmental and social parameters into account in the future.
Lie no 12: The lie of where money is It is…
in my pocket or my bank account! As we previously saw, cash money is nothing more than paper and metal and we don’t really know what the banks do with our money.
So, where is your money? Proposed answer: it is in your capital, which comes from the Latin Caput = Head! Your money is in your head!
Lie No 13: The love of money is the root of all evil
Loving money to the point of cupidity (or stupidity…) could be one way to fill a hole. There is never enough for me, so I want money, money and more money (this could be equally true of food or sex).
What can we do? Try to understand what is lacking and give with love, for example, give money with love and observe.
Lie No 14: The lie of the rich and the poor
According to Peter Koenig, it would be a good idea to transform the point of view that often makes us think that “rich people are greedy, poor people are needy” into “truly rich people are rich with any amount of money” and the same goes for the poor. This moves the debate to an area better related to each person’s internal resources.
“Forced” monetary redistribution would probably only have a short-term effect. Whereas, if the donation comes from the heart, the impact on the recipient can be considerable and can potentially lead to a dynamic spiral of movement and redistribution of money.
Lie no 15: Money is freedom
Simply look at people who organise their life today in such a way as to earn a lot of money in order to be free tomorrow (the distant future) – they will never be free!
Freedom is lived in the present, freedom is now.
Lie no 16: Work and earn money, to do what you want
People who do what they want do so because they have decided to do so, with or without money. Their desires, their dreams are more important than money.
Note: and that is what Olivier’s blog invites us to do, while educating ourselves at the same time!
Lie no 17: You need money, a business plan, capital and a budget to start a project
Successful people did not start with money and a business plan, but by focussing all their attention on achieving a well-defined project, with or without resources at the outset. The difficulty starts when finances become the number 1 issue instead of being at the service of the project objective.
Lie no 18: Everyone can make a profit
Financially, if someone makes money, another person loses money – that is mathematical logic. It is neither good nor bad; it’s just the way it is. Getting into a mental framework in which everyone in the world can make a profit at the same time is also a way of stigmatising losses, which is false. Loss is part of the cycle. We cannot all be in the same place at the same time without creating severe imbalance.
Lie no 19: To sustain itself a business needs to make a profit
Many companies can exist for a long time without ever turning a profit. Amazon was not profitable from 1994 to 2003. Peter Koenig also gives the example of the hotel industry in Austria, which remained in the red for many years, but the banks supported it because its hotel complexes supported the economy of an entire region.
Lie no 20: The price of goods and services is mainly composed of the costs of providing them
Here, Peter Koenig relies on a theory developed by an American (Margrit Kennedy) that suggests that we should take interestinto account when calculating prices.
Each supplier involved in the chain of production pays interest (on a loan, rent, a mortgage) and incorporates it to the prices that the next link in the chain has to pay. The end of the chain (you and I) pays the cumulative interest In addition to this, a small minority of the population receives as much or more in interest than it pays (the richest 20% according to this economist’s calculations).
Lie no 21: Money is independence
It is easy to believe this, but life is neither better nor worse when you can run your own business, aware that you are the source of your own independence and taking responsibility for what comes from that.
Money has nothing to do with independence, which is a state of mind.
Note: It seems to me that many readers of my blog will agree with this. Thanks for your comments below
Lie no 22: Money is dependence
Dependence is not the opposite of independence. It is a reality that is an integral part of our lives, making us depend on each other in what we do. From this point of view, money plays a role in our exchanges, but what we put into the relationship is what creates dependence or not.
Lie no 23: Your pensions and savings will guarantee you a peaceful old age
In this chapter, Peter Koenig tackles what he describes as fraud on the part of the Pensions and Insurance sector when they promise that our purchasing power will be guaranteed. This sector will not be able to produce the yield to maintain purchasing power for different reasons:
- Demographics: decrease in assets, increase in pensioners, increased life expectancy. Governments have known these factors for a long time, but they continue to ignore them and have introduced an additional obligatory contribution to a capitalisation scheme. Which will no longer be able to keep its promise to pay you your pension.
- The increasingly rapid effect of redistribution of compound interest. The income you currently do without in order to ensure your future retirement constitutes important promises upon which fund managers create huge volumes of financial instruments, and they enjoy the interest from this now while you will only receive your pension in several years (perhaps).
- Most fund managers do not create any real wealth because they speculate, most often, on investments that already exist.
So what can we do about it?
First and foremost, your state of mind, your physical health and your social relations are what will contribute the most to ensuring a peaceful retirement. So, if you have a little money put aside, perhaps you could devote it to developing these aspects of your life and in any case, make sure you know where you are putting your money to build your retirement capital.
Lie no 24: The monetary reformers’ lie no. 1: Speculative transactions
…90% of the trillions of dollars exchanged on the currency markets fall under the title of speculation and have nothing to do with the real economy (exchange of goods and services).
To show that this argument is partially false, P Koenig uses the example of a casino. In this example, the speculative activity would happen inside the casino and the real economy would be the outside world. The passageways between the casino and the outside world areimportant because without them, the casino would be simply a closed-off world without consequences.
- Interest-related costs If you have no more money, the casino will lend you some in the form of chips and you will pay interest on them in real currency. This interest is a first-level debt, making it the first debt to honour in the event that your goods are sold forreasons of insolvency. With the interest that you (promise to) pay, the casino can immediately buy goods and services in the real economy. As long as you continue to play, this interest increases exponentially.
- Broker’s fees They are collected on each transaction based on the amount, the volume and speed of the exchanges. They bring the casino a lot of money. Like interest, they constitute a first-level debt and are payable in real currency. The capacity of the casino to create its own chips in unlimited numbers and to lend them with interest contributes to players betting high amounts.
- Become the centre of interest and attention. The “casino” games attract individuals and businesses with the promise of fast potential earnings. In doing this, businesses, attracted by the opportunity to benefit from fast and high returns, are slowly diverted from their core business to turn their attention to the financial results. In doing so, they help the big casinos of the financial markets to prosper, while commissions and interest costs continue to increase.
The more we devote ourselves to the game, the more the systemic effect of these three passageways strengthens the mechanism that automatically redistributes the money to those who are already among the richest members of the population.
Meanwhile, who is taking care of the real economy?
Lie no 25: The monetary reformers’ lie no. 2: Income from work is better than unearned income
If we push this reasoning as far as it will go, it would be tantamount to dividing the world into those who work and those who do not work. The question then arises of how to assess whether a person deserves his or her income. The author suggests a few criteria: time, performance, turnover, effectiveness, qualifications, degree of commitment, family situation, being yourself, joy you bring to those around you….
Lie no 26: Money comes when you give it away
If we give because we have to, with the hope that it will come back to us, it is a waste of time. We have no guarantees that the money we give will come back to us, and in any case, this binds the act of generosity to an expectation, emptying it of its substance. What counts is how sincere we are in our donation.
Lie no 27: The lies about abundance
These days, there is a wide range of books, training courses and techniques that promise abundance. Does it work? That depends!
For the author, it is important to recognise that abundance is our birthright and that it is part of our life, both positive and negative. The assumption is that our world includes just as much that is beautiful as what is ugly, what is easy as much as what is difficult.
If we recognise that everything that is pleasant and beautiful is within our reach, we must also recognise that there are plenty of ugly and unpleasant things too. This complete acceptance of the universe leads to felicity. The best illustration of this thought is the famous Ying-Yang circle, where the Ying (female) is included in the Yang (male) and vice versa.
Our world today is built on a vision that highlights (the fear of) shortage and places us in a state of survival in the hope of a better future. Most of us live our daily lives in this state of survival and the most common economic theories are built on it too.
If you tell someone, “You have the right to abundance”, it could almost be too much, too wonderful and it may be that their first reflex would be to reject this idea because it is too extraordinary to assimilate. This is the path that Peter Koenig proposes, using money as a medium.
Lie no 28: Money is the problem, money is the solution
Money is often presented as being the source of all our problems but also as being the potential solution to those problems. This is never the case. If you take the time to observe and understand what creates a problem, it is generally the quality of the relationship between the parties.
Lie no 29: Money is not important… but makes life easier
In the same way as freedom, independence, security, happiness… life’s “ease” does not lie in money. According to the author, the importance of money lies in the fact that it shows us with precision the individual and collective paths that await us, in including the trap of lie number 30.
Lie no 30: Money is… whatever you think it is
The time has come to pick up the list that you wrote down at the beginning of this chronicle – “Money is…”
The experience of money is created by your thoughts, which create the experience, comforting you in your initial idea, which strengthens the concrete side of your experience and so on.
But the illusion is that the money is never in itself the value or the thing that you may have thought it up to now. Money is a blank screen onto which you project your thoughts, your value or something else. So, if you say that money is a medium of exchange, then money assumes this function atyour service. But it is just one function among others.
You yourself are the medium of exchange and you will remain that way, with or without money. And we forget that we are the source of our projections, so we come to consider that the “medium of exchange” function of money is a fundamental characteristic of the very nature of money. The relationship that you had with money when you were the source of the value projected onto it has disappeared and it seems to taken on a life of its own.
In practice, you now need money because it is a “medium of exchange”. You need to make some, compete for it or even fight with others to get it. You have forgotten that you yourself are the medium of exchange.
The pursuit of money is, in reality, nothing more and nothing less than a manifestation of a loss of connection with the value in question that you yourself possess.
The antidote to this projection mechanism
It is simple and precise. Look at your list again. Let’s say that you wrote “Money is the root of all evil” and “Money is freedom”.
Replace “money” with “I” and this becomes “I am the root of all evil”, and “I am freedom”.
For the process of reappropriation, do what you can to avoid passing judgement, reacting, and simply let it exist and make its way inside you. The process can take some time+, depending on how many layers are affected, and you must expect to be patient and kind to yourself.
Book critique of “30 lies about money” :
This book about money is very interesting because you can read it whether you have any knowledge of economics or not, and the way it is divided into chapters means that you can read it in small pieces and take your time or read it all in one go. I learned a number of things in the parts about interest, how it is calculated and its impact on the real economy.
I sometimes (often in fact!) had to make an effort to understand the logic of the calculations, but for some of you this will probably appear to be quite basic.
And, I also appreciate that the book covers a variety of themes in relation to money, whether reflections on the economy or more everyday beliefs and it seems to me to be a good introductory book on the subject of our relationship with money.
It quietly steers us toward a revolution in the vision that we have of the place money holds in our life. However, even if he gives us a very practical tool at the end, I think that it is a tool that it is not always easy to use alone because it is in direct opposition with our sometimes blindly held beliefs. The presence of a third party is welcome for anyone who wants to throw themselves into the proposed reappropriation at the end.
This proposal for reappropriation is what shifted things for me in my way of working and the way I guide people in my consultations. I have seen how working on the relationship with money is like a laser beam that takes us very quickly to the heart of what is not working inside us, whether emotions or beliefs. And as I also work in association, or even in collaboration, with the body, getting a person to say for example, “I am freedom” or “I am dirty” is a fast and very powerful tool in identifying and dislodging resistance.
A big “A-ha” and often a laugh are a sign that the body has understood and integrated the release before the mind does.
To go into more detail on questions about the economy, I suggest watching the documentary “Inside Job” which intelligently breaks down the mechanisms behind the subprime crisis in 2008 and in particular the role of banks and rating agencies, their interactions and how it all started well before 2008. It is a genuinely fascinating documentary.
My main complaint is that it sometimes feels that the arguments and the lies are not directly related and that he has mangled the logic in order to be able to demonstrate his argument.
In any case, it is a book in which you will always find something that will make you react and I am curious to know what your reactions are.
Strong points :
- Dividing the book into chapters means that you can read it in bite-sized chunks to assimilate the concepts or you can read it in one go.
- Covers a variety of themes from the world of economics to more everyday beliefs.
- Accessible to beginners and to more knowledgeable readers
- A very good point of entry for a book about our relationship with money and to decode the world that surrounds us.
- An informative book about money that is sure to provoke a reaction!
Weak points :
- The arguments are sometimes a bit flimsy
- If you are not too good at economics (like me), you may feel the need to check if the explanations are solid.
- You may find yourself wanting to know more about some of the economic approaches (but this could also be considered a strong point)
My rating :
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