You need to pay attention to the new breed of “bank”

In today’s Exponential Investor…

  • The perfect storm of where’s my money?
  • Control – taketh and giveth away
  • 12% APY on savings

If you read yesterday’s Exponential Investor then you, like me, might be part of the problem of £50 billion that’s “missing” in the British economy.

The reality is, that it’s not missing at all. It’s just unaccounted for. It’s out there, somewhere, with someone maybe even taking part in the “shadow economy”.

Of course, there is a quick fire way to eliminate that.

Digital “programmable” money.

That’s how the Bank of England and the financial authorities can keep track of all money circulating in the UK and around the world. It might even end up in a situation where you’re issued with a BoE digital wallet for life the day you’re born.

It would also make the recovery of money of people who die without an estate all that much easier. It would also make taxing everyone the right amounts easier too.

Come to think about it, there’s really no reason why the BoE and every other central bank on earth wouldn’t transition their currency to a digital currency.

As I say, it’s not a huge leap from what they do now. But quite likely it will have a few more advantages around the “track and trace” nature of it.

Here’s the thing, there’s really not much you can do if this happens. In fact, it probably leaves you with just one option when it comes to options around your finances. You either stay latched to the traditional financial system as we know it… or you look for an alternative.

Control is everything

I see there being a convergence of ideals right now that paints a strong case for “alternative” money.

For a start, what we’ve seen over the last couple of decades is a faster and greater divergence between socioeconomic levels. In other words, the rich are getting richer and the poor are getting comparatively poorer.

Wealth inequality is an issue that concerns a lot of people. And for those on the low end of that spectrum, “concern” doesn’t even to begin to describe it.

Add that to the very public coverage of the central bank flooding the economy with more money. You very quickly end up with people who are simply struggling to put food on the table ask the question, “Where the **** is all this money going?”

It sure isn’t going to them.

You also then end up with the taxpayers asking the question if rampant money printing is going towards all these stimulus measures and bailout packages then, “Where the **** is all my tax money going?”

Then with the possibility that central banks will look to quickly move to digital currencies with stronger track and trace features, it all points to one outcome…

Less control over your money.

Now I’m going to suggest it’s fair to think one of the things you definitely want more control over is your money. Less control is not an option.

There is and maybe will always be an element of control that we all lack over our money.

For instance, you might be invested in the share market. Now you’ve got control over what you invest in and how much. But you don’t have (well in most cases you don’t have) that much control over how that company performs. You want them to succeed and perform and deliver a return on your investment. But ultimately you’re taking an element of risk there for potential reward.

You’re making your money work for you. Now there’s of course nothing wrong with that. Investing in the market is an element of taking control over your money, but at the same time ceding an element of that control.

The thing is that when you’re invested properly, that also takes a strong element of control away from the central authorities.

They will attempt control via mechanisms like tax on you and on the companies that you’re invested in. There are also regulations and legislation that will come and go attempting to move industry in a certain way.

But again you can invest according to some of those control mechanisms in order to help mitigate them.

That’s what’s so important about being invested and making your money work for you – and importantly inside the right kind of investment vehicle – you yield an element of control, but also regain control because of how you can move that money and where you can move it to.

The new “crypto bank”

Of course your money sitting in a bank account does not in my view retain control in the same way that investing can. There is of course a safety element that people desire which compels them to leave money in its most basic form in a bank account.

There are of course day-to-day requirements needed that require money to sit in a bank account. But control is not one such feature of cash in a bank account.

You constantly lose value of it, every single day, thanks to inflation. You also gain no interest on it sitting there, thanks to zero rates implemented from the central bank and the retail banks ensuring that you get no benefit either.

Also, money sat in a bank account is easy to find from any authority at any time. Again, there’s no suggestion they’re going to nick it from you. But by all means it’s one of the weaker controls you have over you money.

Then of course there’s an alternative solution like crypto assets. If you’re thinking about regaining control over your money, then this is an area like the share market in which you do take on far more control, but at the same time relinquish an element of it, with the risks that come with crypto markets.

There are however also some other, new, potentially game-changing aspects of crypto that are starting to make the traditional banking system look like the broken, flawed system it is.

One such aspect is the ability to generate double-digit interest rates on “crypto cash” savings.

Think of it like a fixed interest account where you can earn as much as 12% APY sometimes, but then also access the funds at any time. That’s 1,200-times greater return than I get on my bank “savings” account.

Imagine that. A “crypto bank” account that lets you earn 12% APY on your funds. This is something I’m exploring more. If it proves to be as effective as it appears to be, it might be the single biggest game changer we’ve seen in finance since the creation of bitcoin.

If you’re talking about taking back control of your money – which I always do – then keep a close eye out because this is something I’m going to dig into more in the coming weeks and is something everyone needs to pay attention to.

Regards,

Sam Volkering
Editor, Exponential Investor

Category: Cryptocurrency

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