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Political Information
Inverting the Time Value of Money Business Model
By John Beasley with comments by Ron
Apr 6, 2020 - 12:36:35 AM

https://theduran.com/inverting-the-time-value-of-money-business-model/

  • The oligarchs, for lack of a better term, own the banking cartels. The banking cartels are calculated to hold a controlling investment in seventy-five percent of the publicly traded corporate stocks worldwide.

The general consensus is that banking institutions like the Federal Reserve Bank cannot charge standard interest rates for the use of capital. The reason lenders cannot charge ten percent interest in the USA is that debt is so pervasive that the US Federal Government and private borrowers cannot support any more debt when interest rates are high. This theory holds that interest rates have fallen to one percent or two percent, and could go to zero or negative percentage rates to sustain economic growth.

I would like to argue exactly the opposite case. All the interest, minus a small loan- servicing fee, is now being collected at the beginning of the loan period rather than over the life of the loan. The selling price of residential and commercial real estate is being doubled and even tripled in value. (The same thing is being done with automobiles, trucks and consumer goods).

 

A $100,000 dollar home loan at ten percent interest for thirty years would have a payment of about $877 a month. The interest paid over the life of that $100,000 loan would be $215,925. At two percent interest the same $100,000 dollar home loan would have a payment of only $370 a month. The interest paid over the life of that loan would be about $33,200 dollars. At two percent interest that same monthly payment of $877 would support a retail home value of $237, 400 dollars. This entire $237,400 would go into the economy when the house is built and sold rather than over the thirty-year life of the home loan.

This business model using a high selling price and a low interest rate pushes more money into the economy faster. This can be seen as an inversion of the "Time Value of Money" business equation. The "Time Value of Money" business model takes an investment and discounts the rate of return to compensate for the timing of the cash flows, discounts for all forms of identifiable risks, discounts for various forms of inflation, and subtracts a risk free return, such as treasury bills, from the actual cash flows to arrive at what is called the "Net Present Value" of the cash flows for this investment.

[Ron: Money and currency (ie the fraudulent fiat debt notes called USD) really have and should have NO VALUE. They should be issued interest (usury) free because they are are created out of thin air and have no real value. Money and currency is essentially a lubricant used to assist in the transfer of goods and services which have real value because they represent human ingenuity and labour and the planet's physical resources.].

What if an investor could do away with those risk factors and those discounts that the "Time Value of Money" equation identifies? What if an investor could take all the equity and interest out of a project as soon as possible, in the first or second year of the investment, rather than over the thirty-year life of the loan? If the cost to build the $100,000 dollar home is about $75,000 and if at two percent interest that home could be sold for $237,400 dollars then the Internal Rate of Return on that investment would be about 216%. That is much better return than a ten percent return on capital.

My read on the American housing boom in the early 2000's as well as the current residential and commercial building boom, is that the Federal Reserve Bank has lowered interest rates that allowed for the doubling or tripling in the selling price of buildings to maintain the same affordable payment schedules.

[Ron: I disagree. The doubling and trebling (and more) of the selling price of buildings and everything else except human labour in recent decades was due to the Fed creating huge quantities of fiat currency and issuing it into the economy in order to maintain sufficient liquidity to prevent the economy collapsing. That process was necessary to maintain the commercial banks' usurious lending PONZI scheme. It necessarily caused inflation, ie a constant reduction in the value (ie a devaluation) of the currency. The interest rates were not lowered to enable the doubling and tripling of selling prices but because increased lending was essential to maintain the commercial banking PONZI scheme; and that resulted in the population becoming increasingly burdened with debt. For instance, had interest rates been kept at the near 20% rate reached in the early 1990s almost everyone would have been bankrupted and the population would have rebelled and hung the politicians and the banksters. The banksters operate a carefully modulated usury scheme that only bankrupts a small percentage of the population at any given time in order to deceive the gullible population into thinking that those having their property stolen by being bankrupted are at fault whereas it it is the usurious banking system that is the root cause of the problem.].

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Goodbye Dollar, It Was Nice Knowing You!

The oligarchs, for lack of a better term, own the banking cartels. The banking cartels are calculated to hold a controlling investment in seventy-five percent of the publicly traded corporate stocks worldwide. The oligarchs and banking cartel that controls Wall Street also owns an estimated ninety percent of the construction materials and the construction manufacturing industry.

[Ron: This author says that a tiny cabal of banksters OWN 75% of all publicly traded corporate stocks and an estimated 90% of the construction materials and the construction manufacturing industry globally and that therefore they can take their profit on the sale of tangible real estate assets at the point of sale and not take it in interest payment increments over say, 30 years ie the term of a bank loan. He reckons that means that many sectors of the economy are running on a twenty-five or thirty- five percent annual return on investment. IF he is right, what does that say about the money meme economy in which we live and does that imply that when the banks were charging 10 to 20 percent interest on loans the corporatists were not charging excessive prices for construction projects?

This analysis seems to ignore the fact that since the establishment of the Federal Reserve System in 1913, interest charges by banks have siphoned huge sums of money out of the US economy every year and that the banks have had to create loans to distribute into the economy ever greater sums of money to enable their usurious Ponzi scheme to continue. THAT process has caused price inflation, ie a devaluation of the USD to the extent that today a US dollar barely buys more than one cent could purchase in 1913.

Also, this analysis ignores the fact that a real cost  of any construction is wages and salaries of workers AND that those wages and salaries have been subject to huge increases in personal income taxation which commenced at 1% in 1914 and are now typically 30%.

To assume that the banksters and corporatists can simply front-end load all or much of the profit margin on their production that is usually extracted via bank loans over a period of 30 years is unrealistic. The beauty of usury for banksters is that their THEFT IS gradual and incremental. It also begs the question: "WHY should banksters seek or get profits from construction projects to which they DO NOT contribute any labour or anything else of real value?].

This provides an opportunity to take the profit in this investment at a different point in the investment "supply chain." What we learned in the 1980's and 1990's from "supply chain management business modeling" is that a profit can be taken at any point in the development process. A profit does not have to be taken where it is earned and it can be taken before it is earned.

These low interest rates allow companies to pull equity out of projects at the earliest possible date. I would argue the economy is not running on a one percent to three percent margin. Many sectors of the economy are running on a twenty-five or thirty- five percent annual return on investment. The investment return is being taken in the first or second year of a projects existence rather than over the life of the investment. Of course, this inverted business model that pulls the majority of the cash out of an investment at the beginning of the investment requires constant construction to sustain these higher than average cash flows.

The banking cartels are calculated to hold a controlling investment in seventy-five percent of the publicly traded corporate stocks worldwide. The oligarchs and banking cartel that controls Wall Street also owns an estimated ninety percent of the construction materials and the construction manufacturing industry

One question that comes to mind is who would benefit from pumping large amounts of cash into the economy to create "inventories" of tangible real assets? Why would an investment cartel be more interested in converting cash into tangible assets rather than prudently holding onto their cash reserves and waiting for a market correction to invest? Could this possibly be a calculated hedge against hyperinflation or dollar devaluation?

[Ron: What a silly question! The banking cartels create currency fraudulently called money out of thin air and use it to buy up tangible assets because currency is worthless and tangible assets are real wealth. If this author is correct in saying:

'The banking cartels are calculated to hold a controlling investment in seventy-five percent of the publicly traded corporate stocks worldwide. The oligarchs and banking cartel that controls Wall Street also owns an estimated ninety percent of the construction materials and the construction manufacturing industry.'

THEN the banking cartels already OWN most of the commercial real assets in our world and all they are doing is increasing their ownership of the worlds' REAL WEALTH. WHY wouldn't they continue to do that? After all, if for some reason they want more CASH' all they have to do is type some figures into their bank computers to get it?].

Concluding comments:

This author says that a tiny cabal of banksters OWN 75% of all publicly traded corporate stocks and an estimated 90% of the construction materials and the construction manufacturing industry globally and that therefore they can take their profit on the sale of tangible real estate assets at the point of sale and not take it in interest payment increments over say, 30 years ie the term of a bank loan. He reckons that means that many sectors of the economy are running on a twenty-five or thirty- five percent annual return on investment. IF he is right, what does that say about the money meme economy in which we live and does that imply that when the banks were charging 10 to 20 percent interest on loans the corporatists were not charging excessive prices for construction projects?

This analysis seems to ignore the fact that since the establishment of the Federal Reserve System in 1913, interest charges by banks have siphoned huge sums of money out of the US economy every year and that the banks have had to create loans to distribute into the economy ever greater sums of money to enable their usurious Ponzi scheme to continue. THAT process has caused price inflation, ie a devaluation of the USD to the extent that today a US dollar barely buys more than one cent could purchase in 1913.

Also, this analysis ignores the fact that a real cost of any construction is the wages and salaries of workers AND that those wages and salaries have been subject to huge increases in personal income taxation which commenced at 1% in 1914 and are now typically 30%.

To assume that the banksters and corporatists can simply front-end load all or much of the profit margin on their production that is usually extracted via bank loans over a period of 30 years is unrealistic. The beauty of usury for banksters is that their THEFT IS gradual and incremental. It also begs the question: "WHY should banksters seek or get profits from construction projects to which they DO NOT contribute any labour or anything else of real value? ].

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