Money Creation

Money makes the world go round! Therefore we must understand how it works, in order to attract it, keep it and make it work for us.

We are taught that the amount of money created in an economy depends on the monetary policy of the central bank. The monetary policy varies from setting the interest rate, printing notes, or even through purchasing assets or quantitative easing. Whichever way it’s created, money eventually ends up in the hands of the people through banks.

Banks are then required to hold a certain portion as reverses and they tend to loan the rest. This simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money. This money then circulates in the economy and eventually lands in your hands.

The big question is how do you claim your piece of the pie and retain that money in your pocket?

To be honest the best place to start is with your income. With every cent you earn, there should be at least 10 percent that you should keep. This is possible by getting into the habit of paying yourself first and being disciplined in that habit.

When you learn to keep what you earn, your money will start multiplying and you will be tempted to use it for your expenses. Please don’t give into that temptation; you have worked hard for that money and its time it worked for you. Therefore educate yourself on ways you can beat the system.

There is nothing as sad as losing saved money over irrationality and impulsiveness. So always seek counsel from people who are already doing well in making money work for them. Never trust naysayers or people who lack experience in this topic to give you advice. Neither should you go with the crowd and follow the next big money making scheme.

Creating money is a process that should be enjoyed, so it’s not advisable to invest in something you hate. However financial literacy is vital, you need to know the difference between assets and liabilities so that you understand the importance of accumulating more assets. You also need to learn where to put your money for it to multiply and also understand the law that relates to investing

I often hear people say money is energy and you need to vibrate in its frequency. I get that, but for me money creation is a decision.  The human experience offers us the power of decision making, and a small decision such as controlling your expenses and refraining from solving other people’s money problems could save you a lot.

As an advice, learn to protect small amounts first. Wealth is like a tree it grows from the smallest seed, so the sooner you plant the seed the sooner the tree grows.

References

Clason, G.S. (1926): The Richest Man in Babylon. Penguin Books. London.

Kiyosaki, R (2000): Rich Dad, Poor Dad. Grand Central Publishing. New York City.

McLeay, M, Radia, A & Thomas, R. (2014): Money creation in the modern economy. Bank of England.https://www.filosofiadeldebito.it/wordpress/wp-content/uploads/2017/05/BoE-Money-Creation.pdf

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