Nelson Nash walks through a quiz showing how little people know, then breaks down typical household budgets: 20% on transportation, 33% on housing, with most purchases financed. He cites St. Louis Fed data on declining savings rates and argues that zero-percent financing is disguised discounting, promoting dividend-paying mutual life insurance as an alternative to traditional banking.
Well, this is a good time for a test.
You gotta have a test every once in a while. Plain sheet of paper, number one through ten. Okay. This is gonna be a ten question exam.
By the way. This is a new high school exit exam. Passing requires four correct answers.
Are you ready for question number one? Yep. How long did the Hundred Years War last?
Now don't giggle, Bob. This is serious business. Don't add the style.
Number two, which country makes Panama hats?
Number three, from which animal do we get cat. Good.
Number four, which month do Russians celebrate October revolution?
Number five, What's a camel's hair brush made of?
Number 6. The Canary Islands in the Atlantic are named after what animal?
Number seven. What was King George VI's first name?
Number eight, what color is a purple finch?
Number nine, where Chinese gooseberries from?
And the last question.
What'S the coda of the black box in a commercial airplane?
Are you ready for the answers?
The Hundred year war lasted 116 years.
Panama hats are made in equinor.
We get cat gut from sheep and horses.
Russians celebrate the October Revolution in November.
Camel's hair brush is made of squirrel fur.
Canary Islands are named after dogs. Had to look that up.
King George VI's first name was Albert.
The purple finch is crimson.
Chinese gooseberries come from New Zealand.
And the black box is orange. Of course. Yes. Did anybody pass?
That was close. I said red, crimson and red are close together.
What is that exercise we've just gone through? What does that tell you?
The more you know, the more you realize you didn't know. Yeah. All right.
In your notes you have this. This is a study that I did years ago that I've re examined regularly and the proportions still remain the same. Because there's something that Bill Bar said a number of years ago that substantiate all this. He says that Americans buy things they don't need with money they don't have to impress people they don't know who could care less.
Well, we gotta have these things, right? But it's not true at all. So this is my 29 year old making 28,500 a year and he'll spend 20% of whatever he makes on transportation year down.
Yeah, 20% goes to transportation of some kind. 35, 30% goes to housing. I lied. It's 33. 40% is going to living. I really lied there. I toned it down because I wanted to be able to say he was saving 10% or whatever he makes. And that's not true.
Negative interest rate or negative savings rate happened in the last few years you add all those up and it's 100%. But these things are financed. This is the interest on the automobile over a four year period of time. And that's perpetual because fully 90% of the cars sold in our part of the world are not paid for when they're trading in. They're not paid for. All right.
Typical mortgage only stays on the books five years. Grand Rapids, Michigan a number of years ago lady expert mortgages at that time she said it was only 2.6 years. Now something happens to mortgages. Here's the interest on the bank of Americard the book payments. That's comprehensive inclusion. There's all kind of forms of insurance out there that have no real purpose at all except people don't have any money. They can't afford to take care of something. Emergency that might come along. I saw a study here not too long ago where the typical person in the USA if an emergency of $400 came along, they could not handle it.
That's absurd. It doesn't have to be that way. It's all a mindset now. You get rid of the green, you have the.
Money that's going away from them that would be recovered again. Well that's a 34.5 to 10 ratio if they were saving 10% of their mates. Remember those numbers, 34.5 negative, 10 positive. Now this is the real savings rate according to the 2012 Research Department of St. Louis Federal Reserve. The shaded areas here are recessions. Here we are. 1960 USA types were saving 8%. Now you notice the ups and downs.
And you notice that back there in the recession of 74 we got all the way up to 14% and could not stand that prosperity. Now we'll look what happened here. It dropped a half in just a very short period of time. Well, look what has happened since that time.
It actually went negative. I tell you back at one point. Now here comes that last recession, 2008 bounced right back up at 8% and then just fell right in the same old pattern.
We keep doing the same stupid thing and it's all caused, but it's all created by the banking community.
I see commercials on TV where a zero turn John Deere, Moore lawnmower. You can have seven years or eight years financing on one of those things and you don't have to pay a thing the first year.
Tempur, pedic mattress. 8 years to pay for it on a mattress. Good lord. Yeah. Unbelievable.
But yet you see stadiums just full of spectators to sporting events. Right. Somehow they come up with those sporting events but if anything comes along out there that they get to pay for, they don't have the money for it, so they financed it. But let's go to the other extreme there of the sporting events and things like that. There's a commercial rather regularly there in Birmingham on the radio about don't miss out on your great vacation plans. These are memorable times that you want to spend with your family. Now if you don't have the money, we'll lend you the money to do your vacation with.
That's just like our old days, right Bob? Yeah, uh huh. Yeah. Golly. It's a mindset folks. You don't have to live this way.
There's a problem. All those items are financed either by credit cards or bank loans. And the balance is financed by paying cash that give it thus to enough interest. It could be hard otherwise. Now that goes back to a concept that Richard Canion came up with back 300 years ago. Money has a cost, but yet we hear people talk about 0% interest on their car. There is no such thing. That's just another form of discounting, that's all. Invariably if you redefine fret, they say or what's the or discounted price? Take the discounted price always.
They're financed by other banking organizations, not payers. Now this means the interest proportion of every dollar spent is perpetual. Now what people are going to get through their heads is that when you start up a banking business that you're starting a business from scratch that never existed before. Go back to the videotape.
Backing with life. And when you get the message of that video.
You understand that really a life insurance policy with a dividend paying mutual company is nothing more than a pre engineered trust agreement. That is all the life insurance companies, just your, your trustee, that is all. But you outrank everybody in access to the money that's got to be lent. Well, so it boils down to this, Bob. There's just a few rules to this entire concept. One is that think long range, make at least three generations. Two, don't be afraid to capitalize. The more capital you put in the business, the stronger it is, more premium you pay, the better off it is.
Number three is just don't do business with banks. Mary and I have seen black. I told you in 23 years that's very peaceful, stress free. And the.
Let'S see now, left out one fifth you have a new one. Yeah, the fifth one that we have there. But I seem like I've left out four from the. Yeah.
But the last one is rethink your thing. Don't steal the piece. Don't steal the piece. Yeah. All right. Thank you. I got your back. Don't steal the piece. Thank you. Thank you. Thank you. Don't do business with banks. Yeah. Don't. Yeah, yeah, yeah. Think long range. Don't be afraid to capitalize. Don't steal the fees. Don't do business with bank. And always rethink your thinking.
