The Ultimate Business Model 1. Virtually risk free, actually it really is 100% risk free. (subtract cost bellow item 2) 2. The product, lets say nominal value of 1 dollar per unit, costs nothing (ok maybe few hundreds of a penny to create total normal cost) 3. The buyers are guaranteed, they must use it by law. 4. On top of it, there is a premium charge for usage of the product per year. 5. Ofc the more product required by the nation, users, the more income to the âproducers â For the ones who guessed it right, enter the federal reserve, banking system. The product is debt. 1 and 2 above: what is the risk of creating debt? Few keystrokes, costs are virtually nothing. Money out of thin air! 3 the gov has to use the product(debt) and virtually every American has to use it on an individual level. 4 the premium charged is the interest on the debt paid out of the treasury, taxpayer is on the hook. 5 Well we all know what has been happening (just this last war for example is over a trillion) The more debt issued the more income for the lender. Next of huge importance, the fractional reserve lending system allowed for banks in general. Take your friendly XYZ bank. To keep it simple, its reserves are mainly customerâs deposits, earning letâs say 3% The fractional reserve lending scheme, allows the bank to lend out a multiple of its reserves. Meaning lending out money that bank doesnât really have. Letâs say at 5% reserve requirement, the bank is allowed to lend 20x So if there are 5,000 money (mainly customer deposits) the bank is allowed to lend 100k out at letâs say 9% interest rate, to buy a new house. A borrower could be the same customer that has deposits in that bank want a loan of 100k to buy a new house, and the bank writes it. Letâs examine this simple setup closely. The bank just created 95k out of thin air. The other 5k is really depositors money. The bank has very little into the deal, but it gets better. Two scenarios can happen: a. The borrower defaults and the bank ends up with the property. Amazing! Instantly money out of thin air is converted into real property. Bank sells the property at 50 cents on a dollar and now it has made a profit of 50k with virtually zero cost. The rest is shifting book entries and so on. b. The borrower keeps on paying the mortgage every year. The interest is income to the bank at nil investment from the bankâs side. Bank pays out 3% on 5k = $150, but earns 9% on 100k = $9000 per year. After 30 years of interest collecting, how much has the bank made? Multiples of the original loan. Not bad, not bad at all. Who benefits from increased creation of debt? A truly simple foolproof virtually riskless and amazingly profitable business model. Enough said. Itâs been a great trading week. Have a great weekend all.