Welcome to the second part of our informative series where we delve into the roles of banks, gold, and property in the financial world. In our previous instalment, we laid the groundwork by discussing the value of property as an investment. Now, we’re ready to take a closer look at how banks operate, the significant advantages of investing in real estate, and the vital role gold plays in diversifying your assets.
Why Invest in Property?
One of the primary reasons for investing in property is leverage. But what does that mean? Leverage refers to the ability to amplify your returns by using borrowed funds. For example, if you purchase a property worth £100,000 with a 25% down payment (£25,000), the bank finances the remaining 75% (£75,000). This mechanism allows you to use £100,000 to potentially acquire four properties instead of buying just one outright. These strategic investments can significantly increase your potential profits.
The Nature of Our Debt System
In today’s economy, we live in a debt system where understanding how money and banks operate is crucial. Many people believe that when they deposit money into a bank, it is secure and available for their use at any time. However, the reality is that when you deposit funds, you are effectively lending that money to the bank. This notion may come as a surprise, but it’s essential to recognize that if a bank were to fail, your funds—although theoretically protected—could be at risk of non-accessibility.
The banking system works through a series of transactions that occur digitally rather than in physical currency. If no one borrows money from banks, money, as we know it, wouldn’t exist. This leads to a fundamental question: Is your money truly safe in the bank?
The Risk of Bank Failures
Historically, many people have trusted their banks, believing that their money is safeguarded by government assurances of protection. However, the case of Cyprus illustrates the potential pitfalls. During the banking crisis there, even with government guarantees, people found themselves waiting indefinitely to access their funds after the banks failed. Such events remind us that even in well-regulated regions, banks are not infallible, and financial security can, at times, be an illusion.
The Importance of Gold
Now, let’s discuss a crucial asset that offers stability: gold. Investing in gold provides you with a secure alternative outside the banking system. Unlike bank deposits that can be subject to failures and restrictions, gold can be stored privately and is less volatile compared to other forms of investment.
Why You Should Consider Gold
Security: Gold is a tangible asset that you can hold, mitigating the risks associated with bank failures.
Stability: Gold retains its value over time and tends to perform well even during economic downturns.
No Counterparty Risk: When you buy gold, it is yours and free from any obligations to banks or governments.
Conclusion
In this instalment, we have examined the complexities of our banking system, the invaluable advantages of investing in property, and how gold serves as a safe haven for your wealth. Understanding these concepts is critical for making informed investment decisions that can safeguard your financial future.
As we move forward in this series, let’s remain vigilant and educated about our financial choices. Thank you for joining us, and stay tuned for more insights in the upcoming part of our series!