Know the Game - Level 2 (3/22)
You ever look at your bank app and think, “Okay… I worked for this. So why does it still feel like I’m not moving?”
That feeling isn’t because you’re bad with money (even though that can also be). It’s because most people were taught the personal version of money… but not the system version.
Here’s the big truth that clears up a lot of confusion:
Most money is created when banks issue loans. Not when governments print bills. Not when you “earn” it. When debt is created.
Table of Contents
1. Two Stories of Money (Personal vs System)
2. The Big Lie: “Banks Lend Out Deposits”4. The Café Napkin Example (So It Finally Clicks)
5. Why This Changes Prices, Housing, and Your Life
6. Real-Life Examples (Rent, Mortgages, Groceries, Salaries)
9. The Incentive Engine Behind the Whole System
10. REAL TALK - Your 7-Minute Action Step
1. Two Ways Money Works (The One You Know vs. The One You Don’t)
Most people learn money like this:
- You work.
- You get paid.
- You save a little.
- You try to get ahead.
That’s the version of money you can see.
And it makes sense. It’s how bills get paid.
But there’s another version of money running in the background and almost nobody explains it.
Here’s the key difference:
Your money comes from work.
The system’s money comes from loans.
That’s where the confusion starts.
You’re playing by one set of rules,
while the system is playing by another.
This is why someone can:
- Work harder than ever
- Be responsible
- Avoid dumb decisions
…and still feel like the finish line keeps moving.
Because it does.
The system keeps adding new money through debt, not effort.
Once you see this, the rest of the article clicks into place.
Before we go any further, we need to clear up the biggest misunderstanding about banks.
2. The Big Lie: “Banks Lend Out Deposits”
Most people believe this:
Banks take deposits and lend them out.
Like your money is sitting in a vault and the bank hands it to someone else.
Reality is closer to this:
Banks create deposits when they issue loans.
Core Truth:
Most money is not earned first and spent later.
It is borrowed into existence, then paid for with future work.
3. How Money Is Actually Created (Step-by-Step)
Here’s how it works in real life:
You apply for a $300,000 mortgage. The bank approves you.
What you imagine happens:
- The bank “gives” you $300,000 from existing money.
What typically happens in a modern credit system:
- You sign the loan agreement (you owe $300,000 + interest).
- The bank records your loan as an asset.
- A matching deposit is created so the seller can be paid.
Debt created → money created.
Quick clarification: Central banks don’t create most everyday money directly. They set the rules - interest rates, liquidity, and risk conditions. Commercial banks then create money through lending inside that framework.
Think of central banks as setting the weather, and commercial banks deciding whether to sail.
4. The Café Napkin Example (So It Finally Clicks)
Picture a café tab.
You order coffee and a sandwich. The barista doesn’t go into the back and “find” your money.
They write a number next to your name.
That number becomes real because everyone agrees it’s real.
Banking works similarly but at a national scale.
5. Why This Changes Prices, Housing, and Your Life
If borrowing becomes easier, more money enters the system.
More money chasing the same assets usually means higher prices.
This is why housing can explode in price even when nothing about the house changed.
6. Real-Life Examples
Housing: More credit → higher bids → higher prices.
Rent: Rising home prices eventually raise rent.
Groceries: Prices adjust faster than wages.
Savings: Standing still in a moving system feels like falling behind.
This is why it feels personal - but isn’t.
You can be disciplined and responsible…
and still feel behind in a system that expands money faster than wages.
7. “So Is the Money Fake?”
It’s not fake like it won’t buy food.
It’s better described as permission-based.
One important nuance: money can also be destroyed. When loans are paid back or defaulted on, that money disappears.
The issue isn’t infinite money - it’s that modern systems rely on continuous expansion to remain stable.
8. “Isn’t This Normal?”
Yes. And that’s the point.
Credit isn’t evil. Borrowing can build real things.
The risk shows up when the system requires permanent growth just to avoid breaking.
9. The Incentive Engine Behind the Whole System
This doesn’t make the system evil.
It makes it predictable.
If borrowing and asset ownership are rewarded, that’s what grows.
If saving and waiting are punished, they disappear.
Knowing the game means seeing incentives clearly and without emotion.
10. REAL TALK - Your 7-Minute Action Step
Write this down:
“ Where am I making financial decisions based only on effort and discipline… while prices, housing, and opportunities move through credit? ”
This isn’t about blame. It’s about clarity.
11. Next Reads
- → Know the Game #2: The Day the Dollar Died
- → Know the Game #4: Inflation: How the System Quietly Takes From You
- → Know the Game #11: Incentives Rule the World
The Last 21 Gear
Tools for the men who choose sovereignty.
Know the Game — Level 2 (3/22)
How Money Is Really Created
You ever look at your bank app and think, “Okay… I worked for this. So why does it still feel like I’m not moving?” That feeling isn’t always because you’re bad with money (even though that can also be true). It’s because most people were taught the personal version of money… but not the system version.
Quick Reset (read this twice):
Most money isn’t created when you work.
Most money is created when banks issue loans.
Loan created → new money appears.
This article explains that one sentence and why it changes how you see prices, housing, and “falling behind.”
Table of Contents
- Two Ways Money Works (Personal vs System)
- The Big Myth: “Banks Lend Out Deposits”
- How Money Is Created (Step-by-Step)
- The Café Tab Example (So It Clicks)
- Why This Changes Prices, Housing, and Your Life
- Real-Life Examples (Rent, Mortgages, Groceries, Wages)
- “So Is the Money Fake?”
- “Isn’t This Normal?”
- The Incentive Engine Behind the System
- REAL TALK - Your 7-Minute Action Step
- Next Reads
1. Two Ways Money Works (Personal vs System)
Most people learn money like this:
- You work
- You get paid
- You save a little
- You try to build
That’s the version of money you can see. And it’s real. It’s how bills get paid.
But there’s another version of money running in the background and almost nobody explains it: the system creates money mainly through loans.
Here’s the difference in one line:
Your money usually comes from work. The system’s money mostly comes from credit.
That’s why you can be disciplined and still feel like the scoreboard keeps moving. Because it is.
2. The Big Myth: “Banks Lend Out Deposits”
Most people believe this:
Banks take deposits and then lend them out.
Like your money is sitting in a vault, and the bank hands it to someone else.
What’s closer to reality in modern banking:
Banks create a new deposit when they issue a loan.
Core Truth:
Most money is not earned first and spent later.
It is borrowed into existence… then paid for with future work.
3. How Money Is Created (Step-by-Step)
Here’s how it works in real life.
You apply for a $300,000 mortgage. The bank approves you.
What you imagine happens:
- The bank “gives” you $300,000 from existing money.
What typically happens:
- You sign a loan agreement (you owe $300,000 + interest).
- The bank records your loan as an asset (because you must repay).
- The bank creates a matching deposit so the seller can be paid.
Say it plainly:
Loan created → deposit created → new money appears.
Important nuance: Central banks don’t create most everyday money directly. They set the conditions (interest rates, rules, liquidity). Commercial banks decide how much lending happens inside that framework.
Think of it like this:
Central banks set the weather. Commercial banks decide whether to sail.
4. The Café Tab Example (So It Clicks)
Picture a café tab. You order a coffee and a sandwich.
The barista doesn’t go in the back and “find” your money. They write a number next to your name.
That number becomes real because everyone agrees it’s real and you’re expected to pay it later.
Banking works similarly, just on a national scale:
The promise comes first.
The money follows.
5. Why This Changes Prices, Housing, and Your Life
When borrowing becomes easier, more loans get issued. More loans means more new deposits. More deposits means more money in circulation.
And when more money chases the same limited things (houses, land, stocks, necessities), prices tend to rise.
That’s why housing can explode in price even when nothing about the house changed. The money supply behind the bidding changed.
6. Real-Life Examples (Rent, Mortgages, Groceries, Wages)
- Housing: More credit → higher bids → higher prices.
- Rent: Rising home prices eventually raise rent (landlords follow the market).
- Groceries: Prices adjust faster than wages, especially after monetary expansion.
- Savings: Standing still in a moving system feels like falling behind.
This is why it feels personal but isn’t. You can be responsible… and still feel behind in a system that expands money faster than wages.
7. “So Is the Money Fake?”
Not fake like it won’t buy food. Better description: permission-based.
One important nuance: Money can also be destroyed. When loans are paid back (or default and are written off), that created money disappears.
The bigger issue isn’t “infinite money.” It’s that modern systems often rely on continuous expansion to avoid stress.
8. “Isn’t This Normal?”
Yes. And that’s the point.
Credit isn’t evil. Borrowing can build real things (homes, businesses, infrastructure).
The risk shows up when a system needs permanent growth in lending just to stay stable - because then prices rise, debts stack, and the “average person” feels squeezed.
9. The Incentive Engine Behind the System
This doesn’t make the system evil. It makes it predictable.
Systems follow incentives:
- If borrowing and asset ownership are rewarded, that’s what grows.
- If saving and waiting are quietly punished (through inflation), fewer people do it.
Knowing the game means seeing incentives clearly, without emotion, so you can make decisions that match reality.
10. REAL TALK - Your 7-Minute Action Step
This is simple. No finance knowledge required.
Goal: Spot where credit is quietly running your life, even if you never think about “the system.”
-
Set a 7-minute timer.
Don’t overthink it. Just write. -
Write these 3 numbers:
- Monthly income: $_____
- Total monthly payments: $_____ (rent/mortgage, car, credit cards, subscriptions, loans)
- Money left after payments: $_____
Quick truth: If payments eat most of your income, you’re living inside a credit system - whether you like it or not.
-
Now answer ONE question:
What is the biggest payment in my life right now and what did it cost me in freedom?
Freedom could mean: options, time, stress, relationships, health, sleep, risk-taking, starting something new.
-
Make one move this week (choose one):
- Call and lower a bill or insurance payment
- Pay off one small debt completely (even if it’s annoying)
- Cancel one “leak” subscription you forgot about
- Set a hard rule: no new payments for 30 days
Pick one. Put the date next to it. Done.
Why this matters: The system expands through credit. The way you win personally is by protecting your cashflow and your freedom. Not by pretending effort alone is enough.
11. Next Reads
- → Know the Game #2: The Day the Dollar Died
-
→ Know the Game #4: Inflation is Theft: Here's the Proof
The Last 21 Gear
Tools for the men who choose sovereignty.
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