Follow the Money

Where does the money go, and who really owns it?

Suppose you suddenly received a million dollars. POOF! You just won the lottery and now have one million dollars ($1,000,000) after taxes.

What is the first thing you’re going to do with that million dollars? Pay off some debts? Give some money to your family members? Give some to your church? No, that’s not the first thing you’re going to do. The first thing you’re going to do with that million dollars is put it in the bank.

OK, so now you have that $1m in the bank. Who really owns that money? Why, you do, of course. It’s your money. But guess what. The bank owns it, too. That’s right, your bank treats it just as if the money belongs to the bank, and uses it to make more money. Did you think the bank has a little cash box with your name on it and that you can go to and look at your million dollars any time you want? Nope. The bank uses the money just as if it owned the money.

Therefore, you have $1m to do with as you please and the bank has that same $1m to do with as it pleases. You’re drawing interest on that money and making more money while the bank is investing it and making even more money. Therefore you own that $1m to do with as you please and the bank owns it to do as the bank pleases. Your name is on that money and the bank’s name is on that money.

Now suppose the bank loans out $1m to a construction firm. You have your name on that money; it’s in your account. The bank has its name on the money; it’s in the bank’s accounts receivable. The construction company owns that money; it’s in the company’s checking account. Three people equally own that same one million dollars.

The construction company uses the money to make payroll. Now whose money is it? It belongs to you, to the bank and to ten thousand other people all at the same time. What do the 10,000 people do with the money? They put it in the bank, pay their mortgages and bills, buy groceries, give to their church, buy clothes, put gas in the car, go on vacation, pay for education, and buy lottery tickets.

Now who owns the money? You do. The bank does. And 10,000 other people do. In short, the $1m that belongs to you is back in general circulation. It’s not in a box with your name on it gathering dust. Money is always in general circulation. You can’t keep it out of circulation.

When the United States sends a space ship to Mars that costs $300 million, what happens to that money? Do you think the capsule lands on Mars, breaks open and all the money falls out into the red dust? Of course not. Every penny of that $300m was spent on planet earth. The only thing we actually sent to Mars was some hunks of metal and plastic.

So what happened to that $300m? Some of it was used to pay scientists and other workers. What did they do with it? They put it in the bank, paid their mortgages, bought groceries, paid for their kid’s education and put the money into general circulation.

Have you ever driven by a big beautiful church and said, “Just think of all the poor people they could have fed with the money used to build that church”? Well guess what. They did feed the hungry people by giving them jobs. The seat cushions in the church are not stuffed with $100 bills. All the money it took to build the church went to workers: stone masons, brick layers, glass workers, electricians, carpenters, and plumbers. What did those people do with that money? They put it in the bank, paid their mortgages…

No matter what you do with money, no matter how much you own, money is always in general circulation. The same dollars can be owned again and again by a multitude of people. Nobody is keeping money from anyone else who works for it.

The old adage, “The Rich get richer and the Poor get poorer,” meaning that the Rich get rich by taking the money away from the poor, is just not true. For one thing, the Poor don’t have enough money to make the Rich rich. For another thing, the Poor have the same opportunity to go into business and create wealth, too. The reason the Rich get richer is because they understand the principles of economics and do those things that bring in more money. The Poor get poorer because they keep make the same financial mistakes over and over. What's worse, they teach their children by example and word how to make the same mistakes they're making.