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Debt - The Good, The Bad & The Opportunity · Money And Wealth With John Hope Bryant

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Speaker 1: Welcome the Money in Wealth with John O'Bryant, a production
0:49
Speaker 1: of the Black Effect Podcast Network and iHeartRadio. Yo Yo,
1:01
Speaker 1: this is John Hope Bryant and this is Money and
1:03
Speaker 1: Wealth on the iHeart Radio Network and The Black Effect,
1:08
Speaker 1: where I am honored to be associated with Charlemagne and
1:13
Speaker 1: the team over there, who is fantastic. By the way,
1:17
Speaker 1: and this is a very special podcast episode, something that
1:23
Speaker 1: many many people have asked me about, and it just
1:27
Speaker 1: shows that somebody that's so called as smart as me,
1:31
Speaker 1: so called can be dumbest rocks. What I mean by
1:35
Speaker 1: that is, this is a topic that I should have
1:37
Speaker 1: covered in episode one, but I just basically assumed whenever
1:42
Speaker 1: you assume, you make a you know what out of
1:43
Speaker 1: you and me, I just always assumed this was a
1:46
Speaker 1: topic everybody understood, so I didn't cover it specifically. I
1:49
Speaker 1: talked around it, I talked through it, and then I
1:52
Speaker 1: just realized that one of our biggest problems this issue
1:56
Speaker 1: of debt. And you even have some people there's certain influences,
2:00
Speaker 1: if you want to call it that, who talk about
2:04
Speaker 1: debt in a way, whether they just say that you
2:06
Speaker 1: shouldn't have it right right, that it's just a bad
2:09
Speaker 1: thing and you should be dead free. And we've talked
2:11
Speaker 1: that into society, and we talked that into people's heads,
2:15
Speaker 1: and people have really and by the way, it's a
2:17
Speaker 1: beautiful ambition. Certainly if you're a senior citizen, or if
2:23
Speaker 1: you're a married couple who doesn't manage to handle stress, well,
2:28
Speaker 1: you know, you can go on and on and on.
2:30
Speaker 1: There's all kind of examples of why certain people should
2:32
Speaker 1: not have any debt or much debt, because it just
2:36
Speaker 1: it eat eats away with their peace of mind. But
2:39
Speaker 1: we're not talking about those people. We're talking about you.
2:44
Speaker 1: You've been doing so much with so little for so long,
2:46
Speaker 1: you can almost do anything with nothing. We're talking about
2:49
Speaker 1: a survivor. We're talking about somebody who wants to thrive.
2:52
Speaker 1: We're talking about somebody wants to build. Were talking about
2:54
Speaker 1: somebody who is, to quote my friend departed friend, doctor
2:58
Speaker 1: Dorothy Hyde, is a dreaming with a shovel in their hands.
3:02
Speaker 1: We're talking about about somebody who's over and around it,
3:05
Speaker 1: through it, They're going to get to it. We're talking
3:06
Speaker 1: about somebody who knows how to do it. We're talking
3:08
Speaker 1: about somebody who we're starting to preach now now we're
3:11
Speaker 1: talking about somebody who knows how to succeed or wants
3:14
Speaker 1: to succeed and just wants to know how. And you
3:17
Speaker 1: know that somebody's been holding information back from you, and
3:21
Speaker 1: you want to be set free. You just want the
3:24
Speaker 1: opportunity again. This is like a rap and it's so
3:30
Speaker 1: I apologize first of all for not breaking this down,
3:33
Speaker 1: because it is untrue that dead is just simply bad.
3:37
Speaker 1: It is just functional. In fact, I only is it untrue,
3:40
Speaker 1: it's not even true for the people who are telling
3:41
Speaker 1: you that. So that all the folks telling you that
3:44
Speaker 1: dead is bad have good debt. All the folks who
3:48
Speaker 1: are on TV telling poor people and struggling people and
3:51
Speaker 1: telling the coming up generation you shouldn't own a home
3:55
Speaker 1: because it's thirty years worth of dead or whatever they're
3:59
Speaker 1: mentality is, whatever the rationality is. To all those people
4:03
Speaker 1: who tell you not to own a home on TV,
4:06
Speaker 1: listen to me, now own a home. Repeat that. All
4:09
Speaker 1: the folks who are on TV telling you, the rich
4:11
Speaker 1: people on television telling you not to own a home,
4:14
Speaker 1: I guarantee you own a home. Why do I know
4:17
Speaker 1: that because tax policy in the United States is really
4:21
Speaker 1: designed around home ownership, is designed around real estate, specifically
4:26
Speaker 1: home ownership, single family residential home ownership in real estate.
4:32
Speaker 1: And they're not going to benefit. They're not going to
4:34
Speaker 1: lose out on one of the best tax policies ever
4:36
Speaker 1: created in modern society for any I mean, we're the
4:40
Speaker 1: biggest economy in the world, the United States of America,
4:43
Speaker 1: approaching thirty trillion dollars. Seventy five percent of whites own
4:48
Speaker 1: a home compared to forty one, forty two, forty three,
4:53
Speaker 1: forty four percent on a good day of blacks who
4:55
Speaker 1: own a home. That delta, that difference of thirty percent
4:58
Speaker 1: is a big chunk of generational wealth. So I can't
5:02
Speaker 1: quite figure out why my wealthy friends keep giving my
5:05
Speaker 1: poor and struggling friends bad advice. But I'm here to
5:09
Speaker 1: break that cycle. I'm here to tell you the good,
5:12
Speaker 1: the bad, and the opportunity. That's what this type, that's
5:14
Speaker 1: what this segment is called. I want you to get
5:16
Speaker 1: around a radio, get around your iPhone, get around your smartphone,
5:20
Speaker 1: get around your iPad, get around you, get around your
5:22
Speaker 1: your your streaming device, and get your friends together and
5:25
Speaker 1: let's have this conversation. And I want you to really
5:28
Speaker 1: chop it up. I want you to I want you
5:30
Speaker 1: to have genuine conversation, go back and forth with this
5:32
Speaker 1: and send me questions on social media, and I guarantee
5:35
Speaker 1: you I will answer. This is what's going to be controversial.
5:37
Speaker 1: I've already broken one taboo. I've already said, you know
5:41
Speaker 1: that all debt's not not bad, right, So that's already
5:46
Speaker 1: one taboo that is out there that I'm sure it
5:50
Speaker 1: is going to calls us a lot of consternation. I'm
5:52
Speaker 1: not down playing. I'm not talking down to any social
5:55
Speaker 1: media advocate. I'm not talking down talking down to any
5:59
Speaker 1: financial literacy advisor or financial literacy so called expert or expert.
6:03
Speaker 1: Here's a difference. I'm an entrepreneur. I'm running real businesses.
6:08
Speaker 1: I have built real businesses. A lot of the people
6:10
Speaker 1: who are teaching this are really expert in the theory
6:13
Speaker 1: of money, and they may know more about me by
6:16
Speaker 1: the way in different products and things around the theory
6:19
Speaker 1: of money, but on the practicality and application of money
6:24
Speaker 1: in the instruments and the philosophies of running a business
6:28
Speaker 1: and building something. This is an example where PhD DO
6:31
Speaker 1: is just as good as PhD and in certain cases
6:35
Speaker 1: might be more important. PhD is great, PhD sometimes sometimes
6:40
Speaker 1: are better. You need really both. I have my company.
6:43
Speaker 1: People have degrees. All people work from here highly qualified
6:47
Speaker 1: it with degrees, more degrees than me. But I have
6:49
Speaker 1: a degree in leadership and initiative in building something and
6:52
Speaker 1: taking an idea and turning it into something. And my
6:55
Speaker 1: friend Jim Clifton of Gallup used to say, than the
6:58
Speaker 1: innovation without a customer to it is not a business.
7:01
Speaker 1: And without a business, you can't build wealth. And you
7:04
Speaker 1: and so you build wealth and your sleep in one
7:08
Speaker 1: of the ways you build that is well, your sleep
7:10
Speaker 1: is compounding. And one of the way the leverage, moderately
7:13
Speaker 1: leveraged compounding is good debt. So the differentiator between me
7:18
Speaker 1: and the other people is that I am I think
7:21
Speaker 1: I'm the only one that I can one. I'm the
7:22
Speaker 1: only one I know of who's out here preaching good
7:26
Speaker 1: capitalism and good debt, who's actually using it in a
7:30
Speaker 1: fast growing set of businesses, not who are not dependent
7:34
Speaker 1: upon the advice that they're talking other is not a
7:36
Speaker 1: seminar businesses and not a books selling business. Good that stuff.
7:40
Speaker 1: By the way, I'm running a real estate business, an
7:42
Speaker 1: intellectual property rights business, a advisory business, Fall Street and
7:48
Speaker 1: to Fortune five hundred companies. I'm running a financial literacy
7:52
Speaker 1: coaching organization that's the biggest in the country. In fact,
7:55
Speaker 1: three of my businesses are in themselves the biggest in
7:59
Speaker 1: the country. So I'm a practical entrepreneur. That's the point
8:02
Speaker 1: I'm making. So let's talk about is debt good? Right,
8:06
Speaker 1: and let's just unpack it all, and then let's get
8:09
Speaker 1: into good debt versus bad debt. So let's talk about
8:14
Speaker 1: the history of debt in society. And I'm going to
8:19
Speaker 1: talk about my own history by the way of debt.
8:21
Speaker 1: And let me just say this right off the bat.
8:24
Speaker 1: If it wasn't for good debt, and I even used
8:27
Speaker 1: bad debt for a time, I didn't know the difference.
8:30
Speaker 1: I was just running the hustling I had to outrun
8:33
Speaker 1: the high interest rates that were on tied to the
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Speaker 1: bad debt of using it for good purposes, Which just
8:37
Speaker 1: shows you the power of debt that if you use
8:40
Speaker 1: bad debt for a good purpose and you run really fast,
8:43
Speaker 1: you can outrun the cost of the bad debt with
8:46
Speaker 1: the benefit of the of the good opportunity and still succeed,
8:49
Speaker 1: which was my story early on when I had used
8:51
Speaker 1: bad credit cards for a good purpose, when I was
8:53
Speaker 1: running my businesses as a teenager. I I can't underscore
9:01
Speaker 1: enough how this entire topic requires financial literacy. I can
9:05
Speaker 1: underscore enough why you need to talk to a range
9:08
Speaker 1: of advisors and don't just go off here and just say, well,
9:12
Speaker 1: debt's good. That's not what I'm saying. In fact, too
9:14
Speaker 1: much debt and this will crush you. You got to get
9:16
Speaker 1: this particular conversation exactly right. Why did I use debt
9:20
Speaker 1: because I didn't have equity, because black people and brown
9:23
Speaker 1: people did not have access to equity. I did not
9:27
Speaker 1: have access to equity. I did not have inherited wealth.
9:30
Speaker 1: My parents were not endowed in that way, and so
9:34
Speaker 1: I had to use what was in front of me. So,
9:37
Speaker 1: by the way, is debt capital? Is debt a form
9:40
Speaker 1: of capital? Yes, this is the first definition. Debt and
9:44
Speaker 1: equity loans and earned or received ownership collateral or ownership
9:52
Speaker 1: assets equity. Those two things are both forms of capital.
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Speaker 1: One's debt capital, one's equity capital. Debt capital, you o,
10:01
Speaker 1: somebody got to pay it back. Equity capital theoretically it's
10:06
Speaker 1: yours or somebody gave it to you. There's no loan attached,
10:09
Speaker 1: there's no payment attached to it. Just to make this
10:11
Speaker 1: real simple, one simple rule in business is you never
10:14
Speaker 1: want to finance long term equity with short term debts.
10:17
Speaker 1: You don't want to try to finance a long term
10:19
Speaker 1: business prospect using short term debt that you have to
10:26
Speaker 1: make a payment on. But that's just a that's an
10:28
Speaker 1: aside getting them ahead of myself. Let me talk about
10:31
Speaker 1: why I differentiate, first of all, my advice and my
10:34
Speaker 1: approach to some of my wealthy friends who say just
10:38
Speaker 1: debt is bad. In inner cities and underserved communities, particularly
10:43
Speaker 1: the black community, we have historically relied on debt as
10:46
Speaker 1: a form of capital because there were systemically, we were
10:50
Speaker 1: systemically excluded from accessing equity and generational wealth. This exclusion
10:57
Speaker 1: was not accidental result of racist policies in the twentieth century,
11:04
Speaker 1: even before that, going back to slavery, of course, discrimination,
11:09
Speaker 1: discriminatory financial systems, and structural economic barriers that limited wealth
11:15
Speaker 1: building opportunities. And let me break this down by the way,
11:19
Speaker 1: if you don't need this history lesson, just fast forward
11:22
Speaker 1: on the podcast to the practical advice when I get
11:25
Speaker 1: into good debt and bad debt. But for some people,
11:27
Speaker 1: this for those people who living in this situation, you
11:29
Speaker 1: need to know that you're not dumb, you're not stupid.
11:31
Speaker 1: It's what you don't know that you don't know that's
11:33
Speaker 1: killing you, but you think you know. You need to
11:35
Speaker 1: unlearn what people have taught you in I don't know,
11:38
Speaker 1: even church, maybe about why that is supposedly a bad
11:43
Speaker 1: or evil thing. The Bible. Bible does not say that
11:45
Speaker 1: money is bad. The Bible says the love of money
11:48
Speaker 1: is bad. Hello, Hello, can I get in a man?
11:53
Speaker 1: So you maybe the unlearned some things and you may
11:56
Speaker 1: capitalism is bad. No, capitalism is not bad. Look, even
12:00
Speaker 1: if you want to distribute money like a socialist ship
12:02
Speaker 1: to first collect it like a capitalist. So even the
12:05
Speaker 1: church can't survive without tides and offering contributions and pay
12:09
Speaker 1: their bills. So let's knock off facillity stuff. Capitalism has
12:13
Speaker 1: been around since the beginning of time and get into
12:15
Speaker 1: this with a history of debt. But let me for
12:18
Speaker 1: some people this is really important message to understand that
12:20
Speaker 1: they're not dumb and in that stupid there's a reason
12:22
Speaker 1: why they start They start out behind the starting line
12:26
Speaker 1: and people or mainstream it's important to understand why there
12:30
Speaker 1: needs to be a leveling of the playing field for
12:32
Speaker 1: certain groups. That everybody is not starting out even and
12:35
Speaker 1: you just can't say if you have merit that is
12:37
Speaker 1: good enough. That is just not true. That's why people
12:41
Speaker 1: go to Harvard and not a community college. Harvard may
12:44
Speaker 1: not treat you to teach you any anything more. But
12:46
Speaker 1: it's a club. It's a relationship with people who can
12:48
Speaker 1: to hook each other up for the next forty years.
12:49
Speaker 1: That is a form of capital. By the way, that's
12:51
Speaker 1: relationship capital. It's a different video, it's a different podcast.
12:54
Speaker 1: Or do a separate podcast on relationship capital. Slavery The
12:58
Speaker 1: history of exclusion from equity and wealth building and slavery
13:01
Speaker 1: in the wealth Gap was sixteen nineteen to eighteen sixty five.
13:05
Speaker 1: I'm doing soul podcast just on the economics in the
13:08
Speaker 1: business of slavery and Black Americans were enslaved for about
13:11
Speaker 1: two hundred and fifty years, meaning they were generating. They
13:13
Speaker 1: were generating wealth, but not owning any really important stuff. Here.
13:19
Speaker 1: By the way, we focused on culture, our white friends
13:25
Speaker 1: focused on commerce. That's why when we say something's cool,
13:28
Speaker 1: it's cool in Tibet, it's cool. I'm in Singapore right now,
13:30
Speaker 1: it's cool in Singapore. Black music black. This black when
13:34
Speaker 1: I walk around the malls here, this black music playing everywhere.
13:38
Speaker 1: We have mastered culture all around the world. But we
13:42
Speaker 1: missed the lesson on commerce. Do we need to miss it?
13:44
Speaker 1: Somebody throw the memo and misplaced it and never gave
13:47
Speaker 1: it to us. That was my fourth of system. I
13:51
Speaker 1: can read that one. Certainly get my book Financial Literacy
13:53
Speaker 1: for All was the bestseller right now. So we were
13:56
Speaker 1: in slave for two hundred and fifty years, meaning they
13:58
Speaker 1: were they were generating wealth but not owning any of
14:02
Speaker 1: that wealth. By the time slavery ended, black families had
14:06
Speaker 1: no land, no capital, and no inherited wealth, while white
14:10
Speaker 1: families had been building generational wealth for centuries. Okay, the
14:15
Speaker 1: denial of land and home ownership eighteen sixty five to
14:18
Speaker 1: nineteen sixty eight really started in eighteen sixty two. Forty
14:23
Speaker 1: acres a mule was never delivered. Black Americans were promised
14:27
Speaker 1: land but denied it, while white families benefited from government
14:30
Speaker 1: back land grants. I mean again, we don't this is
14:33
Speaker 1: not this videos about, so I don't want to get distracted.
14:35
Speaker 1: But the Homestead Act of eighteen sixty two allocated ten
14:40
Speaker 1: percent of all American land to ninety nine percent plus
14:44
Speaker 1: white families, about two hundred and seventy million acres. There
14:48
Speaker 1: was no debt type that those land grants. The grants
14:50
Speaker 1: were I think one hundred and sixty acres of my
14:52
Speaker 1: memory serves me properly. And the government even set aside
14:59
Speaker 1: the teachers they were government paid for who taught the
15:02
Speaker 1: white farmers how to farm on the land. Okay. And
15:07
Speaker 1: in contrast, a few years later eighteen sixty five, Philly
15:11
Speaker 1: Action fifteen created four hundred thousand acres in comparison to
15:15
Speaker 1: two hundred and two undred and seventy million acres forty
15:17
Speaker 1: one thousand acres set aside for blacks who were fight
15:20
Speaker 1: who fought in the Union Army, like my second great
15:24
Speaker 1: grandfather who was fighting in the Union Army as part
15:28
Speaker 1: of the Mancipation Proclamation. He was one of seven thousand
15:30
Speaker 1: officers George Young is his name. Anyway, these if you
15:34
Speaker 1: were in the Union Army, you could have gotten one
15:36
Speaker 1: of these eighteen thousand plots of forty acres. Think about
15:39
Speaker 1: this now, forty thousand acres, about eighteen thousand plots of
15:43
Speaker 1: land forty acres each. Within two years, the Lincoln was killed,
15:48
Speaker 1: all that property was turned back over to the original
15:51
Speaker 1: folks who owned the land, who were confectionately effectively Confederate
15:54
Speaker 1: families and slave owners in comparison to the Homestead Act,
15:59
Speaker 1: which was it eighteen sixty two basically during the Civil War,
16:04
Speaker 1: and all that was land going west, and that was
16:08
Speaker 1: ten percent of all American land two undred and seventy
16:11
Speaker 1: million acres, and that accounts for the generational wealth of
16:15
Speaker 1: about one hundred million Americans today. Are the basis of it.
16:29
Speaker 1: Jim Crow laws kept black owning businesses and property, forcing
16:35
Speaker 1: them into low wage labor. Redlining. Nineteen thirties to nineteen sixties,
16:40
Speaker 1: the federal government and banks systemically denied black families access
16:44
Speaker 1: to home loans, meaning they could not build equity through
16:47
Speaker 1: real estate, while white families could. Again why is this important?
16:53
Speaker 1: The federal government called for guarantees on loans called FHA
16:57
Speaker 1: Federal Housing Authority. They read line they put it. It
17:01
Speaker 1: wasn't banks who did this, it was the federal government.
17:03
Speaker 1: They read lined certain areas and said these areas were unsafe.
17:06
Speaker 1: Whether the area is considered unsafe, We're a bank, and
17:09
Speaker 1: you know, no bank in the right right mind wants
17:11
Speaker 1: to do a loan in an unsafe area. Certainly, the
17:13
Speaker 1: federal government is not going to insure the debt. So
17:17
Speaker 1: the federal government. Think we talk about good debt now here,
17:19
Speaker 1: they ensured the debt of loans, of loans, mortgages that
17:22
Speaker 1: were not in red line areas, which coincidentally were in
17:25
Speaker 1: these suburban or white areas where white flight, where whites
17:30
Speaker 1: moved to. And after World War Two it even became
17:34
Speaker 1: more intense, and that's where the mortgages went to. The
17:39
Speaker 1: mortgages went to areas that were ensured by the federal government.
17:45
Speaker 1: This is the definition of of that aras version of
17:48
Speaker 1: good debt. So which which properties. I'm about to give
17:52
Speaker 1: you a real cheat sheet here and about black you know,
17:55
Speaker 1: they called hotan across the train tracks. Why are white
17:58
Speaker 1: homes wired? White homes more valuable than black homes. This started,
18:03
Speaker 1: as you know, really as a baseline in nineteen thirties
18:06
Speaker 1: when FHA would redline the federal government of red line
18:11
Speaker 1: black communities and would not provide mortgages, would not provide
18:14
Speaker 1: guarantees for mortgages, and so banks would not provide loans.
18:17
Speaker 1: In addition to that, banks were racists. Back then. There
18:19
Speaker 1: were family owned banks that a lot of them. I
18:22
Speaker 1: got to do a separate podcast just on this. This
18:24
Speaker 1: is too much information for one podcast. By the way,
18:27
Speaker 1: you can send me notes on social media and tell
18:29
Speaker 1: me which things to focus on, and I'll be happy
18:31
Speaker 1: to do that. So if you could provide a loan
18:34
Speaker 1: and a guarantee at prime rates in a white neighborhood,
18:37
Speaker 1: but you got no loans no guarantees in a black
18:39
Speaker 1: neighborhood guests and so then homes traded and sold, and
18:44
Speaker 1: you could easily sell the home in a white neighborhood.
18:46
Speaker 1: Could you could assume a great mortgage, but a great
18:48
Speaker 1: rate right backed by the full faith and credit of
18:50
Speaker 1: the federal government. I mean Dosnegger rocket science is to
18:53
Speaker 1: figure out that the homes and the white neighborhood would
18:56
Speaker 1: start appraising for hire, and the black neighborhood was already
18:59
Speaker 1: read line to proceed with. The federal government said these
19:02
Speaker 1: are dangerous areas, so of course they would have praised
19:04
Speaker 1: for lower. So this is the basis of good debt
19:08
Speaker 1: and bad debt I'm giving you. Are trying to give
19:10
Speaker 1: you a really good example here the government actually defined
19:13
Speaker 1: what a good debt and the bad debt was by
19:16
Speaker 1: making this redlining action. The lack of access to business credit.
19:20
Speaker 1: This is nineteen hundreds to present, banks refused to lend
19:24
Speaker 1: the black entrepreneurs. While white businesses had access to family
19:27
Speaker 1: wealth bank loans and government grants. The Small Business Administration
19:32
Speaker 1: systemically excluded black entrepreneurs from funding programs until the late
19:36
Speaker 1: twentieth century. By the way, Operation Hope got its loan
19:38
Speaker 1: got its start from the Small Business Administration got a grant,
19:42
Speaker 1: a seven J grand for sixty one thousand dollars in
19:45
Speaker 1: nineteen ninety two. And it was, oddly enough bipartisan. It
19:48
Speaker 1: was George Bush inspired George Bush, the father, inspired by
19:53
Speaker 1: Mayor Tom Bradley, a black mayor back then, the first
19:56
Speaker 1: black mayor, black mayor of a major city ever in
19:59
Speaker 1: South Central in nineteen ninety two. So that was a
20:02
Speaker 1: great example of it wasn't red or wasn't red, it
20:05
Speaker 1: wasn't blue, it was black. It was green. Right, So
20:08
Speaker 1: he was a red and the blue providing the green
20:11
Speaker 1: to some black, to a black man, to this young entrepreneur.
20:18
Speaker 1: So that, luckily that's changing with the SBA. Venture capital
20:22
Speaker 1: has historically ignored black businesses. Even today, black founders received
20:26
Speaker 1: less than two percent of venture capital funding. I talk
20:29
Speaker 1: about venture capital, unpack what that means in a season.
20:34
Speaker 1: Once go back and watch that why Black marias had
20:37
Speaker 1: to use dead instead of equity. Without access to homeownership,
20:40
Speaker 1: business loans, or inherited wealth, black Americans had only one
20:43
Speaker 1: option left debt, using credit cards and loans instead of
20:50
Speaker 1: investment capital. Because banks wouldn't provide these business loans, Black
20:55
Speaker 1: entrepreneurs had to fund businesses using personal credit cards and
20:58
Speaker 1: payday loans. Inherited wealth. Black families use credit for emergency expenses,
21:04
Speaker 1: medical bills, and education, leading higher credit burdens. We use
21:09
Speaker 1: gofund me campaigns today not to start a business, but
21:11
Speaker 1: to bury somebody. I mean, think about this. We made
21:14
Speaker 1: this stuff normal. It's not normal. That's why I say.
21:16
Speaker 1: You know, when you're a fire of the credit score neighborhood,
21:19
Speaker 1: you think that the dumb stuff is normal. You walk
21:21
Speaker 1: up as a check cash or pay day, long lender, rental,
21:25
Speaker 1: own store, title lender, liquor store, powd shop in the
21:27
Speaker 1: inner city neighborhood, a fire the credit score neighborhood, and
21:29
Speaker 1: we think that's normal. Is not normal. And whether you're
21:32
Speaker 1: black and brown, urban or white poor rule, it is
21:35
Speaker 1: the same. It's just bad. Higher interest rates on loans
21:39
Speaker 1: and mortgages. By the way, if you if you're in
21:41
Speaker 1: the one of these underserved neighborhoods, fire their credit cord neighborhoods,
21:44
Speaker 1: and your only you have access to these loans from
21:47
Speaker 1: Pooky and Them and Jojo and Luigi or whoever who's
21:50
Speaker 1: making these loans in the hood where I grew up at,
21:53
Speaker 1: like a hood like where I grew up, their high
21:55
Speaker 1: interest rate loans. So you can't start a normal business.
21:58
Speaker 1: You end up going into the illegal enterprises because that's
22:02
Speaker 1: the only thing that's going to pay you the kind
22:03
Speaker 1: of returns that will allow you to repay these crazy
22:07
Speaker 1: loans that you've gotten. So one thing, one bad idea,
22:09
Speaker 1: feeds on another situation, and you end up in a
22:12
Speaker 1: just toe up from the flow up. Higher interest rates
22:15
Speaker 1: on loans and mortgages due to lower credit scores and
22:18
Speaker 1: systemic barriers, trap black borrowers in a cycle of expensive debt.
22:23
Speaker 1: It's very expensive to be poor. The student loan crisis
22:26
Speaker 1: and lack of family wealth. Black families often do not
22:30
Speaker 1: have generational wealth to pay for colleges out for college
22:33
Speaker 1: expenses outright, by the way, this is an example college expense.
22:36
Speaker 1: College loans is an example of good debt. Explain that
22:39
Speaker 1: at the moment, leading to higher student loan debt because yeah,
22:46
Speaker 1: we don't have the wealth, so we end up in debt.
22:48
Speaker 1: But as I said, that can be a form of
22:51
Speaker 1: good debt. I'm going to do this in two parts.
22:52
Speaker 1: This is too much to carry cover in one city.
22:56
Speaker 1: Black graduates borrow more, take longer to pay off debt,
23:01
Speaker 1: and have higher default rates than their white counterparts for
23:04
Speaker 1: the reasons I've already mentioned. Not because they're dumb, not
23:07
Speaker 1: bect they're stupid because their family and these white families
23:10
Speaker 1: can just pay for the expense of the education, and
23:15
Speaker 1: they're not carrying with them the generational debt. They have
23:19
Speaker 1: generational wealth because well, for the reasons I've already discussed. Uh,
23:23
Speaker 1: And so one thing, one crisis builds on on another
23:28
Speaker 1: in the black community. Meanwhile, white families pay down, pay
23:33
Speaker 1: down their assets, helping with what they pay. They use
23:38
Speaker 1: good debt, and they pay that down, creating assets because
23:40
Speaker 1: now you're building wealth in that. So the guys I
23:43
Speaker 1: hate when people walking to me, Actually I love it
23:45
Speaker 1: because it's a teachable less lesson teachable moment. Oh man,
23:50
Speaker 1: I don't want to buy no house. I buy the
23:52
Speaker 1: house the bank owns the house if you don't pay.
23:56
Speaker 1: Let me tell you something. If I loan use the
23:57
Speaker 1: money and you don't pay them on own your house.
24:00
Speaker 1: But yeah, you don't pay, the bank will own your house.
24:02
Speaker 1: Yes that's true. But as long as you pay and
24:03
Speaker 1: you got to live somewhere, while when you pay rent
24:05
Speaker 1: or mortgage payment, then the equity is yours. Right, don't
24:10
Speaker 1: be a dummy. Right. Meanwhile, white families pay down their assets,
24:14
Speaker 1: helping their children to avoid debt and start life with
24:18
Speaker 1: an economic advantage. The life cycle of debt and the
24:21
Speaker 1: wealth gap. Today, the average black family has ten that
24:24
Speaker 1: ten times less wealth than the average white family. Home
24:28
Speaker 1: ownership rates for black families are still the lowest amongst
24:31
Speaker 1: all racial groups, limiting access to home equity and generational wealth. Okay,
24:37
Speaker 1: and I haven't got into the debt parts yet. This
24:39
Speaker 1: I'm just giving you the baseline. Predatory lending, payday loans,
24:43
Speaker 1: hydras rate credit cards disproportionately target black and underserved communities,
24:47
Speaker 1: keeping them a cycle of debt based on survival rather
24:50
Speaker 1: than equity based wealth creation. I've already again I've covered
24:54
Speaker 1: this that whether you living is the number one The
24:57
Speaker 1: average credit score for the lowest credit score of any
25:01
Speaker 1: group are Black Americans, not Black Caribbeans, not black Nigerians,
25:05
Speaker 1: not black Ghanaians, not black Bohemians, Black Americans because of
25:10
Speaker 1: the legacy of slavery and Jim Crow that I've mentioned
25:13
Speaker 1: here that affected us and didn't affect them in the
25:16
Speaker 1: same way. And so our credit score is the lowest
25:21
Speaker 1: in the country on average is six twenty, which means
25:23
Speaker 1: half of Black people wake up in the morning and
25:26
Speaker 1: lock out of the free enterprise system. Again, there's nothing
25:30
Speaker 1: to do with your intelligence. You can go to church
25:31
Speaker 1: every Sunday be the nicest person in the world to
25:33
Speaker 1: still be broke if you don't understand how this system works.
25:37
Speaker 1: I'm gonna do a whole podcast series on how it's
25:40
Speaker 1: been six thousand years of telling Black people some stupid stuff.
25:46
Speaker 1: I'm gonna try to turn that around in less than
25:48
Speaker 1: six years so you get back on the right track
25:50
Speaker 1: and master this. But this whole concept that somehow where
25:53
Speaker 1: we just we can't be capitalists, it's completely dead wrong,
25:57
Speaker 1: and again, like I to cover it here, we don't
25:59
Speaker 1: have enough time. I'm entire series on that. But we
26:03
Speaker 1: created the whole system. I will touch on that before
26:05
Speaker 1: I finished this particular podcast, my Inclusive Economics Grow The
26:11
Speaker 1: Plan is building the idea that we must transition Black
26:14
Speaker 1: Americans from a debt based survival a platform to an
26:18
Speaker 1: equity based wealth building platform. Increase access to prime credit,
26:23
Speaker 1: home ownership and business investment. Expand financial literacy programs to
26:28
Speaker 1: teach debt management, investing in wealth creation, and of course
26:31
Speaker 1: my favorite thing, good credit scores. Ensure banks, venture capital
26:34
Speaker 1: firms in the federal government invest directly in black owned
26:37
Speaker 1: businesses and home ownership opportunities. Now, this is not to
26:41
Speaker 1: the exclusion of other races of people. Just to make
26:43
Speaker 1: this clear, I want everybody to succeed. I'm just making
26:47
Speaker 1: it clear that Black Americans are a notable example, an exception.
26:50
Speaker 1: That's what. You can't just put Black Americans into a
26:53
Speaker 1: bucket with everybody else because nobody else was enslaved on
26:55
Speaker 1: American soil. And it's stupid for somebody to say otherwise.
26:58
Speaker 1: You can't put Black Americans and say which is like
27:00
Speaker 1: everybody else, because again, no one else was property for
27:04
Speaker 1: two hundred and seventy years, no one else was in
27:07
Speaker 1: slaves in American soil. Literally, banks, if a bank is
27:11
Speaker 1: over one hundred and fifty years old. There are debt
27:15
Speaker 1: records of black slaves on their road or on the
27:18
Speaker 1: bank records. Yes, what I just said is actually true.
27:21
Speaker 1: A plantation owner one hundred and seventy years ago would
27:25
Speaker 1: get a loan for their plantation that would include their livestock,
27:28
Speaker 1: the buildings, the land, and their slaves. Then insurance companies
27:32
Speaker 1: would ensure them and underwrite them, and Wall Street firms
27:36
Speaker 1: sometimes would securitize that debt. It's everybody was involved in
27:40
Speaker 1: this corrupt, bad system. Let's now move on. Let's go
27:44
Speaker 1: to the history of debt. Debt is as old as
27:50
Speaker 1: civilization itself. From early barter systems to today's global financial markets,
27:56
Speaker 1: borrowing and lending have played a crucial role in that
27:59
Speaker 1: canom development, social structures, and wealth distribution. Please hear me now,
28:04
Speaker 1: this is as old as life itself. The Bible talks
28:07
Speaker 1: about money more than talks about anything else, more than
28:10
Speaker 1: two thousand mentions. Again, money's not bad, it's the love
28:14
Speaker 1: of money that's bad. Understanding the original the origins of
28:19
Speaker 1: debt helps us grasp its power both as a tool
28:22
Speaker 1: for progress and a potential source of financial hardship. Jesus
28:26
Speaker 1: only got mad one time when he turned over the
28:28
Speaker 1: table of the money changers when they were inside the temple. Again,
28:33
Speaker 1: it's not money. It's the love of money. It's the greed,
28:36
Speaker 1: it's it's the repressive aspects of it. It can also
28:40
Speaker 1: be very empowering. It could be you do well and
28:43
Speaker 1: become a philanthropist. I guess like me in some ways,
28:46
Speaker 1: I'm still an active capitalist. But I make it and
28:50
Speaker 1: I give some of it away. I make it and
28:51
Speaker 1: I use it as a source of power to lift
28:54
Speaker 1: people up. I eat my philanthropy Operation Hope, which is
28:57
Speaker 1: the largest financial legacy culture organization in America. Ancient debt
29:02
Speaker 1: the first grandit credit systems. Now, I'm gonna run through
29:05
Speaker 1: this pretty quickly because I want to get to the
29:07
Speaker 1: lessons in this one podcast episode. But let me know
29:10
Speaker 1: if you want me to go deeper in a second episode,
29:14
Speaker 1: and I will. I'm gonna try to get through the
29:15
Speaker 1: whole thing before the hour is over, but I will.
29:18
Speaker 1: I'm willing to go deeper if you want me to.
29:22
Speaker 1: What it's interesting to me. They may not be interesting
29:24
Speaker 1: to use what I'm saying. So the earliest record recorded
29:29
Speaker 1: forms of debt date back to Mesopotamia. This is three
29:34
Speaker 1: thousand years before Christ. This is where the Sumerians and
29:44
Speaker 1: Acadeians at Acadeians, among other earlier civilizations in human history,
29:52
Speaker 1: developed a system of loans using silver. He loan my
29:56
Speaker 1: civil rights movement, silver and grain. By the way, before
30:00
Speaker 1: there was a gold standard in America, the America used silver.
30:04
Speaker 1: It's the people's metal, people's precious metal. These societies were
30:09
Speaker 1: predominantly Semitic and Sumerian speaking people, contributing significantly to early
30:18
Speaker 1: urbanization and economic structures. By the way, just to make
30:23
Speaker 1: it real clear, it was the Middle East where money
30:30
Speaker 1: structures debt structures were first originated, specifically in Iran, Okay,
30:36
Speaker 1: to be very clear what I'm saying here in North Africa.
30:41
Speaker 1: So the Middle East and North Africa's where these early
30:43
Speaker 1: systems came fromus. So call anybody, tell you that you're
30:45
Speaker 1: dumb and you're stupid, you'll understand these things. It came
30:48
Speaker 1: from us. These loans were often used for agricultural purposes.
30:51
Speaker 1: Farmers borrowed seeds and livestock, repaying lenders with a portion
30:55
Speaker 1: of the harvest. Hello capitalism, free enterprise. Temples and palace
31:00
Speaker 1: since acted as early banks. Hello, Hello overseeing transactions and
31:06
Speaker 1: setting interest rates. Jeremy temples and palaces acted as early banks.
31:11
Speaker 1: One of the biggest banks in the world is inside
31:14
Speaker 1: of the Catholic Church. Debt in ancient Greece and Rome.
31:29
Speaker 1: By the time the Greek and Roman empires that had
31:31
Speaker 1: become a key part of economic expansion. In Greece, borrowers
31:36
Speaker 1: were Borrowing was widespread among city states and individuals, but
31:40
Speaker 1: failure to repay it often led to severe consequences, including
31:45
Speaker 1: loan including the loss of land and personal freedom. Think
31:49
Speaker 1: about your car being put up by a tow truck
31:52
Speaker 1: today being repossessed the same thing. So no one's picking
31:56
Speaker 1: on you. This is This is old, is modern and
32:00
Speaker 1: human beings and life itself. The Athenian leader of Salon
32:08
Speaker 1: around five ninety four BC before Christ, introduced reforms that
32:13
Speaker 1: abolish debt slavery, Yes, debt slavery. Recognizing that excessive debt
32:19
Speaker 1: could destabilize society, the Romans refined financial systems further. Now
32:24
Speaker 1: we're heading into the Greek era, creating the first formalized
32:28
Speaker 1: banking institutions and debt contracts. Wealthy Roman elites acted as lenders,
32:33
Speaker 1: funding military campaigns, traded expeditions, and public infrastructure projects. The
32:40
Speaker 1: concept of interest usira usereus, that's where this phrase comes from,
32:47
Speaker 1: became more structural, structured. Although excessive rates were frowned upon
32:53
Speaker 1: in society, this is one of the reasons why they're
32:57
Speaker 1: I believe, I'm not an expert in in the Middle
33:00
Speaker 1: East financial system, but I know enough to say this.
33:05
Speaker 1: This is why the Middle East has caps on interest rates.
33:10
Speaker 1: They use a different system, same system, but a different system,
33:13
Speaker 1: a different approach. I say, maybe I'll cover that in
33:16
Speaker 1: another podcast. The Middle Ages, the Church in the rise
33:19
Speaker 1: of credit. During the medieval period, lending was shaped by
33:23
Speaker 1: religious doctrine. The Catholic Church prohibited usury charging interest on loans.
33:29
Speaker 1: So again this is something I'm trying to figure out
33:35
Speaker 1: what to tell you, what not to tell you, because
33:36
Speaker 1: this is just a such a deep topic that I
33:40
Speaker 1: can go on forever and ever on. Because this is
33:42
Speaker 1: the same thing I just mentioned about the Middle Eastern
33:44
Speaker 1: model where they prohibit usury lending to the to the
33:50
Speaker 1: emergence of alternative lending systems. So the Catholic Church prohibitive usury.
33:55
Speaker 1: This is this of course change interest rates on loans,
34:01
Speaker 1: but that was the original system. Jewish and Lombard merchants
34:05
Speaker 1: became the primary money lenders in Europe as Christian restrictions
34:09
Speaker 1: on interest bearing loans limited participation in finance. Now this
34:12
Speaker 1: is a very stanging point. It wasn't like Jews were
34:16
Speaker 1: some privileged groups. They were there. They were the outliers.
34:19
Speaker 1: Jews were outliers. Middle Eastern emmerchants were outliers. African leaders
34:24
Speaker 1: in this space where outliers, they were not mainstream in
34:27
Speaker 1: any way. They were forced to do things that nobody
34:30
Speaker 1: else would do. So here's an example that the church
34:32
Speaker 1: would not allow interest rates, so these other entrepreneurs decided
34:37
Speaker 1: to find a way around it. Do you know in Europe,
34:39
Speaker 1: Jews could not own land in the twentieth century, were
34:41
Speaker 1: prohibited for owning land. So they do they smartly created
34:45
Speaker 1: became experts in finance, which they had been gaining ex
34:49
Speaker 1: expertise in over literally hundreds of years, and they used
34:54
Speaker 1: finance to then control the land that the society said
34:58
Speaker 1: they could not own. And that's exactly with blacks and
35:01
Speaker 1: others should be learning to do, by the way, turning
35:04
Speaker 1: negative into a positive old around to do what you're
35:06
Speaker 1: going to get to at Wall Street, prohibited Jews from
35:10
Speaker 1: being lenders. And this is a whole other story, but
35:13
Speaker 1: this is why Wall Street firms, alternative Was Street firms
35:17
Speaker 1: cropped up and they are now many of them dominant,
35:21
Speaker 1: like Goman Sachs. Hello, that was two Jewish merchants, mister
35:25
Speaker 1: Goman and mister Sachs. But no one thinks about it now.
35:27
Speaker 1: They just think about Goldman Sachs, one of the biggest
35:29
Speaker 1: companies in the world today. That it took an outlier
35:32
Speaker 1: area and made it the mainstream area. Took a negative
35:34
Speaker 1: and turned it into a positive because they were walking
35:36
Speaker 1: down door to door with a little briefcase trying to
35:38
Speaker 1: get a job, trying to sell financial services to the
35:40
Speaker 1: door because they couldn't get a job in the big
35:43
Speaker 1: fancy office buildings in the early twentieth century. So stop
35:47
Speaker 1: hating on Jews because they're good at what they do.
35:50
Speaker 1: It's like hating on a black person because they're good
35:52
Speaker 1: at rapper or basketball or football or preaching or whatever
35:57
Speaker 1: it is we're good at. It's like, is you're good
36:01
Speaker 1: at something, you should just simply applaud that individual or group.
36:06
Speaker 1: It also is stupid if you generalize, you discriminate. I'm
36:11
Speaker 1: not good at rapp by the way, I just discriminate
36:14
Speaker 1: against my own black people, my own people by saying
36:16
Speaker 1: blacks and rappid. But that's a perception. I'm horrible and
36:19
Speaker 1: rapping horrible to rapping in horrible basketball and football either.
36:22
Speaker 1: I love motorsports, but you get my point. The first
36:26
Speaker 1: credit markets began developing in major trade hubs such as
36:29
Speaker 1: Venice and Florence. In Italy. We're merchant banking families. The
36:34
Speaker 1: medicine as an example, pioneer financial instruments like bills of change,
36:39
Speaker 1: early versions of modern promissory notes. These developments led the
36:43
Speaker 1: ground let the groundwork from modern banking today, okay, the
36:47
Speaker 1: birth of modern banking and national debt. By the seventeenth
36:50
Speaker 1: and eighteenth centuries, debt had evolved and took a key
36:53
Speaker 1: tool of state craft. Governments began issuing sovereign debt to
36:57
Speaker 1: finance wars and infrastructure. I'm going to do a separate
37:00
Speaker 1: peace on Haiti and how this is going to blow
37:03
Speaker 1: your mind when I tell you about the story of
37:05
Speaker 1: Haitian how that led to the creation of America. The
37:11
Speaker 1: Bank of England sixteen ninety four was one of the
37:14
Speaker 1: first institutions to formalize government borrowing selling bonds to investors
37:19
Speaker 1: to raise capital the Bank of England. This became This
37:24
Speaker 1: model became standard across Europe, allowing nations to fund expansion
37:27
Speaker 1: without immediate taxation. In the United States, Alexander Hamilton champion,
37:33
Speaker 1: a brilliant guy who championed the creation of national debt
37:36
Speaker 1: after the American Revolution. By the way, there was a
37:38
Speaker 1: lot of pushback to him doing that. People thought he
37:40
Speaker 1: was stupid. And he was from a little Caribbean town.
37:43
Speaker 1: By the way, Alexander Hamilton, our first Secretary of the Treasury,
37:45
Speaker 1: brilliant guy. I think he's paraty black. But that's another story.
37:48
Speaker 1: He had a single mother, no father, came from a
37:50
Speaker 1: Caribbean island. Okay, excuse my sideway sins of humor, sometimes
37:56
Speaker 1: arguing that a well managed debt system couldt rent in
38:00
Speaker 1: the country's financial standings. That's Alexander Hamilton, that's his argument.
38:04
Speaker 1: This laid the foundation for modern treasury bonds and public finance. Okay,
38:08
Speaker 1: the twenty century consumer credit and the rise of personal debt.
38:11
Speaker 1: Now I'm about to get into you and me. I
38:12
Speaker 1: promise you and again. If you don't want to listen
38:15
Speaker 1: to all this, tell people to fast forward to minute forty,
38:17
Speaker 1: which is where I'm about to start about a box
38:19
Speaker 1: starting on you were a minute thirty seven right now.
38:21
Speaker 1: The twenty century saw debt become a household concept. Innovations
38:27
Speaker 1: such as installment plans and the nineteen twenties allow consumers
38:30
Speaker 1: to buy goods on credit, fueling the expansion of the
38:33
Speaker 1: middle class. Hello, I'll read that again. The twentieth century
38:38
Speaker 1: saw debt become a household concept. Innovations such as installment plans,
38:42
Speaker 1: I think about seers now. The nineteen twenties allow consumers
38:46
Speaker 1: to buy who was later series later in nineteen twenties,
38:49
Speaker 1: which you get my point, to buy goods on credit,
38:52
Speaker 1: fueling the expansion of the middle class. The post War
38:56
Speaker 1: War two boom introduced mortgages, student loans, and credit cards.
38:59
Speaker 1: Of our coverage to credit cards in earlier episode this year,
39:03
Speaker 1: So to listen to that if you haven't already making
39:06
Speaker 1: borrowing a standard part of life. So borrowing used to
39:09
Speaker 1: be for the rich, for the wealthy, for the royal class,
39:13
Speaker 1: for only the privilege, and now it became available to everybody.
39:20
Speaker 1: The creation of Fyco scores in nineteen eighty nine, President
39:23
Speaker 1: fycles on my boarded operation Hope. Really good guy. The
39:26
Speaker 1: creation of FYCO Scores in nineteen eighty nine standardized credit worthiness,
39:30
Speaker 1: enabling more people to access loans, but also reinforcing financial disparities. Meanwhile,
39:37
Speaker 1: the two thousand and eight financial crisis exposed the dangers
39:40
Speaker 1: of excessive unregulated debt, particularly in subprime mortgages, leading to
39:44
Speaker 1: global economic turmoil. I'm going to do a whole piece
39:48
Speaker 1: on what recessions mean, because there's certain leaders are now
39:51
Speaker 1: talking about we may have becoming recession. I'll unpack that.
39:55
Speaker 1: But don't fear that any of this. I didn't, you know,
39:58
Speaker 1: I wasn't hurting the two thousand and eight crisis. I
39:59
Speaker 1: didn't a subprime loan. I wasn't taking one of those
40:02
Speaker 1: stupid loans, and no one's going to force one on me.
40:05
Speaker 1: But if you shouldn't be doing a negative amortization loan,
40:11
Speaker 1: which basically means this is bad debt, it's a stupid
40:14
Speaker 1: debt on for good assets. So this is a mortgage
40:17
Speaker 1: for a home, which so that is typically good debt,
40:21
Speaker 1: but there's a stupid debt. So I guess I'm saying
40:23
Speaker 1: there's a good debt, bad debt, and stupid debt right,
40:27
Speaker 1: because these a negative amortization mortgage means that because you're
40:31
Speaker 1: focused on the payment, not what the interest rate is,
40:34
Speaker 1: and your you never asks what the payment is when
40:35
Speaker 1: there's an interest rate attached. So when they bought the house, look,
40:40
Speaker 1: I just want this payment. Well, that meant that you
40:43
Speaker 1: have more debt tomorrow than you had yesterday because you
40:46
Speaker 1: all you do is managing the payment amount, and the
40:48
Speaker 1: lenders like, okay, that's that's what you want. So the
40:51
Speaker 1: rest of the interest that you're not paying gets put
40:53
Speaker 1: to the back of the loan. It's called a negative
40:55
Speaker 1: amortization loan debt. Today a double edged sword. In the
41:02
Speaker 1: twenty first century, debt remains a double ed sword. A
41:05
Speaker 1: ed sword. Use wisely, it fused home ownership, business investment,
41:10
Speaker 1: and economic growth. Misuse, it traps individuals and nations and
41:13
Speaker 1: cycles of financial distress. Today's global economy runs on a
41:18
Speaker 1: complex debt market, government bonds, corporate borrowings, and personal credit,
41:24
Speaker 1: but rising income, inequality, and unsustainable debt levels post significant risks. Again,
41:30
Speaker 1: I've talked about the credit card debt at one point
41:32
Speaker 1: one trade and growing the student loan debt. I think
41:34
Speaker 1: it's one point six trade and one point seven trade.
41:37
Speaker 1: American US debt levels after the pandemic through the roof.
41:43
Speaker 1: Typically tax breaks are sugar high. They give you a
41:46
Speaker 1: short term boost, but then end up with deficits the
41:49
Speaker 1: back end, which can lead that could burden down a
41:53
Speaker 1: growing economy. And so I have a whole strategy for
41:56
Speaker 1: that of how America can lead again and rise again.
41:59
Speaker 1: I will burden you with that in this podcast. But
42:05
Speaker 1: even a nation can't survive without a good debt in
42:08
Speaker 1: managing it and not doing stupid debt. Good debt, bad debt,
42:11
Speaker 1: stupid debt. I guess it's opportunity led debt, which is
42:15
Speaker 1: what I used when I was growing up. It took
42:16
Speaker 1: a bad debt turned it into good debt because there
42:20
Speaker 1: was opportunity attached to it, otherwise would have become stupid debt.
42:23
Speaker 1: This is a rap. Financial literacy is more critical than ever.
42:27
Speaker 1: Financial literacy is a civil rights issue with this generation.
42:29
Speaker 1: You know better, you do better. Understanding the history of
42:34
Speaker 1: debt helps us make informed decisions, ensuring that borrowers and
42:39
Speaker 1: borrowing serves as a tool for empowerment rather than a
42:43
Speaker 1: source of economic vulnerability and repression. The challenge ahead is clear,
42:47
Speaker 1: we must use debt strategically, ensuring that it builds opportunity
42:52
Speaker 1: rather than eroading financial stability. All right, So now I
42:57
Speaker 1: am going to definitely doing this in two parts because
43:02
Speaker 1: I'm not going to go over an hour on this session.
43:05
Speaker 1: But let me cut to the quick. I've covered the
43:09
Speaker 1: history of debt in society. I've laid out the basic
43:13
Speaker 1: premise for why some people say that debt is bad
43:17
Speaker 1: and explained why I think stupidly wealth people tell poor
43:21
Speaker 1: people not to take on good debt. I didn't explain that,
43:26
Speaker 1: I laid it out. I can't explain it because don't
43:28
Speaker 1: make any sense. I give you the ancient forms of
43:31
Speaker 1: credit in lending. I talked about the emergence of modern
43:35
Speaker 1: banking and debt instruments. Now let me get into why
43:41
Speaker 1: you're here, admitted forty three. This is the drop that Mic.
43:55
Speaker 1: There's good debt and there's bad debt. Good debt it's
43:59
Speaker 1: tied to something that may appreciate. Bad debt, it's tied
44:03
Speaker 1: to something that probably will depreciate. In all likeily that
44:07
Speaker 1: will depreciate. Financing jewelry is bad debt. I don't care
44:12
Speaker 1: how much it blings. It don't sing when you go
44:15
Speaker 1: to the bank. Most jewelry has incredible margins profit margins
44:20
Speaker 1: attached to it. If you take that same jewelry from
44:24
Speaker 1: the jeweler and go back, there's probably an eighty percent
44:26
Speaker 1: profit margin. The diamonds and all that stuff and not
44:29
Speaker 1: worth nearly what you think they are. The craftsmanship, you
44:32
Speaker 1: don't get any value for that. So if you finance that,
44:35
Speaker 1: you're just putting you from bad to worse. I hope
44:38
Speaker 1: you never have to sell your jewelry, but you'll be
44:40
Speaker 1: shocked if ever you have to. In most cases their
44:45
Speaker 1: exceptions to the rule, but essentially, never, never finance jewelry.
44:49
Speaker 1: Never finance tennis shoes, never finands clothes. We do it
44:52
Speaker 1: all the time. We have department People think this is
44:54
Speaker 1: a stupid example, but you have a department store, credit
44:56
Speaker 1: school credit card, credit card, most consumer credit card. It's
45:00
Speaker 1: in this America most The average credit card rate in
45:03
Speaker 1: this country is twenty eight percent plus, did you hear me?
45:06
Speaker 1: The average, which means if you charge a dollar, twenty
45:09
Speaker 1: eight cents of that is interest. So you know, unless
45:13
Speaker 1: you're going to pay it off right away, you should
45:15
Speaker 1: not be putting things on a charge card. A charge
45:17
Speaker 1: card and a credit card are different, and I talk
45:20
Speaker 1: about that in the credit card episode. You shouldn't finance
45:25
Speaker 1: some plane tickets. You shouldn't finance rental cars. People are
45:29
Speaker 1: doing this by the way that they have a little
45:30
Speaker 1: app that you can charge it right away and they'll
45:33
Speaker 1: give you a payment. They'll just finance it, and you're
45:36
Speaker 1: just like, oh, I can afford all this. How are
45:39
Speaker 1: these people going to these fancy concerts spending five thousand
45:42
Speaker 1: dollars on a sporting event because they're charging it. And
45:47
Speaker 1: if your outflow seat your inflows and you're overhead, it'll
45:49
Speaker 1: be your downfall. You shouldn't finance vacations you I mean,
45:54
Speaker 1: I can go on and on and on. There's a
45:55
Speaker 1: lot of dumb things that people are financing, and it's
46:01
Speaker 1: bad debt. You're going to pay for it right now.
46:03
Speaker 1: It's going to feel good right now, and then you
46:05
Speaker 1: can be paying for it for a very long time
46:07
Speaker 1: and feeling dumb and angry. But as a result of that,
46:11
Speaker 1: good debt is a completely different thing. Good debt is
46:14
Speaker 1: tied to something that might appreciate. A mortgage on a
46:16
Speaker 1: home is a great example of this. So a thirty
46:20
Speaker 1: year mortgage you're going to probably spend twenty percent twenty
46:23
Speaker 1: of the thirty years will probably be mortgage interests, by
46:28
Speaker 1: the way, which you write off on your taxes. So
46:31
Speaker 1: first think about that is a bad thing. You've got
46:34
Speaker 1: to live in the house anyway. If that those mortgage
46:36
Speaker 1: payments which you're paying, you get the right You get
46:38
Speaker 1: that return to you in a write off, which you
46:43
Speaker 1: then get with an itemized tax return to deduct whole
46:48
Speaker 1: or part from your income. You get a tax refund
46:52
Speaker 1: your if this is an investment property, you get the
46:54
Speaker 1: benefit of depreciation and that counts against our counts for
47:00
Speaker 1: you with regard to your calculation of taxes owed and
47:03
Speaker 1: possibly a tax refund. You get the appreciation which you
47:09
Speaker 1: own nobody, it's yours. That is the start of generational wealth.
47:13
Speaker 1: That's a part of equity capitals. Now I'm finishing. I'm
47:17
Speaker 1: tapping the back end of this podcast. With the first
47:19
Speaker 1: part of the podcast, were talked about the different kinds
47:22
Speaker 1: of debt. I talked about debt with different types of capital,
47:25
Speaker 1: debt capital and equity capital. Okay, you follow me. The
47:30
Speaker 1: whole tax system in America, again, I've said, as I
47:33
Speaker 1: said earlier, is designed to benefit homeowners. So home ownership
47:38
Speaker 1: is good debt and it's tied to an asset that
47:43
Speaker 1: in all likelihood will appreciate. Never in the history of
47:46
Speaker 1: America have three things gone down debt levels, sorry sorry,
47:50
Speaker 1: home ownership values, stock market values, and the GDP of
47:54
Speaker 1: the nation gross domestic product. That doesn't mean that there's
47:57
Speaker 1: not recessions. Things go up, they re set recess right drop.
48:03
Speaker 1: Please don't sell. Okay, this is a stupid investment or
48:06
Speaker 1: assets you've got or flake, something flaky. But if it's stable,
48:09
Speaker 1: don't sell and you reset above the line. It's after
48:13
Speaker 1: the recession, it resets and climbs above the line and
48:16
Speaker 1: where it was before. So this is probably not a
48:21
Speaker 1: great time to say this, but I mean I recently
48:24
Speaker 1: lost money because I didn't take my own advice, which
48:27
Speaker 1: is in a bad environment, if you have a good investment,
48:31
Speaker 1: just sit in and hold it, don't do anything. And
48:32
Speaker 1: I didn't do that. I went to cash treasury bills,
48:35
Speaker 1: and I'll tell I'll break this down in the recession episode.
48:39
Speaker 1: I do, but I actually lost money and all I need.
48:42
Speaker 1: What I really should have done is taken my own advice.
48:44
Speaker 1: Don't make emotional decisions. Just chill, just sit there, let
48:47
Speaker 1: it do it, Let the market do its thing. Everybody
48:49
Speaker 1: makes mistake, but that doesn't make you a mistake. So
48:53
Speaker 1: good debt can be a small business investment. Good debt
48:55
Speaker 1: can be a small business loan. Good debt can be
48:58
Speaker 1: a student loan. You have a loan, give you a
49:03
Speaker 1: bachelor's degree, or a master's degree or a doctor degree.
49:07
Speaker 1: You're going to make multiples more in income with an
49:11
Speaker 1: advanced degree than you will with a high school education,
49:14
Speaker 1: without question. You'll make millions with advanced degrees of the
49:18
Speaker 1: course of your life, and you're going to make hundreds
49:21
Speaker 1: of thousands with a high school education. So this is
49:24
Speaker 1: good debt, all right. So let me see, I got
49:29
Speaker 1: to run through the rest of this well, so let
49:32
Speaker 1: me no, let me just let me underscore this whole
49:35
Speaker 1: good debt piece. So somebody out there saying, John, it
49:38
Speaker 1: doesn't make any sense to me. I mean, why would
49:40
Speaker 1: I want to go everybody's again your counterculture. Everybody's telling
49:44
Speaker 1: me not to have debt. You're telling me that I
49:46
Speaker 1: should have good debt. Please listen to me. Minute forty nine. Okay,
49:50
Speaker 1: just drop the mic. Every successful person that you know,
49:55
Speaker 1: every millionaire that you know, including the one talking to
49:57
Speaker 1: you right now, owns real estate, and typically on that
50:01
Speaker 1: real estate is some level of good debt. I mean, well,
50:05
Speaker 1: you know, prime interest rates, good terms, all those kinds
50:08
Speaker 1: of things. No multi millionaire that you know of or
50:14
Speaker 1: read about, No billionaire you know about or read about.
50:18
Speaker 1: No growing city economy, no successful state economy. No nation,
50:23
Speaker 1: including the United States of America or whatever country that
50:27
Speaker 1: you love, has ever done it without good debt. Please
50:31
Speaker 1: did you hear me? What do you think government bonds are?
50:34
Speaker 1: What do you think? You know? What do you what
50:37
Speaker 1: do you what do you think that treasuries are? These?
50:41
Speaker 1: You know these are people, These are people in countries
50:43
Speaker 1: buying our debt. Okay, what do you think city bonds are?
50:50
Speaker 1: The city said they're going to float some bonds. Right.
50:55
Speaker 1: There's nobody. I just can't. I just can't underscore this enough.
50:58
Speaker 1: There's nobody who has been old, true, oh oh, uber
51:01
Speaker 1: successful who didn't do it with good debt. Because you
51:04
Speaker 1: build you make money during the day, you build wealth
51:07
Speaker 1: your sleep, and you do that through compounding. And when
51:10
Speaker 1: you have modest levels of good debt, it allows the
51:13
Speaker 1: equity to compound in ways that are I say unnatural,
51:18
Speaker 1: but natural for financial services. So money makes more money.
51:21
Speaker 1: Here's a cheat sheet for you. Money makes more money
51:24
Speaker 1: on money than you can ever make money on labor.
51:26
Speaker 1: Did you hear me in that said that, this is
51:28
Speaker 1: the one podcast you have to listen to two or
51:30
Speaker 1: three times money makes more money on money then money
51:36
Speaker 1: can ever make on your labor or you can ever
51:39
Speaker 1: make money on your labor. Hello, you can make more
51:44
Speaker 1: money money and technology makes more money on money than money.
51:50
Speaker 1: So money and technology, which is why the technology companies
51:52
Speaker 1: are going gangbusters today. But money definitely makes more money
51:58
Speaker 1: on money than it does on just you making money
52:01
Speaker 1: on your labor. That's why you have to have to
52:03
Speaker 1: be smart about money and financial literacy. And that's why
52:06
Speaker 1: the Wall Street there's three times more economic activity than Washington,
52:11
Speaker 1: d C. Even tho everybody's focused on the money in Washington,
52:14
Speaker 1: d C. The real money, the real play is in
52:16
Speaker 1: that country called Manhattan, the city of Manhattan, which is
52:21
Speaker 1: the second largest GDP in the United States of America.
52:26
Speaker 1: One city, city of Manhattan. So the state of California
52:28
Speaker 1: is the biggest economy inside of the US, but that's
52:31
Speaker 1: the whole state. The city of Manhattan is a baller
52:34
Speaker 1: city of Manhattan. It's just on fire with economic activity
52:37
Speaker 1: the reasons that I've just mentioned to you. So there's
52:41
Speaker 1: a role of debt in the economy and you've got
52:44
Speaker 1: to be smart about it. And the key to it
52:45
Speaker 1: is financial literacy, which is why that I say financial
52:48
Speaker 1: literacy is the civil rights issue of this generation. If
52:51
Speaker 1: you don't know better, you can't do better. And governments
52:55
Speaker 1: and businesses and individuals all use debt. But if you
52:59
Speaker 1: live in a a low of neighborhood, if you don't
53:02
Speaker 1: have financial literacy, if you have a core terrible credit score,
53:05
Speaker 1: you're going to get horrible debt. You're going to those
53:08
Speaker 1: make the lead and at least you're gonna pay the most.
53:10
Speaker 1: You're going to be in a debt trap. And because
53:12
Speaker 1: you're ever a surviving mindset and now are thriving a
53:13
Speaker 1: building mindset, you're not going to use this debt as
53:16
Speaker 1: an instrument to set yourself free. It'll put you in
53:19
Speaker 1: purgatory instead. This has been a wrap or I'll tell
53:23
Speaker 1: you now there are a lot of areas I didn't
53:26
Speaker 1: cover in this podcast. You got to tell me what
53:27
Speaker 1: you want me to do this In the part too,
53:29
Speaker 1: I almost have no choice. Here's all the stuff I
53:32
Speaker 1: did not cover. The consumer debt versus investment debt. I
53:36
Speaker 1: touched that a little bit. Types of debt instruments did
53:38
Speaker 1: not cover that at all. Revolving credit cards and lines
53:42
Speaker 1: of revolving credit. Credit cards and lines of credit sort
53:45
Speaker 1: of touched on that the credit card podcast sort of.
53:48
Speaker 1: But I didn't cover lines of credit. Installment debts. That's
53:50
Speaker 1: the mortgages, auto loans, student loans, business and commercial loans,
53:56
Speaker 1: government debts, bonds, treasuries, deficit spending cover that a little bit.
54:00
Speaker 1: The true cost of borrowing, interest rates and compounding debt.
54:04
Speaker 1: Good debt versus bad debt A simple framework of giving
54:07
Speaker 1: you that. Good debt tied to appreciating assets okay, real estate, business, investments,
54:11
Speaker 1: education with high return on investment ROI. They call it
54:16
Speaker 1: bad debt tied to depreciating assets covered that. Credit card debts,
54:20
Speaker 1: payday loans, car loans that are pooking them, car loans.
54:25
Speaker 1: If you have a car loan with eighteen percent interest
54:27
Speaker 1: rate and Mercedes, it's not a Mercedes, it's Mercedes payments. Okay.
54:31
Speaker 1: Using good debt to build wealth, The power of leveraging
54:36
Speaker 1: debt and wealth creation is my personal story. So you
54:41
Speaker 1: can read up from nothing my fifth book, and I
54:43
Speaker 1: cover my failures, not my successes, and I think it's
54:46
Speaker 1: a good lesson for you there, so you should go
54:49
Speaker 1: read that book and then refinancial literacy for all. My
54:51
Speaker 1: last book, home Ownership and Generational Wealth. So I'm a
54:54
Speaker 1: personal example of using good debt and again when I
54:58
Speaker 1: was earlier, even bad debt with opportunity touched to it
55:02
Speaker 1: to succeed because I didn't have a generational wealth. Business
55:06
Speaker 1: Loans and Entrepreneurship. Home Ownership and Generational Wealth covered that.
55:10
Speaker 1: Investing in income generating assets didn't really cover that in detail,
55:16
Speaker 1: but you're smart people. I'm going to try to actually
55:18
Speaker 1: give you all the cliff notes here investing in income
55:22
Speaker 1: generating assets, how the wealthy US debt differently? I did
55:26
Speaker 1: not cover that, but maybe I do that in part
55:28
Speaker 1: two of you asked me how happy to do that?
55:30
Speaker 1: That's a really fascinating conversation. The strategic use of other
55:35
Speaker 1: people's money, hell OPM. Understanding credit scores and interest rates
55:40
Speaker 1: to maximize borrowing power, how to avoid the debt trap?
55:45
Speaker 1: That's you know, this is my overall teaching budgeting and
55:50
Speaker 1: responsible debt management. This is the power and work of
55:53
Speaker 1: Operation Hope, the largest financial coaching organization in America. The
55:56
Speaker 1: emotional and psychological pull of easy credit. This is what
55:59
Speaker 1: happens when I bashador. Andrew Young said, to live in
56:02
Speaker 1: the system of free enterprise and not to understand the
56:04
Speaker 1: rules of free enterprise must be the very definition of slavery.
56:08
Speaker 1: And when you or mark, when you're an easy prey,
56:12
Speaker 1: people will separate you from your wallet. On the reel,
56:15
Speaker 1: the importance of financial literacy and debt decision making. And
56:18
Speaker 1: well that's me walking right. I'm sure I'm trying to
56:22
Speaker 1: give you the framework of this entire podcast, and you
56:25
Speaker 1: can decide whether you want me to go back and
56:27
Speaker 1: cover in greater detail. The last. The last is encouraging
56:33
Speaker 1: smart debt usage, personal your action steps. I want for
56:37
Speaker 1: you to just know your credit score and improve it.
56:39
Speaker 1: That's what Operate Shelpa's doing. Increasing credit score fifty four
56:42
Speaker 1: points in six months, one hundred and twenty points in
56:44
Speaker 1: twenty four months. Nothing changed your life more than God
56:47
Speaker 1: or love than moving your credit score one hundred and
56:49
Speaker 1: twenty points. When you go to the club tonight on
56:52
Speaker 1: Saturday night, whenever you go to the club and you
56:54
Speaker 1: see this fine woman. Oh, man, she's fine. What's her name?
56:57
Speaker 1: Ladi's like, oh, he's handsome. What's his name? After you
57:00
Speaker 1: get the name, ask them what the credit score is.
57:03
Speaker 1: And I'm only partly kidding, because that's your business partner
57:07
Speaker 1: for life, that's your running But my wife, Shasery, has
57:09
Speaker 1: a great credit score. In fact, sometimes her credit score
57:12
Speaker 1: is better than mine because I'm an entrepreneur. You know,
57:14
Speaker 1: I got all these dead loads and lines of credit
57:17
Speaker 1: things in and out tying to my personal name, and
57:21
Speaker 1: hopefully she gets to chill. So your wife or the
57:24
Speaker 1: person who's actually not taking on the obligations in your
57:26
Speaker 1: family might have a better credit score then you, and
57:29
Speaker 1: do not use them to tear to Do not use
57:32
Speaker 1: them to do not pump your spouse or your children
57:37
Speaker 1: because you're not paying your obligations. If they can, if
57:40
Speaker 1: they have great credit score, you want to protect it
57:42
Speaker 1: and you only want to use it when you know
57:44
Speaker 1: you want to abuse it. This is a wrap. Well,
57:47
Speaker 1: I'll tell you what I'm rhyming, not even trying. I
57:52
Speaker 1: check my credit score every two days. By the way,
57:54
Speaker 1: you guys should do it every day, every two days,
57:56
Speaker 1: once a week. On the regular though, and if you
57:58
Speaker 1: never check your credit score is guaranteed as an error
58:00
Speaker 1: on it on your credit report. And if you go
58:02
Speaker 1: to Operation Hope, we can typically challenge that with the
58:05
Speaker 1: credit burials and typically can can get you a twenty
58:08
Speaker 1: to thirty percent credit score right away. Because the removal
58:11
Speaker 1: of a credit score of the credit eerr, the credit
58:14
Speaker 1: burials cannot confirm that error is yours, that item is yours.
58:18
Speaker 1: They must remove within thirty days. That silver rights facts
58:22
Speaker 1: I'm giving you. Only borrow when it makes your money. Hello,
58:27
Speaker 1: good debt. Only borrow when it makes you money. That
58:32
Speaker 1: it may always be true, but you should have as
58:34
Speaker 1: a mindset, I'm only going to borrow when I think
58:36
Speaker 1: is going to make me some money. Avoid in post
58:39
Speaker 1: debt on depreciating items. I didn't say I almost had assets.
58:44
Speaker 1: It's not an asset. Certainly was not what it's on
58:46
Speaker 1: your ass It's definitely not an asset. I said to
58:49
Speaker 1: say that, avoid impost debt on appreciating items. And you
58:55
Speaker 1: know Opertions mission is financial literacy that can all compowerment.
58:58
Speaker 1: So use Operation Hope as your financial coach, as your
59:01
Speaker 1: private banker, or I get a coach assigned to you
59:04
Speaker 1: and talk to them on a least on a monthly basis.
59:06
Speaker 1: That is a tool. Use it wisely and it will
59:09
Speaker 1: work for you. Abuse it and it will own you.
59:12
Speaker 1: This is John O'Briant. We got through this in less
59:15
Speaker 1: than an hour. Left out a lot. Tell me what
59:17
Speaker 1: you want me to focus on. I think you want
59:19
Speaker 1: me to focus on how wealthy used that. I will
59:22
Speaker 1: only do that if you tell me too. I'll do
59:23
Speaker 1: a whole episode just on that. This is John O'Brien.
59:26
Speaker 1: This is Money and Wealth and this is the Black
59:28
Speaker 1: Effect Network on iHeartRadio. This is season two and know this.
59:33
Speaker 1: I love you, peace and light. This is a silver
59:37
Speaker 1: rights movement. Go get my book Financial Literacy for I'll
59:40
Speaker 1: tell you all your friends to subscribe to this weekly podcast.
59:43
Speaker 1: This is my ministry of finance, my pulpit of hope
59:47
Speaker 1: and opportunity. This is not moving from parshing in the
59:50
Speaker 1: streets to cutting business deals in the business suite. This
59:53
Speaker 1: is where ownership matters. Money and Wealth with John O'Brien
1:00:10
Speaker 1: is a production of the Black Effect Podcast Network. For
1:00:13
Speaker 1: more podcasts from the Black Effect Podcast Network, visit the
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Speaker 1: iHeartRadio app, Apple Podcasts or wherever you listen to your
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Speaker 1: favorite shows,