Good morning today. We’re going to discuss how to get paid from the federal reserve we want to do with this is I know over the last, what, since 2008, the market’s gone straight up. Right. And if you had basically invested in anything, you’d be great. Right? That’s part of the reason why we’re having this whole video is because me and my grandma missed out on it and 10 years later, we’re not millionaires. Right? So now I want to, I’ve been talking to her and explaining to her like, look, we got to change something. So the next 10 years, we’re not looking back and like, man, we missed it again. Right. Excuse me, excuse me again. So now that the market’s on all time highs like yesterday was Thursday, December 19th, and it hit another all time high. Right? Well, what’s happening also is the federal reserve, right?
Changes its rates. Sometimes it’s cheap money. Sometimes it’s expensive money. Right? I go more into this later on, but what, what this income strategy is based off of is based off of investing in one, one security, right? It’s kind like it’s a mutual fund kind of more or less, for lack of better words, it’s a fund, right? Not a mutual fund, it’s a fund. And what it does is it invest in bonds, right? Earn like basically the federal reserve bonds and it’s a free floating rate bonds. So what it does is when the government increases interest rates, right? Well, it has money set on the side, right. To capitalize on that. So it’s always adjusting, right. I’m not good enough to be able to do that. And I’m pretty sure you’re not good enough to be able to do that either. So there’s, they got professionals in the background.
I just think it’s because they’re in cash majority of the time, like 80% or something like that. And then they adjusted around. Right. So all right. Well, to break, I mean, the way that they explain it is a little bit more confusing. So it invest in the bond and it does a futures, right? So through the futures that hedges itself even more right. Cause the futures are more liquid. All right. Don’t need to go into that. What, how does it help you? They pay you once a month, right? It’s not, it’s not that they’re not paying you millions of dollars every month. Right. But they’re paying you a small stipend every month. I mean, it’s not, you’re not getting rich off of it, right. It’s a one 12 or 1.2, 5% per month. Right. But if you continuously get that, then you’re making a decent amount of money yearly, especially if you compound it, like, we’ll talk about drip later on and you ran best that money back into the fund, but that’s in a different strategy right now.
We’re just solely just talking about how do we hedge ourselves against the inflation or not inflation, excuse me, the interest rates going up, going down and going all the way around. It’s confusing. You don’t know how much, how expensive money is to let the professionals do it for you and gain a nice little, little bit of money every single month off of your investment. Cause that’s basically what we’re trying to do. That’s the basis of everything is to set ourselves up for the future. Now with further ado, let’s get into the explanation of the federal reserve, kind of how it came about and there, all right, to understand the federal reserve need to understand this person right here, J P Morgan and the importance on why we created the federal reserve. Now a lot of people can have their federal reserve. Is this private dadadadada that child’s own this and own that.
And you know, you can go down that path and, and, you know, have fun, but there was a reason why United States created. And the reason has a lot to do with this person right here, JP Morgan. I know we, we, you know, the bank, right? JP Morgan, right? Well, the person that created the bank is this is this person right here. Now there was more reasons than just this, but part of the real reasons why we created the federal reserve system is because what happened in 1895, right? The United States had gone through a couple of years, depression and I happened have heard, you know, the civil war, as I says right here they’ve read a, he rested the United States first in 1895. Right? So what he did was after the civil war, there was a, like the, like I said, the boom on railroads that triggered a series of bank failures in a run-on goal.
So what happened is at that point in time, you know, we were the country for runoff of gold and domination of gold. And you went into the bank with some gold, the gold, the banks gave you some, some, some like paper money or whatever. And you know, I, I don’t want to get into the banking system too much because that’s not what I’m discussing right now, but to make, to it, to explain it easily. Right. And short that’s kind of what happened. Right. So what happened in 1895 is when we started going in the second year of a depression, people started wanting to get their gold back. Right. They didn’t want the paper money, they wanted the gold. Right. And so they went to their banks, they went everywhere and they started to go on bankrupts. Right. Kind of, kind of like in the great depression that we know, but a little bit different.
Cause it was, it was a little bit, it was before the central bank. It was before all that. So it was, it was just it was, it’s the same thing that we know today in 2008 route the banking crisis. But imagine what, a hundred years ago before technology and things. And so it was, it was a lot scarier and a lot more uncertain. So what JP Morgan did is he basically guaranteed the money. And then we started buying a lot of gold from overseas and replacing the gold back into the United States so that the United States wouldn’t fumble. Right. As, I mean, get into more detail, but that’s, that’s like the basis, the easiest way to explain it. Right. So he was basically the bank of the United States. Right. So when we think of today, we think of the federal reserve, okay. We need a new budget, right.
A new military budget, new education budget. We go talk to the federal reserve and the federal reserves like, okay, well we’ll give you this. Right. So back in those days, we didn’t have that. So we also didn’t have very many people that knew or knew or could solve the problem. JP Morgan was a banker was used to solving problems. So that’s what he did for the United States in 1895 is he basically saved the economy the first time right now, not too many years later in 1907. Right. So we’re talking what 12 years, 12, you know, give or take started, starts, you know, cause everything’s not on a precise moment, 12, 15 years, which makes sense. You know, cause that’s when you know, every 12, 15 years we have a kind of a downfall, you know, as a business cycle. Right.
Okay.
Well, eight give or take whatever, eight to 10 years, eight to 15 years, whatever. So in this one, what happened was, you know, we did the same. This is more like, it’s the easier way to explain this as is the housing crisis because we all understand, well, for the most part, we, we understand that it’s a little older for some of the younger kids or someone younger people, but for the most part, we, what happened. Well kind of understand what happened. All right. So what happened is, is this company down here in Tennessee, coal, iron, and railroad, all right, you can read it. It’s it’s
Well on Wikipedia and you can, you can look and you can read it yourself. But for the most part, let me just summarize what happened. So just like in the housing crisis, people are like, no, what? I don’t have any money, but this house is going to go up. I’ve seen so many people get rich. I’m just gonna buy this house. Even though I know I can’t afford it. And in a year I’m going to sell it for a huge profit. All right. That is an amazing strategy until it doesn’t work. Right. When it works, you’re a genius. You get rich in a year, you know, your life changes. But when it doesn’t work, you compound a negative situation. All right. So that’s kind of what this company did. All right. So they pledged $6 million of olden time money, which is a lot of money now on base to, you know, $6 million.
That’s I did like a hundred or a million and it was like 23 million. So what, six times 23, we’re looking at over a hundred, hundred million. And when you’re thinking of the, the GDP back then, that is in the staggering amount of money. Right? So they borrowed a lot of money from banks that they didn’t have. They gave them a piece of paper saying basically promissory note, right? A piece of stock saying, look, this is going to be worth as much money, but then the banks wanted their money back. Right. And when they wanted the money back from Tennessee coal, iron and railroad company, they didn’t have it. Right. Kind of like when people bought houses, they couldn’t afford. And when the balloon payment went up from a thousand dollars a month to $8,000 a month, they didn’t have it. Right. So they had to read Nick.
Well, when you borrow, when you bend known money to somebody, you know, you, you lend a little bit more than you, you know, you should, right. You have 10 friends and your loan money to each and every one of them right now, they’re your friends. They’re supposed to pay you back. But when they don’t all right. And what happens to you, then you put yourself in a horrible situation, especially when you have bills, right? So things can get turned off because of the debt of other people, right. Their credit worthiness. Wasn’t very good. So, you know, that’s what happened in second time, Mr. JP Morgan has to come back and basically buy out the railroad. The 10 minutes is TLC buy everything out in order, because we knew that it, some banks started to fail and other ones would bail and there’d be another run on banks, another panic.
Right. So they had to stop this. So I mean antitrust and it to make it simple, right. I can get much more into it, but I’m trying to make it as simple as possible so everyone can follow me. What happened at JP Morgan had to come in for a second time and bail out the United States before it basically crumbled itself right after they did it for the second time, the United States realized that no one person can have that much power. Right. JP Morgan was visiting the most powerful person in the United States at the time because he controlled the money. Right. He controlled the banks. He can basically control the stock market. He, I mean, he was the done data of that era, right? When it comes to banking and understanding finance, right. It wasn’t the richest person, as, as Rockefeller said, you know, died a poor man, right?
I mean, we’re talking hundreds of millions of dollars and, and Rockefeller’s like go to bad and guide a poor man. Right? So this man was very wealthy. Wasn’t the most wealthiest of the time, but was very influential on the banking system. So after the two times that one person had to save the United States, the United States was like, never again, never again, can we depend on just one person? So that’s like right here by Senator Nelson, Albridge decided never again. And that’s what they created the federal reserve, right. To be able to have an entity, which isn’t government, right. It’s its own separate entity. So it’s kinda like JP Morgan, but was a group of money, right? It’s not just one person. It’s a group of different banks throughout the United States that all talk together and discuss in union. Right. And unison about banking system.
Like, do we need the money supply? Do we need to raise interest rates to make an let’s go down here? Money is cheap. If you ever heard that, that means that the interest rates are low, so you can borrow money for cheaper. Right? So the federal reserve, like the easiest way to think of it, all right, you go to a bank, right? Cash checks, do everything, you know, get alone, all that kind of good stuff, whatever we go to the bank for. Well, the bank has the federal reserve to do that. Right. So again, I don’t want to go too far into it. It’ll take way too long to explain. And it’s not the class for this. It’s really just talking about float, right. About getting in and being able to buy it. So I just wanted to give you a little bit of insight on what the interest rates and the federal reserve.
Right? So when they raise interest rates and they make money expensive, right. To go for other people to borrow you capitalize on, right. If we all heard over the years, basically since 2008, the interest rates have been nothing. Right? If you look back in the eighties, the interest rates were extremely high, right? Then we come into now, interest rates are low. If you go to look at Japan, I don’t know if it’s still that way, but it’s a negative interest rate. So if you were to hold money in the bank, actually lose money. Right. They brought it. The part of the reason they do that is because they’re trying to stimulate, spending right. Spending. Because if there’s no incentive to save, then what do you do? You spend it right. Different class. I’m important right here. But what they’re doing is win. And that’s like, it’s applying a man contracting retract and the, the economy.
But again, what float does this right here. See, I mean, the intro, you don’t make very much money. Right. But you’ve also looked in the last five years. It hasn’t really gone anywhere. Right. So it’s, it’s, it’s not a get rich quick scheme by any means. It really, truly is hedging against the world and hedging against interest rates. Right? Hope you learn a little bit about JP Morgan providing didn’t go too far into history and go and confuse you too much about what’s happening back in the day. But yeah, that’s kind of why the federal reserve was created and to get part, to be a part of, you know, that the hemoglobin that giant and get paid from that grand idea, this is a great, great way to invest in it. And can continuously just gain a small little interest interest off of your money. And like I said, when they make money more expensive, you’ll get paid more. Right. That’s the whole thing.