When you’re accustomed to the beatings, you never trust the helping hand.
And for the last decade or so, the beatings have been regular and unceasing, delivered by the Federal Reserve, at the hands of the banking industry.
Here’s how it goes:
You walk into your nearest branch, you have a bundle of Ben Franklins you want to stick into the highest-yield savings account you can find, and the banker—sporting a malevolent Marquis de Sade grin—tells you that your money will earn next to nothing…and you’ll like it.
What’cha gonna do, really?
The sadist on the opposite corner of the street offers nothing better.
And then along comes the helping hand…
Decentralized finance, or DeFi.
You may have heard the term: It’s all the traditional financial services you and I know—banking, insurance, loans, savings accounts, etc.—except delivered using blockchain…the powerful technology behind cryptocurrencies like bitcoin. This eliminates middlemen and makes these services more efficient and cheaper to operate, which means “crypto-banks” can offer much higher interest rates on deposits.
But so many of us just assume the helping hand is another beating. So, we ignore it.
I know this because too many of my friends slap me down when I tell them that I’m earning an interest rate of 10.3% on my latest crypto-savings account…using a crypto asset that tracks the dollar on a 1:1 basis and is so stable and low-risk that the U.S. government allows traditional banks to hold it, too.
They don’t care. Don’t want to hear about it. They change the subject. I am the devil on their shoulder, tempting them with too-good-to-be-true puffery. They’ve been abused for so long that they’ve come to enjoy the abuse. It makes them feel safe.
It’s financial Stockholm Syndrome.
This—DeFi—is our every tomorrow and it’s here today.
Just this month, SEC Commissioner Hester Peirce offered this comment as part of a virtual conference: “Disintermediating can be quite helpful for financial stability. Also, for ensuring easy access to financial services on the same terms—transparent terms. That’s a positive thing.”
Let me translate: Getting rid of the middlemen across the financial-services industry and allowing consumers to interact directly with the services they want…that makes the system stronger, more transparent, and more efficient. It also opens up financial services to consumers who historically have not had access. And that’s splendiferous!
The fact that a Securities and Exchange Commission pooh-bah sees this and is publicly voicing her support…well, that tells you that deep within the bowels of bureaucracy, the overseers and regulators of securities, money, financial services, etc. know they are up against historic, fundamental changes.
They know they can either get on board and work alongside this new technology as it emerges, or they can be steamrolled by an unstoppable, global force.
I’m not one to give government much credit, but I will say that when it comes to money issues, it is acutely aware of what’s going on, because it’s always looking for its next grift.
DeFi is a fundamentally different way of banking, a different way of saving and investing.
Like I said, I’m earning 10.3% interest on one account…7.5% on another…10% on a third. I’m soon to move some cash into a fourth account earning 12.7%. Again, all of this is based on a type of crypto asset called “stablecoins” that shadow the U.S. dollar, so I’m not exposed to crazy, cryptocurrency volatility. (The July issue of the Global Intelligence Letter is all about earning double-digit returns on crypto-savings accounts, and three accounts to consider.)
If you’re wondering why so many accounts—why not just stick all my cash in the highest-yielding account? Diversification.
DeFi is new. Things happens. I spread my assets around to mitigate risks. Not that I think anything will happen, given the crypto-banks I’m using. But it’s just prudent.
Let me leave with you with this bit of math, just to remind you what earning a real interest rate on your dollars look like:
If you stick $10,000 in a typical savings account today, you’ll earn an annual rate of about 0.17%, as per national averages. Compound that over the next five years, and you’ll walk away with $10,085.
Stick the same $10K in a crypto-bank paying 10.3% and you’ll have $10,085 after the first 30 days…and at the end of five years, you’ll have more than $16,300.
That’s what savings and banking should look like.
What I’m saying is that it’s time to leave your abusive banking relationship. There’s a helping hand offering your money a better life.