Greed is blamed for much of the economic crisis currently facing us. But blaming greed misses the real point. Greed needs a mechanism—a tool—to put greed to work. This tool has been touted as the magic money-making tool. What is the tool? It is leverage.

Underneath all of the complicated terms, such as “derivatives,” “leveraged buyouts,” “financial instruments,” the fundamental tool that has led us to this point of crisis is misused leverage.

What is leverage anyway? Leverage is the result of the action of a lever. When properly positioned, a lever allows you to move something you could not move with your own strength.

A simple machine consisting of a rigid bar pivoted on a fixed point and used to transmit force, as in raising or moving a weight at one end by pushing down on the other. Lever

In finance, leverage is primarily the use of borrowed money to buy what you could not afford to buy with your own money.
 
The real estate boom has been fueled by leverage. This has been the great selling point for real estate investing. You can use leverage to buy real estate with little or none of your own money. In other words, you finance your real estate purchases with debt.

Leverage is the tool that rewards greed. With leverage—whatever form that leverage takes—you can buy more than you would be able to buy using your own money.

Leverage is a tool that can and does create profit. The real estate boom is a testimony to the effectiveness of leverage as a wealth creating tool.

People used to build wealth through building equity in their homes. Today, people prefer to speculate on the price of their house by using historically high levels of leverage. Richard Bernstein

So why are we in the current financial crisis? Underneath the crisis is a shared belief that values will keep going up. Robert Schiller makes this point in his book, Subprime Solution.

In Shiller’s view, the biggest dangers in financial markets come from unanimity. In Subprime Solution, he argues that what united the missteps by the Federal Reserve, mortgage brokers, Wall Street bankers and home buyers that together brought on the current financial mess was a shared belief that house prices never go down. Crash Master

This is the true irrational belief behind the financial mess. In reality, real estate prices are subject to cycles, and ups-and-downs. The old adage states: What goes up must come down. Nothing continues on a continual upward path indefinitely.

Yet, from the greatest investment banks on Wall Street, to novice real estate investors, many of us operated with the belief that real estate values would continue to go up, and that leveraging borrowed money was the smart way to make money fast.

As a result of this shared belief, many real estate investors and the bankers who financed their transactions, never saw the downside of using leverage as a tool to create wealth.  Read the rest of the article here

Dr. Kalinda Rose Stevenson

Do you know how banks make money out of thin air?  Find out in No Money Limits For Real Estate Investors.  And be sure to sign up for your Free “52 Heart Of Money Insights.”  

The episode is meant to demonstrate that happy and excited thoughts focused on a desired outcome will result in getting what you want. In “The Secret,” the boy “manifested” his bicycle as a result of his concentrated positive thoughts and feelings. This is the secret of abundance in “The Secret.”

My son contrasted this story with his own experience. When he was in middle school, he wanted a Go-Kart. We said he could have one if he earned the money for it. So he went out and offered to work for people in the area. He raked leaves, swept driveways, and did other odd jobs. In a short period of time, he earned enough money to buy his Go-Kart. He “manifested” his Go-Kart as the result of concentrated intention and hard work. He has commented more than once in the years since that we did him a great favor by encouraging him to work to buy his Go-Kart rather than to buy it for him. It taught him that he could have what he wanted by taking focused action to get it.
 
I don’t mean to dispute the validity of “The Law of Attraction,” or deny the possibility that people can manifest what they want to have by concentrated thought. In a world of quantum possibilities, the mind is a powerful creator. I do mean to make the point that entrepreneurs are much more likely to get what they want than dreamers are, because dreamers merely dream, hoping for an outcome. Entrepreneurs act upon their dreams to produce abundance.

On contrast, so many of the stories addressed to children teach magical thinking as the method of manifestation. Fairy godmothers wave magic wands, genies grant wishes, boy wizards recite magic incantations. Children also learn about Santa Claus with his flying reindeer as the great wish fulfiller, a giant rabbit who brings colored eggs and candy, and tooth fairies who exchange baby teeth for cold, hard cash. As a child, I even learned to wish upon the first star I saw at night. I had no similar instruction in how to turn my wishes into reality by creating an action plan.

During elementary school, as a child growing up on Cape Cod, I was involved in a summer children’s theater. I had some small acting roles and did some behind-the-scenes work. During the production of “Peter Pan,” I sat in a theater box to the upper left of the stage and did sound effects. One sound effect was to jingle little bells for Tinkerbell.

In the story, Tinkerbell drinks poison and is dying. Peter Pan calls out to children everywhere to save her life by believing. Peter addresses the audience directly and claims that if there aren’t enough children who believe in fairies, little Tinkerbell will die. At that point, the audience gets involves and wishes Tinkerbell back to life. My part in the dramatic moment was to jingle the bells louder to show that Tinkerbell had been restored by the fervent wishes of the children.

Now, many years after my brief career in theatrical sound effects, I look back on Peter Pan as one more way that the adult world teaches children magical thinking. Maybe it is all part of the wonder of childhood and maybe it is all harmless stuff. But I am not convinced. The common denominator in all of these fantasies is to instill in children the idea that if you only find the right magic spell, the right genie, the right wizard, the right fairy godmother, do the right things to please Santa, then you can have what you want.

Such magical thinking does not end with childhood. When we get older, we can substitute hope in winning the lottery, hitting the jackpot, or buying into the latest biz-op as the way to get rich without doing anything beyond hoping for abundance.

Whatever else “The Secret” teaches, in this one episode about a child who wanted a bicycle, it teaches magical thinking as the method to achieve abundance.
 
In contrast, successful entrepreneurs do what my son did. They don’t use magical thinking to accomplish their dreams. When they want something, they do something about it. As a result, entrepreneurs are more likely to create wealth and abundance than any other group of people.

One way to overcome magical thinking is to understand the real nature of money. Be sure to get your free “52 Heart Of Money Insights.” 

Kalinda Rose Stevenson, PhD

“Entrepreneur” is one of those umbrella terms that can cover a range of meanings. In essence, an entrepreneur wants more out of life and is willing to do what it takes to have it. An entrepreneur is a dreamer, but dreamers are not always entrepreneurs. The primary skill of the entrepreneur is to imagine what does not now exist, and to take actions to create it.

Entrepreneurs are always “up to something.” Talk with an entrepreneur and you will hear some big plan, some bold idea, some powerful dream to create something that does not currently exist.

Compare someone who buys lottery tickets each week with the hope of striking it rich with the entrepreneur who sets out to create a profitable business. One hopes for an abundant outcome. The other takes action to create an abundant outcome.

Of the two choices, acting to create abundance has vastly greater probability of success than hoping to win a jackpot. Certainly, people do win jackpots, but the odds are miniscule. And the sad result is that many lottery winners end up worse off than they were before winning because they have no idea how to handle their new abundant money.

Years ago, there was a TV show called “The Millionaire.” Each week, a rich man sent his assistant out to give a million dollar cashier’s check to someone. The point of the show was to see how the money changed the recipient. It was usually not for the better.

What is the connection between being an entrepreneur and creating abundance?  Both require a similar mindset. Abundance is the direct result of a creative process. Abundance requires focused action toward your dreams rather than a passive hope that someone will leave abundance on your doorstep. The best strategy for abundance is to become an entrepreneur and create your own abundance.

One of the best ways to create your entrepreneur abundance strategy is to understand the real nature of money. 

Be sure to subscribe to your free 52 Heart of Money Insights. 

This fundamental reality of Monopoly is that one player wins while the others lose. This reflects the experience of the Great Depression. Thousands stood in breadlines while a few people became very rich.

Monopoly does not allow players to help each other. The rules forbid partnerships and loans between players.

What is the psychological lesson from such a competitive game? You learn that you are a solo player and you want the other players to fail. You would never want to help another player because that could mean you would lose.

What kind of economic model does Monopoly teach? It teaches that wealth comes to the most competitive. The only way to become wealthy is to take money from others.

This belief is deeply engrained in our shared consciousness about money and success. The game of Monopoly reinforces a common belief that the only way to win is to defeat your competitors.

What kind of success model is this game based on competition for a limited money supply? You don’t have to look any further than the statistic that 96% of the population will reach 65 without enough money to be financially self-sufficient. Instead of congratulating the 4% who somehow manage to create financial freedom for themselves in this economic system, you need to ask: Why do so many lose the money game?

The short answer is that many have to lose in order for a few to create wealth. The economic model of competition for limited resources demands that almost everyone must end the game broke for a few to become rich.

Attempting to create wealth according to the Monopoly model is a lonely struggle in a highly competitive game. There is always a winner in Monopoly. You might be the one to win. It is much more likely that you will be one of the majority of those who lose.

This Depression era game is stuck in the mindset and beliefs of a game that doesn’t create money. The winner takes money from others, but does nothing to create more money through transactions.

Mr. Monopoly had it wrong when he thought that the only way to win was to drive competitors out of business. It’s true that business is full of “black knights” and hostile takeovers from people who still treat business as a game that allows only one winner. But the Great Depression ended more than sixty years ago. It’s time for a new game with a new understanding of money. The fact is, you’ll make more money in transactions than you will in takeovers.

In this era, the most enlightened business people understand that you will make more money in joint ventures with others than you will by competing against them. When you take off the Depression era Mr. Monopoly glasses, you can see a new vision of money and business. Money is not currency. Money is an idea, and the only limits to money are the limits of your vision.

For your new vision of money beyond the zero sum game of Monopoly, be sure to
get the award-winning book, No Money Limits For Real Estate Investors:
Discover The Money-Making Secret In The Real Estate Game That Transforms Your
Money Struggles Into Financial Abundance by Kalinda Rose Stevenson,
Ph.D. at www.NoMoneyLimits.com.
USA Book News Best Books Winner in Business: Real Estate category
and Finalist in Business: Personal Finance category. No Money
Limits For Real Estate Investors is not just for real estate investors, but
for anyone who wants to know how the assumptions of the Monopoly Game keep people
struggling needlessly with money limits.