Debt - The Good, The Bad & The Opportunity

In this episode, John breaks down debt! Not all debt is bad! There are some misconceptions about debt that are getting demystified today! Get your notebooks ready!

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Episode Transcript

Speaker 1 (00:00):
Speaks to the planning.

Speaker 2 (00:01):
I go by the name of Charlamagne the God, and
guess what, I can't wait to see y'all at the
third annual Black Effect Podcast Festival. That's right, We're coming
back to Atlanta, Georgia, Saturday, April twenty six at Poeman
Yards and it's hosted by none other than Decisions, Decisions Man,
D B and Wheezy. Okay, we got the R and
B Money podcast. We're taking Jay Valentine. We got the
Woman of All Podcasts with Saray Jake Roberts, we got

(00:22):
Good Mom's Bad Choices. Carrie Champion will be there with
her next sports podcast and the Trap Nerds podcast, with
more to be announced. And of course it's bigger than podcasts.
We're bringing the Black Effect Marketplace with black owned businesses
plus the food truck court to keep you fed while
you visit us. All right, listen, you don't want to
miss this. Tap in and grab your tickets now at
Black Effect dot Com Flash Podcast Festival.

Speaker 1 (00:45):
Welcome the Money in Wealth with John O'Bryant, a production
of the Black Effect Podcast Network and iHeartRadio. Yo Yo,
this is John Hope Bryant and this is Money and
Wealth on the iHeart Radio Network and The Black Effect,

(01:08):
where I am honored to be associated with Charlemagne and
the team over there, who is fantastic. By the way,
and this is a very special podcast episode, something that
many many people have asked me about, and it just
shows that somebody that's so called as smart as me,

(01:31):
so called can be dumbest rocks. What I mean by
that is, this is a topic that I should have
covered in episode one, but I just basically assumed whenever
you assume, you make a you know what out of
you and me, I just always assumed this was a
topic everybody understood, so I didn't cover it specifically. I
talked around it, I talked through it, and then I

(01:52):
just realized that one of our biggest problems this issue
of debt. And you even have some people there's certain influences,
if you want to call it that, who talk about
debt in a way, whether they just say that you
shouldn't have it right right, that it's just a bad
thing and you should be dead free. And we've talked
that into society, and we talked that into people's heads,

(02:15):
and people have really and by the way, it's a
beautiful ambition. Certainly if you're a senior citizen, or if
you're a married couple who doesn't manage to handle stress, well,
you know, you can go on and on and on.
There's all kind of examples of why certain people should
not have any debt or much debt, because it just

(02:36):
it eat eats away with their peace of mind. But
we're not talking about those people. We're talking about you.
You've been doing so much with so little for so long,
you can almost do anything with nothing. We're talking about
a survivor. We're talking about somebody who wants to thrive.
We're talking about somebody wants to build. Were talking about
somebody who is, to quote my friend departed friend, doctor

(02:58):
Dorothy Hyde, is a dreaming with a shovel in their hands.
We're talking about about somebody who's over and around it,
through it, They're going to get to it. We're talking
about somebody who knows how to do it. We're talking
about somebody who we're starting to preach now now we're
talking about somebody who knows how to succeed or wants
to succeed and just wants to know how. And you
know that somebody's been holding information back from you, and

(03:21):
you want to be set free. You just want the
opportunity again. This is like a rap and it's so
I apologize first of all for not breaking this down,
because it is untrue that dead is just simply bad.
It is just functional. In fact, I only is it untrue,
it's not even true for the people who are telling

(03:41):
you that. So that all the folks telling you that
dead is bad have good debt. All the folks who
are on TV telling poor people and struggling people and
telling the coming up generation you shouldn't own a home
because it's thirty years worth of dead or whatever they're
mentality is, whatever the rationality is. To all those people

(04:03):
who tell you not to own a home on TV,
listen to me, now own a home. Repeat that. All
the folks who are on TV telling you, the rich
people on television telling you not to own a home,
I guarantee you own a home. Why do I know
that because tax policy in the United States is really
designed around home ownership, is designed around real estate, specifically

(04:26):
home ownership, single family residential home ownership in real estate.
And they're not going to benefit. They're not going to
lose out on one of the best tax policies ever
created in modern society for any I mean, we're the
biggest economy in the world, the United States of America,
approaching thirty trillion dollars. Seventy five percent of whites own

(04:48):
a home compared to forty one, forty two, forty three,
forty four percent on a good day of blacks who
own a home. That delta, that difference of thirty percent
is a big chunk of generational wealth. So I can't
quite figure out why my wealthy friends keep giving my
poor and struggling friends bad advice. But I'm here to

(05:09):
break that cycle. I'm here to tell you the good,
the bad, and the opportunity. That's what this type, that's
what this segment is called. I want you to get
around a radio, get around your iPhone, get around your smartphone,
get around your iPad, get around you, get around your
your your streaming device, and get your friends together and
let's have this conversation. And I want you to really
chop it up. I want you to I want you

(05:30):
to have genuine conversation, go back and forth with this
and send me questions on social media, and I guarantee
you I will answer. This is what's going to be controversial.
I've already broken one taboo. I've already said, you know
that all debt's not not bad, right, So that's already
one taboo that is out there that I'm sure it
is going to calls us a lot of consternation. I'm

(05:52):
not down playing. I'm not talking down to any social
media advocate. I'm not talking down talking down to any
financial literacy advisor or financial literacy so called expert or expert.
Here's a difference. I'm an entrepreneur. I'm running real businesses.
I have built real businesses. A lot of the people
who are teaching this are really expert in the theory

(06:13):
of money, and they may know more about me by
the way in different products and things around the theory
of money, but on the practicality and application of money
in the instruments and the philosophies of running a business
and building something. This is an example where PhD DO
is just as good as PhD and in certain cases

(06:35):
might be more important. PhD is great, PhD sometimes sometimes
are better. You need really both. I have my company.
People have degrees. All people work from here highly qualified
it with degrees, more degrees than me. But I have
a degree in leadership and initiative in building something and
taking an idea and turning it into something. And my

(06:55):
friend Jim Clifton of Gallup used to say, than the
innovation without a customer to it is not a business.
And without a business, you can't build wealth. And you
and so you build wealth and your sleep in one
of the ways you build that is well, your sleep
is compounding. And one of the way the leverage, moderately
leveraged compounding is good debt. So the differentiator between me

(07:18):
and the other people is that I am I think
I'm the only one that I can one. I'm the
only one I know of who's out here preaching good
capitalism and good debt, who's actually using it in a
fast growing set of businesses, not who are not dependent
upon the advice that they're talking other is not a
seminar businesses and not a books selling business. Good that stuff.

(07:40):
By the way, I'm running a real estate business, an
intellectual property rights business, a advisory business, Fall Street and
to Fortune five hundred companies. I'm running a financial literacy
coaching organization that's the biggest in the country. In fact,
three of my businesses are in themselves the biggest in
the country. So I'm a practical entrepreneur. That's the point

(08:02):
I'm making. So let's talk about is debt good? Right,
and let's just unpack it all, and then let's get
into good debt versus bad debt. So let's talk about
the history of debt in society. And I'm going to
talk about my own history by the way of debt.
And let me just say this right off the bat.

(08:24):
If it wasn't for good debt, and I even used
bad debt for a time, I didn't know the difference.
I was just running the hustling I had to outrun
the high interest rates that were on tied to the
bad debt of using it for good purposes, Which just
shows you the power of debt that if you use
bad debt for a good purpose and you run really fast,
you can outrun the cost of the bad debt with

(08:46):
the benefit of the of the good opportunity and still succeed,
which was my story early on when I had used
bad credit cards for a good purpose, when I was
running my businesses as a teenager. I I can't underscore
enough how this entire topic requires financial literacy. I can
underscore enough why you need to talk to a range

(09:08):
of advisors and don't just go off here and just say, well,
debt's good. That's not what I'm saying. In fact, too
much debt and this will crush you. You got to get
this particular conversation exactly right. Why did I use debt
because I didn't have equity, because black people and brown
people did not have access to equity. I did not
have access to equity. I did not have inherited wealth.

(09:30):
My parents were not endowed in that way, and so
I had to use what was in front of me. So,
by the way, is debt capital? Is debt a form
of capital? Yes, this is the first definition. Debt and
equity loans and earned or received ownership collateral or ownership

(09:52):
assets equity. Those two things are both forms of capital.
One's debt capital, one's equity capital. Debt capital, you o,
somebody got to pay it back. Equity capital theoretically it's
yours or somebody gave it to you. There's no loan attached,
there's no payment attached to it. Just to make this
real simple, one simple rule in business is you never

(10:14):
want to finance long term equity with short term debts.
You don't want to try to finance a long term
business prospect using short term debt that you have to
make a payment on. But that's just a that's an
aside getting them ahead of myself. Let me talk about
why I differentiate, first of all, my advice and my

(10:34):
approach to some of my wealthy friends who say just
debt is bad. In inner cities and underserved communities, particularly
the black community, we have historically relied on debt as
a form of capital because there were systemically, we were
systemically excluded from accessing equity and generational wealth. This exclusion

(10:57):
was not accidental result of racist policies in the twentieth century,
even before that, going back to slavery, of course, discrimination,
discriminatory financial systems, and structural economic barriers that limited wealth
building opportunities. And let me break this down by the way,

(11:19):
if you don't need this history lesson, just fast forward
on the podcast to the practical advice when I get
into good debt and bad debt. But for some people,
this for those people who living in this situation, you
need to know that you're not dumb, you're not stupid.
It's what you don't know that you don't know that's
killing you, but you think you know. You need to
unlearn what people have taught you in I don't know,
even church, maybe about why that is supposedly a bad

(11:43):
or evil thing. The Bible. Bible does not say that
money is bad. The Bible says the love of money
is bad. Hello, Hello, can I get in a man?
So you maybe the unlearned some things and you may
capitalism is bad. No, capitalism is not bad. Look, even
if you want to distribute money like a socialist ship
to first collect it like a capitalist. So even the

(12:05):
church can't survive without tides and offering contributions and pay
their bills. So let's knock off facillity stuff. Capitalism has
been around since the beginning of time and get into
this with a history of debt. But let me for
some people this is really important message to understand that
they're not dumb and in that stupid there's a reason
why they start They start out behind the starting line

(12:26):
and people or mainstream it's important to understand why there
needs to be a leveling of the playing field for
certain groups. That everybody is not starting out even and
you just can't say if you have merit that is
good enough. That is just not true. That's why people
go to Harvard and not a community college. Harvard may
not treat you to teach you any anything more. But
it's a club. It's a relationship with people who can

(12:48):
to hook each other up for the next forty years.
That is a form of capital. By the way, that's
relationship capital. It's a different video, it's a different podcast.
Or do a separate podcast on relationship capital. Slavery The
history of exclusion from equity and wealth building and slavery
in the wealth Gap was sixteen nineteen to eighteen sixty five.
I'm doing soul podcast just on the economics in the

(13:08):
business of slavery and Black Americans were enslaved for about
two hundred and fifty years, meaning they were generating. They
were generating wealth, but not owning any really important stuff. Here.
By the way, we focused on culture, our white friends
focused on commerce. That's why when we say something's cool,
it's cool in Tibet, it's cool. I'm in Singapore right now,

(13:30):
it's cool in Singapore. Black music black. This black when
I walk around the malls here, this black music playing everywhere.
We have mastered culture all around the world. But we
missed the lesson on commerce. Do we need to miss it?
Somebody throw the memo and misplaced it and never gave
it to us. That was my fourth of system. I

(13:51):
can read that one. Certainly get my book Financial Literacy
for All was the bestseller right now. So we were
in slave for two hundred and fifty years, meaning they
were they were generating wealth but not owning any of
that wealth. By the time slavery ended, black families had
no land, no capital, and no inherited wealth, while white
families had been building generational wealth for centuries. Okay, the

(14:15):
denial of land and home ownership eighteen sixty five to
nineteen sixty eight really started in eighteen sixty two. Forty
acres a mule was never delivered. Black Americans were promised
land but denied it, while white families benefited from government
back land grants. I mean again, we don't this is
not this videos about, so I don't want to get distracted.

(14:35):
But the Homestead Act of eighteen sixty two allocated ten
percent of all American land to ninety nine percent plus
white families, about two hundred and seventy million acres. There
was no debt type that those land grants. The grants
were I think one hundred and sixty acres of my
memory serves me properly. And the government even set aside

(14:59):
the teachers they were government paid for who taught the
white farmers how to farm on the land. Okay. And
in contrast, a few years later eighteen sixty five, Philly
Action fifteen created four hundred thousand acres in comparison to
two hundred and two undred and seventy million acres forty
one thousand acres set aside for blacks who were fight

(15:20):
who fought in the Union Army, like my second great
grandfather who was fighting in the Union Army as part
of the Mancipation Proclamation. He was one of seven thousand
officers George Young is his name. Anyway, these if you
were in the Union Army, you could have gotten one
of these eighteen thousand plots of forty acres. Think about
this now, forty thousand acres, about eighteen thousand plots of

(15:43):
land forty acres each. Within two years, the Lincoln was killed,
all that property was turned back over to the original
folks who owned the land, who were confectionately effectively Confederate
families and slave owners in comparison to the Homestead Act,
which was it eighteen sixty two basically during the Civil War,

(16:04):
and all that was land going west, and that was
ten percent of all American land two undred and seventy
million acres, and that accounts for the generational wealth of
about one hundred million Americans today. Are the basis of it.

(16:29):
Jim Crow laws kept black owning businesses and property, forcing
them into low wage labor. Redlining. Nineteen thirties to nineteen sixties,
the federal government and banks systemically denied black families access
to home loans, meaning they could not build equity through
real estate, while white families could. Again why is this important?

(16:53):
The federal government called for guarantees on loans called FHA
Federal Housing Authority. They read line they put it. It
wasn't banks who did this, it was the federal government.
They read lined certain areas and said these areas were unsafe.
Whether the area is considered unsafe, We're a bank, and
you know, no bank in the right right mind wants
to do a loan in an unsafe area. Certainly, the

(17:13):
federal government is not going to insure the debt. So
the federal government. Think we talk about good debt now here,
they ensured the debt of loans, of loans, mortgages that
were not in red line areas, which coincidentally were in
these suburban or white areas where white flight, where whites
moved to. And after World War Two it even became

(17:34):
more intense, and that's where the mortgages went to. The
mortgages went to areas that were ensured by the federal government.
This is the definition of of that aras version of
good debt. So which which properties. I'm about to give
you a real cheat sheet here and about black you know,

(17:55):
they called hotan across the train tracks. Why are white
homes wired? White homes more valuable than black homes. This started,
as you know, really as a baseline in nineteen thirties
when FHA would redline the federal government of red line
black communities and would not provide mortgages, would not provide
guarantees for mortgages, and so banks would not provide loans.

(18:17):
In addition to that, banks were racists. Back then. There
were family owned banks that a lot of them. I
got to do a separate podcast just on this. This
is too much information for one podcast. By the way,
you can send me notes on social media and tell
me which things to focus on, and I'll be happy
to do that. So if you could provide a loan
and a guarantee at prime rates in a white neighborhood,
but you got no loans no guarantees in a black

(18:39):
neighborhood guests and so then homes traded and sold, and
you could easily sell the home in a white neighborhood.
Could you could assume a great mortgage, but a great
rate right backed by the full faith and credit of
the federal government. I mean Dosnegger rocket science is to
figure out that the homes and the white neighborhood would
start appraising for hire, and the black neighborhood was already

(18:59):
read line to proceed with. The federal government said these
are dangerous areas, so of course they would have praised
for lower. So this is the basis of good debt
and bad debt I'm giving you. Are trying to give
you a really good example here the government actually defined
what a good debt and the bad debt was by
making this redlining action. The lack of access to business credit.

(19:20):
This is nineteen hundreds to present, banks refused to lend
the black entrepreneurs. While white businesses had access to family
wealth bank loans and government grants. The Small Business Administration
systemically excluded black entrepreneurs from funding programs until the late
twentieth century. By the way, Operation Hope got its loan
got its start from the Small Business Administration got a grant,

(19:42):
a seven J grand for sixty one thousand dollars in
nineteen ninety two. And it was, oddly enough bipartisan. It
was George Bush inspired George Bush, the father, inspired by
Mayor Tom Bradley, a black mayor back then, the first
black mayor, black mayor of a major city ever in
South Central in nineteen ninety two. So that was a
great example of it wasn't red or wasn't red, it

(20:05):
wasn't blue, it was black. It was green. Right, So
he was a red and the blue providing the green
to some black, to a black man, to this young entrepreneur.
So that, luckily that's changing with the SBA. Venture capital
has historically ignored black businesses. Even today, black founders received

(20:26):
less than two percent of venture capital funding. I talk
about venture capital, unpack what that means in a season.
Once go back and watch that why Black marias had
to use dead instead of equity. Without access to homeownership,
business loans, or inherited wealth, black Americans had only one
option left debt, using credit cards and loans instead of

(20:50):
investment capital. Because banks wouldn't provide these business loans, Black
entrepreneurs had to fund businesses using personal credit cards and
payday loans. Inherited wealth. Black families use credit for emergency expenses,
medical bills, and education, leading higher credit burdens. We use
gofund me campaigns today not to start a business, but

(21:11):
to bury somebody. I mean, think about this. We made
this stuff normal. It's not normal. That's why I say.
You know, when you're a fire of the credit score neighborhood,
you think that the dumb stuff is normal. You walk
up as a check cash or pay day, long lender, rental,
own store, title lender, liquor store, powd shop in the
inner city neighborhood, a fire the credit score neighborhood, and
we think that's normal. Is not normal. And whether you're

(21:32):
black and brown, urban or white poor rule, it is
the same. It's just bad. Higher interest rates on loans
and mortgages. By the way, if you if you're in
the one of these underserved neighborhoods, fire their credit cord neighborhoods,
and your only you have access to these loans from
Pooky and Them and Jojo and Luigi or whoever who's
making these loans in the hood where I grew up at,

(21:53):
like a hood like where I grew up, their high
interest rate loans. So you can't start a normal business.
You end up going into the illegal enterprises because that's
the only thing that's going to pay you the kind
of returns that will allow you to repay these crazy
loans that you've gotten. So one thing, one bad idea,
feeds on another situation, and you end up in a
just toe up from the flow up. Higher interest rates

(22:15):
on loans and mortgages due to lower credit scores and
systemic barriers, trap black borrowers in a cycle of expensive debt.
It's very expensive to be poor. The student loan crisis
and lack of family wealth. Black families often do not
have generational wealth to pay for colleges out for college
expenses outright, by the way, this is an example college expense.

(22:36):
College loans is an example of good debt. Explain that
at the moment, leading to higher student loan debt because yeah,
we don't have the wealth, so we end up in debt.
But as I said, that can be a form of
good debt. I'm going to do this in two parts.
This is too much to carry cover in one city.
Black graduates borrow more, take longer to pay off debt,

(23:01):
and have higher default rates than their white counterparts for
the reasons I've already mentioned. Not because they're dumb, not
bect they're stupid because their family and these white families
can just pay for the expense of the education, and
they're not carrying with them the generational debt. They have
generational wealth because well, for the reasons I've already discussed. Uh,

(23:23):
And so one thing, one crisis builds on on another
in the black community. Meanwhile, white families pay down, pay
down their assets, helping with what they pay. They use
good debt, and they pay that down, creating assets because
now you're building wealth in that. So the guys I
hate when people walking to me, Actually I love it

(23:45):
because it's a teachable less lesson teachable moment. Oh man,
I don't want to buy no house. I buy the
house the bank owns the house if you don't pay.
Let me tell you something. If I loan use the
money and you don't pay them on own your house.
But yeah, you don't pay, the bank will own your house.
Yes that's true. But as long as you pay and
you got to live somewhere, while when you pay rent

(24:05):
or mortgage payment, then the equity is yours. Right, don't
be a dummy. Right. Meanwhile, white families pay down their assets,
helping their children to avoid debt and start life with
an economic advantage. The life cycle of debt and the
wealth gap. Today, the average black family has ten that
ten times less wealth than the average white family. Home

(24:28):
ownership rates for black families are still the lowest amongst
all racial groups, limiting access to home equity and generational wealth. Okay,
and I haven't got into the debt parts yet. This
I'm just giving you the baseline. Predatory lending, payday loans,
hydras rate credit cards disproportionately target black and underserved communities,
keeping them a cycle of debt based on survival rather

(24:50):
than equity based wealth creation. I've already again I've covered
this that whether you living is the number one The
average credit score for the lowest credit score of any
group are Black Americans, not Black Caribbeans, not black Nigerians,
not black Ghanaians, not black Bohemians, Black Americans because of
the legacy of slavery and Jim Crow that I've mentioned

(25:13):
here that affected us and didn't affect them in the
same way. And so our credit score is the lowest
in the country on average is six twenty, which means
half of Black people wake up in the morning and
lock out of the free enterprise system. Again, there's nothing
to do with your intelligence. You can go to church
every Sunday be the nicest person in the world to

(25:33):
still be broke if you don't understand how this system works.
I'm gonna do a whole podcast series on how it's
been six thousand years of telling Black people some stupid stuff.
I'm gonna try to turn that around in less than
six years so you get back on the right track
and master this. But this whole concept that somehow where
we just we can't be capitalists, it's completely dead wrong,

(25:57):
and again, like I to cover it here, we don't
have enough time. I'm entire series on that. But we
created the whole system. I will touch on that before
I finished this particular podcast, my Inclusive Economics Grow The
Plan is building the idea that we must transition Black
Americans from a debt based survival a platform to an

(26:18):
equity based wealth building platform. Increase access to prime credit,
home ownership and business investment. Expand financial literacy programs to
teach debt management, investing in wealth creation, and of course
my favorite thing, good credit scores. Ensure banks, venture capital
firms in the federal government invest directly in black owned
businesses and home ownership opportunities. Now, this is not to

(26:41):
the exclusion of other races of people. Just to make
this clear, I want everybody to succeed. I'm just making
it clear that Black Americans are a notable example, an exception.
That's what. You can't just put Black Americans into a
bucket with everybody else because nobody else was enslaved on
American soil. And it's stupid for somebody to say otherwise.
You can't put Black Americans and say which is like
everybody else, because again, no one else was property for

(27:04):
two hundred and seventy years, no one else was in
slaves in American soil. Literally, banks, if a bank is
over one hundred and fifty years old. There are debt
records of black slaves on their road or on the
bank records. Yes, what I just said is actually true.
A plantation owner one hundred and seventy years ago would

(27:25):
get a loan for their plantation that would include their livestock,
the buildings, the land, and their slaves. Then insurance companies
would ensure them and underwrite them, and Wall Street firms
sometimes would securitize that debt. It's everybody was involved in
this corrupt, bad system. Let's now move on. Let's go
to the history of debt. Debt is as old as

(27:50):
civilization itself. From early barter systems to today's global financial markets,
borrowing and lending have played a crucial role in that
canom development, social structures, and wealth distribution. Please hear me now,
this is as old as life itself. The Bible talks
about money more than talks about anything else, more than
two thousand mentions. Again, money's not bad, it's the love

(28:14):
of money that's bad. Understanding the original the origins of
debt helps us grasp its power both as a tool
for progress and a potential source of financial hardship. Jesus
only got mad one time when he turned over the
table of the money changers when they were inside the temple. Again,
it's not money. It's the love of money. It's the greed,

(28:36):
it's it's the repressive aspects of it. It can also
be very empowering. It could be you do well and
become a philanthropist. I guess like me in some ways,
I'm still an active capitalist. But I make it and
I give some of it away. I make it and
I use it as a source of power to lift
people up. I eat my philanthropy Operation Hope, which is

(28:57):
the largest financial legacy culture organization in America. Ancient debt
the first grandit credit systems. Now, I'm gonna run through
this pretty quickly because I want to get to the
lessons in this one podcast episode. But let me know
if you want me to go deeper in a second episode,
and I will. I'm gonna try to get through the
whole thing before the hour is over, but I will.

(29:18):
I'm willing to go deeper if you want me to.
What it's interesting to me. They may not be interesting
to use what I'm saying. So the earliest record recorded
forms of debt date back to Mesopotamia. This is three
thousand years before Christ. This is where the Sumerians and

(29:44):
Acadeians at Acadeians, among other earlier civilizations in human history,
developed a system of loans using silver. He loan my
civil rights movement, silver and grain. By the way, before
there was a gold standard in America, the America used silver.
It's the people's metal, people's precious metal. These societies were

(30:09):
predominantly Semitic and Sumerian speaking people, contributing significantly to early
urbanization and economic structures. By the way, just to make
it real clear, it was the Middle East where money

(30:30):
structures debt structures were first originated, specifically in Iran, Okay,
to be very clear what I'm saying here in North Africa.
So the Middle East and North Africa's where these early
systems came fromus. So call anybody, tell you that you're
dumb and you're stupid, you'll understand these things. It came
from us. These loans were often used for agricultural purposes.

(30:51):
Farmers borrowed seeds and livestock, repaying lenders with a portion
of the harvest. Hello capitalism, free enterprise. Temples and palace
since acted as early banks. Hello, Hello overseeing transactions and
setting interest rates. Jeremy temples and palaces acted as early banks.

(31:11):
One of the biggest banks in the world is inside
of the Catholic Church. Debt in ancient Greece and Rome.
By the time the Greek and Roman empires that had
become a key part of economic expansion. In Greece, borrowers

(31:36):
were Borrowing was widespread among city states and individuals, but
failure to repay it often led to severe consequences, including
loan including the loss of land and personal freedom. Think
about your car being put up by a tow truck
today being repossessed the same thing. So no one's picking

(31:56):
on you. This is This is old, is modern and
human beings and life itself. The Athenian leader of Salon
around five ninety four BC before Christ, introduced reforms that
abolish debt slavery, Yes, debt slavery. Recognizing that excessive debt

(32:19):
could destabilize society, the Romans refined financial systems further. Now
we're heading into the Greek era, creating the first formalized
banking institutions and debt contracts. Wealthy Roman elites acted as lenders,
funding military campaigns, traded expeditions, and public infrastructure projects. The

(32:40):
concept of interest usira usereus, that's where this phrase comes from,
became more structural, structured. Although excessive rates were frowned upon
in society, this is one of the reasons why they're
I believe, I'm not an expert in in the Middle

(33:00):
East financial system, but I know enough to say this.
This is why the Middle East has caps on interest rates.
They use a different system, same system, but a different system,
a different approach. I say, maybe I'll cover that in
another podcast. The Middle Ages, the Church in the rise
of credit. During the medieval period, lending was shaped by

(33:23):
religious doctrine. The Catholic Church prohibited usury charging interest on loans.
So again this is something I'm trying to figure out
what to tell you, what not to tell you, because
this is just a such a deep topic that I
can go on forever and ever on. Because this is
the same thing I just mentioned about the Middle Eastern

(33:44):
model where they prohibit usury lending to the to the
emergence of alternative lending systems. So the Catholic Church prohibitive usury.
This is this of course change interest rates on loans,
but that was the original system. Jewish and Lombard merchants

(34:05):
became the primary money lenders in Europe as Christian restrictions
on interest bearing loans limited participation in finance. Now this
is a very stanging point. It wasn't like Jews were
some privileged groups. They were there. They were the outliers.
Jews were outliers. Middle Eastern emmerchants were outliers. African leaders
in this space where outliers, they were not mainstream in

(34:27):
any way. They were forced to do things that nobody
else would do. So here's an example that the church
would not allow interest rates, so these other entrepreneurs decided
to find a way around it. Do you know in Europe,
Jews could not own land in the twentieth century, were
prohibited for owning land. So they do they smartly created
became experts in finance, which they had been gaining ex

(34:49):
expertise in over literally hundreds of years, and they used
finance to then control the land that the society said
they could not own. And that's exactly with blacks and
others should be learning to do, by the way, turning
negative into a positive old around to do what you're
going to get to at Wall Street, prohibited Jews from

(35:10):
being lenders. And this is a whole other story, but
this is why Wall Street firms, alternative Was Street firms
cropped up and they are now many of them dominant,
like Goman Sachs. Hello, that was two Jewish merchants, mister
Goman and mister Sachs. But no one thinks about it now.
They just think about Goldman Sachs, one of the biggest
companies in the world today. That it took an outlier

(35:32):
area and made it the mainstream area. Took a negative
and turned it into a positive because they were walking
down door to door with a little briefcase trying to
get a job, trying to sell financial services to the
door because they couldn't get a job in the big
fancy office buildings in the early twentieth century. So stop
hating on Jews because they're good at what they do.
It's like hating on a black person because they're good

(35:52):
at rapper or basketball or football or preaching or whatever
it is we're good at. It's like, is you're good
at something, you should just simply applaud that individual or group.
It also is stupid if you generalize, you discriminate. I'm
not good at rapp by the way, I just discriminate

(36:14):
against my own black people, my own people by saying
blacks and rappid. But that's a perception. I'm horrible and
rapping horrible to rapping in horrible basketball and football either.
I love motorsports, but you get my point. The first
credit markets began developing in major trade hubs such as
Venice and Florence. In Italy. We're merchant banking families. The

(36:34):
medicine as an example, pioneer financial instruments like bills of change,
early versions of modern promissory notes. These developments led the
ground let the groundwork from modern banking today, okay, the
birth of modern banking and national debt. By the seventeenth
and eighteenth centuries, debt had evolved and took a key
tool of state craft. Governments began issuing sovereign debt to

(36:57):
finance wars and infrastructure. I'm going to do a separate
peace on Haiti and how this is going to blow
your mind when I tell you about the story of
Haitian how that led to the creation of America. The
Bank of England sixteen ninety four was one of the
first institutions to formalize government borrowing selling bonds to investors

(37:19):
to raise capital the Bank of England. This became This
model became standard across Europe, allowing nations to fund expansion
without immediate taxation. In the United States, Alexander Hamilton champion,
a brilliant guy who championed the creation of national debt
after the American Revolution. By the way, there was a
lot of pushback to him doing that. People thought he

(37:40):
was stupid. And he was from a little Caribbean town.
By the way, Alexander Hamilton, our first Secretary of the Treasury,
brilliant guy. I think he's paraty black. But that's another story.
He had a single mother, no father, came from a
Caribbean island. Okay, excuse my sideway sins of humor, sometimes
arguing that a well managed debt system couldt rent in

(38:00):
the country's financial standings. That's Alexander Hamilton, that's his argument.
This laid the foundation for modern treasury bonds and public finance. Okay,
the twenty century consumer credit and the rise of personal debt.
Now I'm about to get into you and me. I
promise you and again. If you don't want to listen
to all this, tell people to fast forward to minute forty,
which is where I'm about to start about a box
starting on you were a minute thirty seven right now.

(38:21):
The twenty century saw debt become a household concept. Innovations
such as installment plans and the nineteen twenties allow consumers
to buy goods on credit, fueling the expansion of the
middle class. Hello, I'll read that again. The twentieth century
saw debt become a household concept. Innovations such as installment plans,

(38:42):
I think about seers now. The nineteen twenties allow consumers
to buy who was later series later in nineteen twenties,
which you get my point, to buy goods on credit,
fueling the expansion of the middle class. The post War
War two boom introduced mortgages, student loans, and credit cards.
Of our coverage to credit cards in earlier episode this year,

(39:03):
So to listen to that if you haven't already making
borrowing a standard part of life. So borrowing used to
be for the rich, for the wealthy, for the royal class,
for only the privilege, and now it became available to everybody.
The creation of Fyco scores in nineteen eighty nine, President

(39:23):
fycles on my boarded operation Hope. Really good guy. The
creation of FYCO Scores in nineteen eighty nine standardized credit worthiness,
enabling more people to access loans, but also reinforcing financial disparities. Meanwhile,
the two thousand and eight financial crisis exposed the dangers
of excessive unregulated debt, particularly in subprime mortgages, leading to

(39:44):
global economic turmoil. I'm going to do a whole piece
on what recessions mean, because there's certain leaders are now
talking about we may have becoming recession. I'll unpack that.
But don't fear that any of this. I didn't, you know,
I wasn't hurting the two thousand and eight crisis. I
didn't a subprime loan. I wasn't taking one of those
stupid loans, and no one's going to force one on me.

(40:05):
But if you shouldn't be doing a negative amortization loan,
which basically means this is bad debt, it's a stupid
debt on for good assets. So this is a mortgage
for a home, which so that is typically good debt,
but there's a stupid debt. So I guess I'm saying
there's a good debt, bad debt, and stupid debt right,

(40:27):
because these a negative amortization mortgage means that because you're
focused on the payment, not what the interest rate is,
and your you never asks what the payment is when
there's an interest rate attached. So when they bought the house, look,
I just want this payment. Well, that meant that you
have more debt tomorrow than you had yesterday because you
all you do is managing the payment amount, and the

(40:48):
lenders like, okay, that's that's what you want. So the
rest of the interest that you're not paying gets put
to the back of the loan. It's called a negative
amortization loan debt. Today a double edged sword. In the
twenty first century, debt remains a double ed sword. A
ed sword. Use wisely, it fused home ownership, business investment,

(41:10):
and economic growth. Misuse, it traps individuals and nations and
cycles of financial distress. Today's global economy runs on a
complex debt market, government bonds, corporate borrowings, and personal credit,
but rising income, inequality, and unsustainable debt levels post significant risks. Again,
I've talked about the credit card debt at one point

(41:32):
one trade and growing the student loan debt. I think
it's one point six trade and one point seven trade.
American US debt levels after the pandemic through the roof.
Typically tax breaks are sugar high. They give you a
short term boost, but then end up with deficits the
back end, which can lead that could burden down a

(41:53):
growing economy. And so I have a whole strategy for
that of how America can lead again and rise again.
I will burden you with that in this podcast. But
even a nation can't survive without a good debt in
managing it and not doing stupid debt. Good debt, bad debt,
stupid debt. I guess it's opportunity led debt, which is

(42:15):
what I used when I was growing up. It took
a bad debt turned it into good debt because there
was opportunity attached to it, otherwise would have become stupid debt.
This is a rap. Financial literacy is more critical than ever.
Financial literacy is a civil rights issue with this generation.
You know better, you do better. Understanding the history of
debt helps us make informed decisions, ensuring that borrowers and

(42:39):
borrowing serves as a tool for empowerment rather than a
source of economic vulnerability and repression. The challenge ahead is clear,
we must use debt strategically, ensuring that it builds opportunity
rather than eroading financial stability. All right, So now I
am going to definitely doing this in two parts because

(43:02):
I'm not going to go over an hour on this session.
But let me cut to the quick. I've covered the
history of debt in society. I've laid out the basic
premise for why some people say that debt is bad
and explained why I think stupidly wealth people tell poor
people not to take on good debt. I didn't explain that,

(43:26):
I laid it out. I can't explain it because don't
make any sense. I give you the ancient forms of
credit in lending. I talked about the emergence of modern
banking and debt instruments. Now let me get into why
you're here, admitted forty three. This is the drop that Mic.

(43:55):
There's good debt and there's bad debt. Good debt it's
tied to something that may appreciate. Bad debt, it's tied
to something that probably will depreciate. In all likeily that
will depreciate. Financing jewelry is bad debt. I don't care
how much it blings. It don't sing when you go
to the bank. Most jewelry has incredible margins profit margins

(44:20):
attached to it. If you take that same jewelry from
the jeweler and go back, there's probably an eighty percent
profit margin. The diamonds and all that stuff and not
worth nearly what you think they are. The craftsmanship, you
don't get any value for that. So if you finance that,
you're just putting you from bad to worse. I hope
you never have to sell your jewelry, but you'll be

(44:40):
shocked if ever you have to. In most cases their
exceptions to the rule, but essentially, never, never finance jewelry.
Never finance tennis shoes, never finands clothes. We do it
all the time. We have department People think this is
a stupid example, but you have a department store, credit
school credit card, credit card, most consumer credit card. It's
in this America most The average credit card rate in

(45:03):
this country is twenty eight percent plus, did you hear me?
The average, which means if you charge a dollar, twenty
eight cents of that is interest. So you know, unless
you're going to pay it off right away, you should
not be putting things on a charge card. A charge
card and a credit card are different, and I talk
about that in the credit card episode. You shouldn't finance

(45:25):
some plane tickets. You shouldn't finance rental cars. People are
doing this by the way that they have a little
app that you can charge it right away and they'll
give you a payment. They'll just finance it, and you're
just like, oh, I can afford all this. How are
these people going to these fancy concerts spending five thousand
dollars on a sporting event because they're charging it. And

(45:47):
if your outflow seat your inflows and you're overhead, it'll
be your downfall. You shouldn't finance vacations you I mean,
I can go on and on and on. There's a
lot of dumb things that people are financing, and it's
bad debt. You're going to pay for it right now.
It's going to feel good right now, and then you
can be paying for it for a very long time

(46:07):
and feeling dumb and angry. But as a result of that,
good debt is a completely different thing. Good debt is
tied to something that might appreciate. A mortgage on a
home is a great example of this. So a thirty
year mortgage you're going to probably spend twenty percent twenty
of the thirty years will probably be mortgage interests, by

(46:28):
the way, which you write off on your taxes. So
first think about that is a bad thing. You've got
to live in the house anyway. If that those mortgage
payments which you're paying, you get the right You get
that return to you in a write off, which you
then get with an itemized tax return to deduct whole
or part from your income. You get a tax refund

(46:52):
your if this is an investment property, you get the
benefit of depreciation and that counts against our counts for
you with regard to your calculation of taxes owed and
possibly a tax refund. You get the appreciation which you
own nobody, it's yours. That is the start of generational wealth.

(47:13):
That's a part of equity capitals. Now I'm finishing. I'm
tapping the back end of this podcast. With the first
part of the podcast, were talked about the different kinds
of debt. I talked about debt with different types of capital,
debt capital and equity capital. Okay, you follow me. The
whole tax system in America, again, I've said, as I
said earlier, is designed to benefit homeowners. So home ownership

(47:38):
is good debt and it's tied to an asset that
in all likelihood will appreciate. Never in the history of
America have three things gone down debt levels, sorry sorry,
home ownership values, stock market values, and the GDP of
the nation gross domestic product. That doesn't mean that there's
not recessions. Things go up, they re set recess right drop.

(48:03):
Please don't sell. Okay, this is a stupid investment or
assets you've got or flake, something flaky. But if it's stable,
don't sell and you reset above the line. It's after
the recession, it resets and climbs above the line and
where it was before. So this is probably not a
great time to say this, but I mean I recently

(48:24):
lost money because I didn't take my own advice, which
is in a bad environment, if you have a good investment,
just sit in and hold it, don't do anything. And
I didn't do that. I went to cash treasury bills,
and I'll tell I'll break this down in the recession episode.
I do, but I actually lost money and all I need.
What I really should have done is taken my own advice.
Don't make emotional decisions. Just chill, just sit there, let

(48:47):
it do it, Let the market do its thing. Everybody
makes mistake, but that doesn't make you a mistake. So
good debt can be a small business investment. Good debt
can be a small business loan. Good debt can be
a student loan. You have a loan, give you a
bachelor's degree, or a master's degree or a doctor degree.

(49:07):
You're going to make multiples more in income with an
advanced degree than you will with a high school education,
without question. You'll make millions with advanced degrees of the
course of your life, and you're going to make hundreds
of thousands with a high school education. So this is
good debt, all right. So let me see, I got

(49:29):
to run through the rest of this well, so let
me no, let me just let me underscore this whole
good debt piece. So somebody out there saying, John, it
doesn't make any sense to me. I mean, why would
I want to go everybody's again your counterculture. Everybody's telling
me not to have debt. You're telling me that I
should have good debt. Please listen to me. Minute forty nine. Okay,

(49:50):
just drop the mic. Every successful person that you know,
every millionaire that you know, including the one talking to
you right now, owns real estate, and typically on that
real estate is some level of good debt. I mean, well,
you know, prime interest rates, good terms, all those kinds
of things. No multi millionaire that you know of or

(50:14):
read about, No billionaire you know about or read about.
No growing city economy, no successful state economy. No nation,
including the United States of America or whatever country that
you love, has ever done it without good debt. Please
did you hear me? What do you think government bonds are?
What do you think? You know? What do you what

(50:37):
do you what do you think that treasuries are? These?
You know these are people, These are people in countries
buying our debt. Okay, what do you think city bonds are?
The city said they're going to float some bonds. Right.
There's nobody. I just can't. I just can't underscore this enough.

(50:58):
There's nobody who has been old, true, oh oh, uber
successful who didn't do it with good debt. Because you
build you make money during the day, you build wealth
your sleep, and you do that through compounding. And when
you have modest levels of good debt, it allows the
equity to compound in ways that are I say unnatural,
but natural for financial services. So money makes more money.

(51:21):
Here's a cheat sheet for you. Money makes more money
on money than you can ever make money on labor.
Did you hear me in that said that, this is
the one podcast you have to listen to two or
three times money makes more money on money then money
can ever make on your labor or you can ever
make money on your labor. Hello, you can make more

(51:44):
money money and technology makes more money on money than money.
So money and technology, which is why the technology companies
are going gangbusters today. But money definitely makes more money
on money than it does on just you making money
on your labor. That's why you have to have to
be smart about money and financial literacy. And that's why

(52:06):
the Wall Street there's three times more economic activity than Washington,
d C. Even tho everybody's focused on the money in Washington,
d C. The real money, the real play is in
that country called Manhattan, the city of Manhattan, which is
the second largest GDP in the United States of America.
One city, city of Manhattan. So the state of California

(52:28):
is the biggest economy inside of the US, but that's
the whole state. The city of Manhattan is a baller
city of Manhattan. It's just on fire with economic activity
the reasons that I've just mentioned to you. So there's
a role of debt in the economy and you've got
to be smart about it. And the key to it
is financial literacy, which is why that I say financial
literacy is the civil rights issue of this generation. If

(52:51):
you don't know better, you can't do better. And governments
and businesses and individuals all use debt. But if you
live in a a low of neighborhood, if you don't
have financial literacy, if you have a core terrible credit score,
you're going to get horrible debt. You're going to those
make the lead and at least you're gonna pay the most.
You're going to be in a debt trap. And because

(53:12):
you're ever a surviving mindset and now are thriving a
building mindset, you're not going to use this debt as
an instrument to set yourself free. It'll put you in
purgatory instead. This has been a wrap or I'll tell
you now there are a lot of areas I didn't
cover in this podcast. You got to tell me what
you want me to do this In the part too,
I almost have no choice. Here's all the stuff I

(53:32):
did not cover. The consumer debt versus investment debt. I
touched that a little bit. Types of debt instruments did
not cover that at all. Revolving credit cards and lines
of revolving credit. Credit cards and lines of credit sort
of touched on that the credit card podcast sort of.
But I didn't cover lines of credit. Installment debts. That's
the mortgages, auto loans, student loans, business and commercial loans,

(53:56):
government debts, bonds, treasuries, deficit spending cover that a little bit.
The true cost of borrowing, interest rates and compounding debt.
Good debt versus bad debt A simple framework of giving
you that. Good debt tied to appreciating assets okay, real estate, business, investments,
education with high return on investment ROI. They call it

(54:16):
bad debt tied to depreciating assets covered that. Credit card debts,
payday loans, car loans that are pooking them, car loans.
If you have a car loan with eighteen percent interest
rate and Mercedes, it's not a Mercedes, it's Mercedes payments. Okay.
Using good debt to build wealth, The power of leveraging
debt and wealth creation is my personal story. So you

(54:41):
can read up from nothing my fifth book, and I
cover my failures, not my successes, and I think it's
a good lesson for you there, so you should go
read that book and then refinancial literacy for all. My
last book, home Ownership and Generational Wealth. So I'm a
personal example of using good debt and again when I
was earlier, even bad debt with opportunity touched to it

(55:02):
to succeed because I didn't have a generational wealth. Business
Loans and Entrepreneurship. Home Ownership and Generational Wealth covered that.
Investing in income generating assets didn't really cover that in detail,
but you're smart people. I'm going to try to actually
give you all the cliff notes here investing in income
generating assets, how the wealthy US debt differently? I did

(55:26):
not cover that, but maybe I do that in part
two of you asked me how happy to do that?
That's a really fascinating conversation. The strategic use of other
people's money, hell OPM. Understanding credit scores and interest rates
to maximize borrowing power, how to avoid the debt trap?
That's you know, this is my overall teaching budgeting and

(55:50):
responsible debt management. This is the power and work of
Operation Hope, the largest financial coaching organization in America. The
emotional and psychological pull of easy credit. This is what
happens when I bashador. Andrew Young said, to live in
the system of free enterprise and not to understand the
rules of free enterprise must be the very definition of slavery.
And when you or mark, when you're an easy prey,

(56:12):
people will separate you from your wallet. On the reel,
the importance of financial literacy and debt decision making. And
well that's me walking right. I'm sure I'm trying to
give you the framework of this entire podcast, and you
can decide whether you want me to go back and
cover in greater detail. The last. The last is encouraging

(56:33):
smart debt usage, personal your action steps. I want for
you to just know your credit score and improve it.
That's what Operate Shelpa's doing. Increasing credit score fifty four
points in six months, one hundred and twenty points in
twenty four months. Nothing changed your life more than God
or love than moving your credit score one hundred and
twenty points. When you go to the club tonight on
Saturday night, whenever you go to the club and you

(56:54):
see this fine woman. Oh, man, she's fine. What's her name?
Ladi's like, oh, he's handsome. What's his name? After you
get the name, ask them what the credit score is.
And I'm only partly kidding, because that's your business partner
for life, that's your running But my wife, Shasery, has
a great credit score. In fact, sometimes her credit score
is better than mine because I'm an entrepreneur. You know,

(57:14):
I got all these dead loads and lines of credit
things in and out tying to my personal name, and
hopefully she gets to chill. So your wife or the
person who's actually not taking on the obligations in your
family might have a better credit score then you, and
do not use them to tear to Do not use
them to do not pump your spouse or your children

(57:37):
because you're not paying your obligations. If they can, if
they have great credit score, you want to protect it
and you only want to use it when you know
you want to abuse it. This is a wrap. Well,
I'll tell you what I'm rhyming, not even trying. I
check my credit score every two days. By the way,
you guys should do it every day, every two days,
once a week. On the regular though, and if you

(57:58):
never check your credit score is guaranteed as an error
on it on your credit report. And if you go
to Operation Hope, we can typically challenge that with the
credit burials and typically can can get you a twenty
to thirty percent credit score right away. Because the removal
of a credit score of the credit eerr, the credit
burials cannot confirm that error is yours, that item is yours.

(58:18):
They must remove within thirty days. That silver rights facts
I'm giving you. Only borrow when it makes your money. Hello,
good debt. Only borrow when it makes you money. That
it may always be true, but you should have as
a mindset, I'm only going to borrow when I think
is going to make me some money. Avoid in post

(58:39):
debt on depreciating items. I didn't say I almost had assets.
It's not an asset. Certainly was not what it's on
your ass It's definitely not an asset. I said to
say that, avoid impost debt on appreciating items. And you
know Opertions mission is financial literacy that can all compowerment.
So use Operation Hope as your financial coach, as your

(59:01):
private banker, or I get a coach assigned to you
and talk to them on a least on a monthly basis.
That is a tool. Use it wisely and it will
work for you. Abuse it and it will own you.
This is John O'Briant. We got through this in less
than an hour. Left out a lot. Tell me what
you want me to focus on. I think you want
me to focus on how wealthy used that. I will

(59:22):
only do that if you tell me too. I'll do
a whole episode just on that. This is John O'Brien.
This is Money and Wealth and this is the Black
Effect Network on iHeartRadio. This is season two and know this.
I love you, peace and light. This is a silver
rights movement. Go get my book Financial Literacy for I'll
tell you all your friends to subscribe to this weekly podcast.

(59:43):
This is my ministry of finance, my pulpit of hope
and opportunity. This is not moving from parshing in the
streets to cutting business deals in the business suite. This
is where ownership matters. Money and Wealth with John O'Brien

(01:00:10):
is a production of the Black Effect Podcast Network. For
more podcasts from the Black Effect Podcast Network, visit the
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