The Infinite Money Machine

The story I am about to tell you will contradict almost everything I have taught people about risk and return, about how easy it is to make money and about arbitrage in markets. Today I’m going to tell you how an experimental physicist Konstantin Anikeev discovered an infinite money machine and used it to make $310 thousand dollars. In addition he made this money in such a way that the IRS could not even tax him on the income. because Konstantin doesn’t have to pay taxes on his gains, he is left with enough money to buy a Lamborghini Huracan and get it wrapped in gold. It is reasonable to believe that he has achieved “The FX Trader Lifestyle”

Okay welcome back to patrick boyle on finance  so the story i’m about to tell you today will   contradict almost everything i’ve taught people  about risk in return about how easy it is to make   infinite money about arbitrage profits all sorts  of lessons go out the window today i’m going to   tell you how an experimental physicist

Constantine  anakiev discovered an infinite money machine   and used it to make three hundred and ten thousand  dollars and then the irs could not even tax him   on the income now just to be clear normally if you  make three hundred and ten thousand dollars in the   united states after taxes social security medicare  and

So on you’d be left with under two hundred   thousand dollars which is not enough to buy the  cheapest lamborghini the euros which is a horrible   suv and not a real lamborghini thus such games  while nice will impress none of the forex traders   on instagram but because constantine does not have  to pay taxes on his gains he’s

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Left with the full   is enough money to buy a lamborghini hurricane   which while it doesn’t have the right kind of  doors does the job on instagram and he even has   enough money left over to get it wrapped in gold  and to get one of those louis vuitton bags full of   cash that all the traders carry around with them 

So how did he do this how did constantine get   his hands on non-taxable gold lambo money and can  you do it too well constantine took his idea from   personal finance websites the idea was to exploit  the difference between unlimited five percent   credit card rewards and lower fees on gift cards  and money orders he told the

Wall street journal   if one has a theory one can test it experimentally  some require a large hadron collider to test   started out with an american express card   on money spent at grocery stores and pharmacies   so he used this money to buy prepaid visa gift  cards at grocery stores stopping often during his  

Commute and purchasing the maximum dollar amount  allowed per day at a store he used the gift cards   to buy money orders and then use the money orders  to make deposits in his bank account and then use   that money to pay his credit card bill constantine  a physicist had invented a perpetual money machine   in a 500 transaction

The 5 rewards would yield 25  which was more than enough to cover gift card fees   of around 5 and the 1 fee on the money order he  did this between 2013 and 2014 and made about 310   000 it’s a fairly straightforward approach but  impressive in its sheer scale an american express   spokesman told the wall street journal that

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The  company uses a combination of strategies to police   the rules of rewards programs that don’t allow  purchases of cash equivalents but what about the   taxes how did he get this money tax-free well in  the united states most forms of income are taxable   cash back in the purchase that is not considered   income and

It’s not taxable most american credit  cards do have rewards associated with them and   that cashback is not taxable income it’s simply a  reduction in the purchase price if you spend we’ll   say 250 000 on a gold-plated lamborghini and get  twelve thousand five hundred back it’s viewed by   the irs as a two hundred and thirty

Seven thousand  five hundred dollar purchase not as twelve   thousand five hundred dollars of income but what  if you buy 6.4 million dollars worth of grocery   store gift cards exchange them for money orders  that you then use to pay off your credit card bill   allowing you to keep the 310 000 in cash rewards  offered by

The credit card company the irs who   are notorious spoilsports didn’t like this and  of course sued him claiming that the money was   a gold wrapped mid-range lamborghini and the   instagram fame associated with it constantine said  no it’s just rebates on purchases now in many ways   the irs is right surely the only way

To get three  hundred and ten thousand dollars of rebates is by   having more than three hundred and ten thousand  dollars of taxable income if you make fifty   thousand dollars in salary and cycle it madly  through your american express card until you get   three hundred and ten thousand dollars of rewards  it can’t really

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Be the case that your taxable   income was only fifty thousand dollars but i think  both you and i want constantine to get a gold wrap   lamborghini and so did the judge in the case the  judge found that the amex perpetual money machine   works and is non-taxable because it’s based on  the irs policy that credit card rewards are

Not   income the judge wrote this policy reflects the  recognition that a taxpayer who avails himself   of a discount in acquiring goods and services has  no accession to wealth that taxpayer has retained   more of his or her wealth than a taxpayer who  pays the full price for the same good or service   he or she simply

Has reduced consumption the   judge then went on to quote benjamin franklin who  wisely observed a penny saved is a penny earned   future penny earned not on the current penny saved   constantine the experimental physicist had the  general theory that rebates on consumption are not   income he then simply ran an experiment

To see if  the theory held and it turns out that it does so   there you go another video on quant finance don’t  forget to subscribe and i’ll see you next week bye

Transcribed from video
The Infinite Money Machine By Patrick BoyleliveBroadcastDetails{isLiveNowfalsestartTimestamp2021-03-09T232840+0000endTimestamp2021-03-09T233707+0000}

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