We are constantly being told that the dollar is losing value, that it doesn't buy as much as it did in the past. This is simply not true, at least in the domestic economy. Value is a relative thing and means different things to different people, but in fact it is the amount a person is willing to pay for a commodity or service. As I said in the introductory blurb, Adam Smith is alive and well down here at the grass roots level where most of us live. It's the laissez faire relationship between supply and demand. And it is the key to our control of the economy if we will only realize it. Consider what happened to gasoline prices over the past few months: they went from nearly $4.00 a gallon to as low as $1.50. The reason? People stopped buying as much gasoline and looked to other modes of transportation to get around; public transportation, car pooling, and bicycling.
That's the point! Price something out of reach of most people and they will stop buying whatever it is. The person(s) selling the commodity will lose business (revenues) and they can either go out of business or lower their prices. As with the oil companies (that are too big to just go out of business) increased production lowers prices.
The key to understanding this critical point is the realization that a laissez faire economy tends toward full employment. In Adam Smith's time there were no "safety nets" such as unemployment insurance, welfare, or government sponsored re-training programs. A person who was put out of work immediately started looking for something else to do - and was willing to earn less! The person who earns less spends less and when enough people are earning low wages the economy suffers because people have less discretionary income to spend. Entrepreneurs make things to sell; if nobody's buying what they make or the services they provide, then they are willing to earn less, and the whole cycle reverses. The British social economist Herbert Spencer coined the phrase "survival of the fittest" when addressing the economic realities of his time (the quote has been erroneously attributed to Charles Darwin).
Survival! That's what it has always been and we in America are in much better shape that anyone in history in terms of economic realities. The only challenge is to realize that there are alternatives to "business as usual" and one of these is the second hand market.
Want a new suit? Well, you can go to an expensive retail store and spend a lot if money. Suppose you choose this option; you get measured, the alterations are made, and you pay for it. What have you got? A new suit; right? Yes, a new second hand suit because the moment you pay for it it's second hand. The minute you buy a new car and drive it one mile, it's a used car. That's how the system works; commodities are always new until somebody buys them. So why not cut out the middleman and just go to a re-seller, Goodwill Industries, or the Salvation Army - there are some really good bargains to be had there, just be patient and look. Some things I have bought at these places were still in their original packages - with the price tags still attached! You find what you're looking for, maybe have it altered, and nobody will ever know the difference.
See, the only economy that matters is YOUR economy; how you manage your money. Get more for less and you're a winner. Make your dollars stretch. This brings me to the matter of shampoo. Read the directions: Lather, rinse, repeat. Don't repeat and the shampoo will last twice as long - or it will last somewhat longer depending on what else you us it for. What else? you say. Try this: next time you have grimy tile or a bathtub ring to deal with, put a little shampoo on a piece of fiber scouring pad and go to it. See how nice? Easy too.
Message: Shampoo is soap. I have washed dishes with shampoo, washed my hair with dish washing liquid, and cleaned tile surfaces with either one. It's all soap, so just get a large jar of shampoo and save on buying all those special cleaners that don't work any better. Soap is soap.
We have been Madison Avenued to death for over fifty years with the idea that the right deodorant or the right toothpaste will ensure that you will be appealing to the opposite sex; driving the right car will show others your station in life, or that wearing the latest fashions will identify you as "in" or "with it", whatever"in" means or what you might be "with". Producers manufacture merchandise to be bought; if no one buys it they either make something else that people will buy or go out of business. Advertising is what induces the easily led into buying things they don't really need, or even want, so as not to feel left out or less-than. It was in the 1950's that the Big Three auto makers started building over sized, gas guzzling, road hogs - and people bought them.
The power of advertising may still be seen in the purchase today of monstrously large vehicles, topped off by the ugly, cramped, overpriced, gas burners patterned after a certain military vehicle: this at a time when fuel economy should be the prime focus of auto makers, not some $58,000 piece of junk that delivers a whole 8 miles per gallon.
The marketing strategies of the '50s and '60s was predicated with "keeping up with the Joneses"; who were the Joneses keeping up with? Actually much of the marketing ploys were stupid to any thinking person. In the early '70s OPEC shut down oil exports (not really; that's what we were told) and there was a gasoline shortage. The focus was on fuel economy, there commended speed being 55 miles per hour optimum. But Detroit still brought out cars that would reach speeds of over 150 miles per hour! Anyone with any idea of mechanics understands that a super-performing machine is most efficient when operated within 80% of its maximum output. With highway speed limits of 60 mph the efficiency in terms of power delivery is only some thirty to 40%; what kind of sense does that make?
The only economy that matters is YOUR economy: if you have more coming in than going out you are solvent, even if only marginally; if you have more going out then you are bankrupt: no two ways about it. Bankruptcies, foreclosures, and business failures, are headline news these days. The Joneses you were trying to keep up with lost their home, their jobs, and are in debt up to their ears. They bought the "American Dream" touted by Madison Avenue and the piper has come to be paid. And there are a lot of Joneses; if you're not one of them then consider yourself blessed. If you are then you have a long road ahead of you; hard but not impossible.
Not all businesses are hurting: that's the good news. OVERSTOCK.com just announced its first profits in five years of selling name brand goods to consumers at substantial discounts. They announced also that they are expecting to bring in a whole lot of new merchandise - purchased from stores that are going out of business! They are but one example of the new business class: Liquidators.
The gloomy GDP (Gross Domestic Product) for the current quarter is dismal, and the next quarter is expected to be even worse: down 3.8% to 5.5%; why? Because retailers are sitting on inventories they can't sell, not because people don't have any money: they just aren't spending it as lavishly as before. And when people aren't buying prices come down until they are. Naturally the GDP is going to fall; with inventories up the last thing any business wants is more merchandise to sell. They can't sell what they have!
Ever since business was turned over to the accountants we have experienced a level of myopic stupidity in the market place. Short run profit targets took over from long run planning. One example was when I smoked store bought cigarettes. I had a favorite brand, unfiltered, and smoked nothing else. I won't mention the brand but one of its advertising campaigns years ago advised that "fine tobacco is its own best filter". Well, maybe not, because this same brand started coming out with filters - and they tasted awful. I didn't pay very close attention but believe that there were more than one variation; lights, ultralights, maybe even menthol - I don't know. What I do know is that on several occasions I went to my favorite drug store to buy the version of the brand that I preferred only to be told that they were out. But there were stacks of the filtered versions.
"Do you know why you have so many of these filtered versions of the brand?" I asked a clerk who had just told me they were out of my cigarettes. She responded with a blank stare.
"Because you're not selling them!" Spell obvious with a capital "O".
"And the reason you are out of the ones I like is because you are selling them."
Duh!
Another time I bought a wristwatch at a department store. It was a name brand and fairly expensive. Awhile later I cracked the crystal and went back to the store to see about getting it replaced.
"We'll have to send the watch to New York," the girl behind the jewelry counter told me. I'm in Dallas, Texas: it makes no sense to ship the timepiece to New York just to have a crystal replaced. I then asked how much it would be to have a crystal shipped to me and have it installed locally.
"Thirty-two dollars," the clerk said. She also said that they could send it out to a local jeweler to have it mounted. So what was all this business about New York? Then I asked how much it would be if I bought two crystals, one for a spare.
"That would be another thirty-two dollars," the clerk said. I asked her how it could be that a spare unmounted crystal is priced the same as one that is mounted. Blank stare. I returned the watch for a full refund.
More stupidity? Try this. I went into a popular superstore (think bull's eye)to buy a pair of bedroom slippers and was told that they only stock them during the holidays.
No wonder the economy sucks! But there's an irony here. There are two factors that have negatively affected the macro-economy that have a positive effect on the micro-economy - where you and I operate.
Next time.
Friday, January 30, 2009
Thursday, January 29, 2009
The Silver Lining
There is much gloom and doom concerning the economy and I believe things are not as bad as they are made out to be. Take job losses due to downsizing. Certainly not good for the displaced, at least in the short run; but who's really hurting? The corporations!
And that's good! Let them collapse and good riddance.
And the dollar? That's going to be alright, too, but not because of any bailouts of the wealthy. It's just something that economists don't seem to register: that the economy at the grass roots level is just fine. And down here where we live Adam Smith is alive and well. In the next series of articles I will examine the American economy and show the way to a better future and a not too bad present.
And that's good! Let them collapse and good riddance.
And the dollar? That's going to be alright, too, but not because of any bailouts of the wealthy. It's just something that economists don't seem to register: that the economy at the grass roots level is just fine. And down here where we live Adam Smith is alive and well. In the next series of articles I will examine the American economy and show the way to a better future and a not too bad present.
Sunday, January 11, 2009
Building on an Idea
In a past article I've expressed my view that investing in stock market issues is a foolish waste of time and money. Stock markets are closed systems operated by insiders who have only their own interests at heart. The day traders of a decade ago learned this painful lesson: that small fry don't stand a chance when playing in the same arena with institutional investors and individuals with deep pockets. Brokers served their major investors while the little guys were put on hold. When their orders were finally executed, changes in price during the interim often resulted in these purchases made at higher than intended prices. Often it happened that a day trader placed an order for a stock at $10 a share only to have it go up to $12 by the time the trade was made, and then watch the stock drop back to $10.
The bottom line in my post was simply that is makes no sense to give your money to perfect strangers who profit from your investment whether you win or lose. When a company goes under it's your money that's lost, not theirs. And my recommendation was that if you have money to invest you search out local companies from which you can obtain first hand information. A perfect example of what I'm talking about is contained in an e-mail I received recently. It was from one of those investment advisors who says he(they) can assure me ungodly profits in any market, through any depression, recession, global pandemic (I made that one up) - in short, no matter what happens! And...
they were giving me the opportunity to save $753.00 right off the bat. That's right! And it was as easy as clicking on the link to order their information. If I just do this one simple thing - get this - I can get this valuable advice for only $1,747.00!
How does that save me $753.00? Simple. If I don't order right away, or by February 5th, the same materials I'll have to pay $2,500.00 for them. Did I jump on the chance to save money? You bet I did: I saved $1,747.00 without clicking on anything.
I believe hat people ought to invest if they have the resources but also that they should be given some protection against the folly of just throwing money to the four winds. For this I propose local Investor's Unions.
These unions would be funded by bond issues earmarked as Economic Recovery Bonds and would be of the same genre as Municipal Bonds. The unions would serve local business in the same capacity as investment banks and stock brokerages combined. They would in other words be full service entities answerable to local government to ensure honest results.
Investor's Unions would audit local businesses that are seeking capital and would report such things as; cash flow, management quality, debt levels,work in progress, market presence, and sales. This would inspire local firms to run more efficiently as they would be examined by an impartial agency dedicated to assessing their quality as investment vehicles. Unions would publish their findings in summary form, details to be disclosed to interested parties at the proper time. The union would make recommendations based on this data, grading these companies in much the same way that Moody's or Standard and Poor rate bonds: AAA to D.
These unions would serve investors at any level of participation, handling sums as little as $100.00 up to whatever upper limit local investors control. Then the unions would put the firms and investors together and structure bond and stock sales tailored to the investor's wishes. The unions would actually issue the stocks and bonds, taking a small commission on each sale from both parties.
The benefits of this system would be twofold; it would provide local investors with reliable and detailed data on prospective firms in which to invest, and inspire firms to upgrade themselves by correcting any shortcomings that the union's investigation might discover. Certainly not all local businesses would be rated AAA owing to local market conditions, market share, cost of raw materials, and a number of other factors. For example; a company rated BB might be well run and have reasonably good fundamentals and be in a position to upgrade itself with a fresh capital infusion. As an investment vehicle it may not be a first choice but may appeal to less risk averse investors who might buy into the firm if bonds were scaled at higher interest rates according to the degree of risk entailed. Stocks would be priced commensurately lower according to the risk, these prices being quoted by the Investor's Union according to a formula relating the level of risk to the price of a stock and the interest due on a bond issue.
It would be well worth trying.
The bottom line in my post was simply that is makes no sense to give your money to perfect strangers who profit from your investment whether you win or lose. When a company goes under it's your money that's lost, not theirs. And my recommendation was that if you have money to invest you search out local companies from which you can obtain first hand information. A perfect example of what I'm talking about is contained in an e-mail I received recently. It was from one of those investment advisors who says he(they) can assure me ungodly profits in any market, through any depression, recession, global pandemic (I made that one up) - in short, no matter what happens! And...
they were giving me the opportunity to save $753.00 right off the bat. That's right! And it was as easy as clicking on the link to order their information. If I just do this one simple thing - get this - I can get this valuable advice for only $1,747.00!
How does that save me $753.00? Simple. If I don't order right away, or by February 5th, the same materials I'll have to pay $2,500.00 for them. Did I jump on the chance to save money? You bet I did: I saved $1,747.00 without clicking on anything.
I believe hat people ought to invest if they have the resources but also that they should be given some protection against the folly of just throwing money to the four winds. For this I propose local Investor's Unions.
These unions would be funded by bond issues earmarked as Economic Recovery Bonds and would be of the same genre as Municipal Bonds. The unions would serve local business in the same capacity as investment banks and stock brokerages combined. They would in other words be full service entities answerable to local government to ensure honest results.
Investor's Unions would audit local businesses that are seeking capital and would report such things as; cash flow, management quality, debt levels,work in progress, market presence, and sales. This would inspire local firms to run more efficiently as they would be examined by an impartial agency dedicated to assessing their quality as investment vehicles. Unions would publish their findings in summary form, details to be disclosed to interested parties at the proper time. The union would make recommendations based on this data, grading these companies in much the same way that Moody's or Standard and Poor rate bonds: AAA to D.
These unions would serve investors at any level of participation, handling sums as little as $100.00 up to whatever upper limit local investors control. Then the unions would put the firms and investors together and structure bond and stock sales tailored to the investor's wishes. The unions would actually issue the stocks and bonds, taking a small commission on each sale from both parties.
The benefits of this system would be twofold; it would provide local investors with reliable and detailed data on prospective firms in which to invest, and inspire firms to upgrade themselves by correcting any shortcomings that the union's investigation might discover. Certainly not all local businesses would be rated AAA owing to local market conditions, market share, cost of raw materials, and a number of other factors. For example; a company rated BB might be well run and have reasonably good fundamentals and be in a position to upgrade itself with a fresh capital infusion. As an investment vehicle it may not be a first choice but may appeal to less risk averse investors who might buy into the firm if bonds were scaled at higher interest rates according to the degree of risk entailed. Stocks would be priced commensurately lower according to the risk, these prices being quoted by the Investor's Union according to a formula relating the level of risk to the price of a stock and the interest due on a bond issue.
It would be well worth trying.
Thursday, January 8, 2009
Let's Talk Money
With all this talk about the economy and the potential collapse of the dollar, maybe even the government, I believe it's time to take a cool headed appraisal of just where we stand with respect to money. My favorite definition of money which I learned in college economics is: Money is anything that has value.
But somehow that doesn't say enough. A realistic assessment of money matters depends upon identifying value. Currency, regardless the source, is not truly money in that it has no intrinsic value: it merely represents value. Therein lies it value, but value nonetheless. The value of a currency may be considered as three distinct kinds;
Comparative Value: This is the measure of the purchasing power of a currency compared to its purchasing power at some time(s) in the
past. Example: The dollar was at maximum value in 1911 and has diminished over the years.
Relative Value: This is the measure of the purchasing power of a currency relative to other currencies; Euros, Pounds, Yen, Wan, Pesos.
Exchange Value: This is the measure of value of a currency with respect to what it will purchase in its domestic market. That is all that matters to the members of society: What can I buy with x units of currency?
Exchange value is everything, nothing else truly matters, and the true test of any currency is its acceptance by the issuing authority, primarily the government but any source of the several forms money takes. Store and manufacturers coupons are money in this sense, use of these result in a consumer paying less than retail for the item covered. But most people do not regard coupons as money and most of them are unredeemed; the result is that people who do purchase the product end up paying more for the product than they otherwise would, as the item is generally marked up to absorb the "saving". Other forms of money are; Money orders, traveler's cheques, gift certificates and gift cards; all redeemable in exchange for goods and services. All these forms of money have the same thing in common: they are subsidized, they exist as created instruments for which actual money may have been paid to secure them. The cautionary nature of this observation is due to the prolific use of credit cards. Credit cards are not a form of money.
Credit in any form creates money from thin air and is the source of the ever rising inflation that we have been experiencing for the last ninety years. Inflation is inevitable in any growing society, necessary to avoid the natural tendency toward depression when a money supply is held constant. If a million dollars is divided equally among ten people each would have $100,000; divided among a million people each would have only one dollar. Now imagine this same million people with credit cards, each having a $10,000 limit. If each card is maxed out we're talking a billion dollars - just like that! But these obligations have to be repaid in currency; where does this specie have to come from? Why the printing press of course! And these presses are operated by Central Banks, ours being the Federal Reserve System.
Critics of the Federal Reserve call for the return to sound money: that is, money that is backed by gold bullion. That is very unlikely to happen simply because there isn't enough gold in the whole world to support the volume of currency necessary to the economic functions of a population of nearly seven-billion people. There is no way around the fact, supported by one of the axioms of Systemantics which states that a system will expand to fill its universe, that populations will grow until that growth is curbed by unbreachable barriers: available land being the ultimate curb. But land itself is only the basic consideration; on top of that there is the matter of developing that land for whatever purposes that are deemed necessary. All land cannot be used for habitation; some must be preserved in the natural state, other areas for agriculture, manufacturing, and recreation. And all this development takes money to finance it. The proponents of hard money fail to take human nature into account. People will reproduce despite any efforts to control the global money supply; that's why there is so much poverty in the world, and human nature makes the creation of so-called fiat money inevitable. We will always generate more money in the effort to raise the less fortunate to a higher standard of living rather than do with less ourselves.
So where do we stand? The much debated national debt, now grown to many trillions of dollars (no one is quite certain how many: estimates range from 18 to 70 trillion) is not the overwhelming burden that many economists make it out to be. It is the amount of money the taxpayers owe the government for the funds, plus interest that it borrows from the Federal Reserve System. It's called debt money and is nothing more than a bank creating money the way all banks do: by lending money. It's that simple. The US Congress can abolish the Federal Reserve anytime it chooses, turn the operation over to the Treasury Department, and most of the debt would be abolished at a stroke. Will we ever do that? I believe we will when pushed to the wall. But we must keep in mind that most of this money is air-money, money created out of thin air in this credit economy that trades time for commodities. Time is money: We trade a portion of our future time for money in the present; but it isn't really money. It's debt which must be redeemed in currency, hence the printing presses keep rolling. The currency itself means nothing; Confederate money would have value if enough people were willing to accept it.
Gresham's Law states that cheap money drives out dear money. There is a propensity on the part of Americans to hold dollars but not to save them. It's a conundrum, one that is unfortunately true in this case. While people will not save, most of the time because they are in so much debt they will nonetheless add to that debt rather than spend currency. The credit card is a form of cheap money while cash is relatively dearer. It's a foolish notion when one takes a realistic look at the situation. The consumer buys goods using a credit card and saving the cash, which he then deposits in a checking account from which he pays the credit card balance. The problem is that the credit balance soon outruns the capacity to accumulate sufficient funds in cash, the end result being default either of a payment or of the whole balance. People just have to get smarter when it comes to handling money. The present system of consumer credit stands Gresham on its head: cheap money ultimately becomes dear money when the time comes to pay off the credit card balances.
The dire prediction of a depression deeper even that the Great Depression seem somewhat far-fetched but bears consideration. What would it take for things to get that bad? One suggestion by some economists is the continued printing of currency by the Federal Reserve. But that's bee going on ever since the Fed was established. In fact the Great Depression in America was exacerbated precisely because the Fed drew down the money supply by one-third; that would have been the time to crank up the printing presses. The reason given for this move was to preserve the value of the dollar; in the long run this value has diminished greatly and is now worth about 4 cents, but that is a Comparative Value; Exchange Values have remained fairly constant the whole time. Looking at the present situation we see the prices of consumer goods falling, gasoline is now cheaper that it has been in a decade as people are cutting back on fuel consumption. What we are seeing in this sector of the economy, falling prices, is the way the market economy really works. And people are working, despite what the unemployment figures show. Yes, there's a lot of downsizing in corporate America but that doesn't mean anything at the grass roots level of the economy: people will still find ways to earn money, and there's plenty of money (currency) floating around out there.
In sum let me state that the dire predictions of the naysayers will come true only if the wealth of this nation is wasted and lies untapped. Money is anything that has value, and our greatest value is the will, energy, drive, and resourcefulness, of the people. There is nothing like crisis to bring out the best in people, and I believe that this co-called "meltdown" will spur people to rally to the colors, to finally admit that the form of government we have today is a failure and should collapse, to be replaced by a new system; one that adheres to the philosophy of the Constitution, to protect the sovereign citizen from the encroachments of a strong central government. We have made a lot of mistakes, but we have learned and the coming weeks and months, perhaps years, will provide ample opportunity to profit from the lessons we have learned. One of these is that the people can be victimized by the encroachments of even a weak central government, like the criminal regime of G. W. Bush and company.
Keep the faith.
But somehow that doesn't say enough. A realistic assessment of money matters depends upon identifying value. Currency, regardless the source, is not truly money in that it has no intrinsic value: it merely represents value. Therein lies it value, but value nonetheless. The value of a currency may be considered as three distinct kinds;
Comparative Value: This is the measure of the purchasing power of a currency compared to its purchasing power at some time(s) in the
past. Example: The dollar was at maximum value in 1911 and has diminished over the years.
Relative Value: This is the measure of the purchasing power of a currency relative to other currencies; Euros, Pounds, Yen, Wan, Pesos.
Exchange Value: This is the measure of value of a currency with respect to what it will purchase in its domestic market. That is all that matters to the members of society: What can I buy with x units of currency?
Exchange value is everything, nothing else truly matters, and the true test of any currency is its acceptance by the issuing authority, primarily the government but any source of the several forms money takes. Store and manufacturers coupons are money in this sense, use of these result in a consumer paying less than retail for the item covered. But most people do not regard coupons as money and most of them are unredeemed; the result is that people who do purchase the product end up paying more for the product than they otherwise would, as the item is generally marked up to absorb the "saving". Other forms of money are; Money orders, traveler's cheques, gift certificates and gift cards; all redeemable in exchange for goods and services. All these forms of money have the same thing in common: they are subsidized, they exist as created instruments for which actual money may have been paid to secure them. The cautionary nature of this observation is due to the prolific use of credit cards. Credit cards are not a form of money.
Credit in any form creates money from thin air and is the source of the ever rising inflation that we have been experiencing for the last ninety years. Inflation is inevitable in any growing society, necessary to avoid the natural tendency toward depression when a money supply is held constant. If a million dollars is divided equally among ten people each would have $100,000; divided among a million people each would have only one dollar. Now imagine this same million people with credit cards, each having a $10,000 limit. If each card is maxed out we're talking a billion dollars - just like that! But these obligations have to be repaid in currency; where does this specie have to come from? Why the printing press of course! And these presses are operated by Central Banks, ours being the Federal Reserve System.
Critics of the Federal Reserve call for the return to sound money: that is, money that is backed by gold bullion. That is very unlikely to happen simply because there isn't enough gold in the whole world to support the volume of currency necessary to the economic functions of a population of nearly seven-billion people. There is no way around the fact, supported by one of the axioms of Systemantics which states that a system will expand to fill its universe, that populations will grow until that growth is curbed by unbreachable barriers: available land being the ultimate curb. But land itself is only the basic consideration; on top of that there is the matter of developing that land for whatever purposes that are deemed necessary. All land cannot be used for habitation; some must be preserved in the natural state, other areas for agriculture, manufacturing, and recreation. And all this development takes money to finance it. The proponents of hard money fail to take human nature into account. People will reproduce despite any efforts to control the global money supply; that's why there is so much poverty in the world, and human nature makes the creation of so-called fiat money inevitable. We will always generate more money in the effort to raise the less fortunate to a higher standard of living rather than do with less ourselves.
So where do we stand? The much debated national debt, now grown to many trillions of dollars (no one is quite certain how many: estimates range from 18 to 70 trillion) is not the overwhelming burden that many economists make it out to be. It is the amount of money the taxpayers owe the government for the funds, plus interest that it borrows from the Federal Reserve System. It's called debt money and is nothing more than a bank creating money the way all banks do: by lending money. It's that simple. The US Congress can abolish the Federal Reserve anytime it chooses, turn the operation over to the Treasury Department, and most of the debt would be abolished at a stroke. Will we ever do that? I believe we will when pushed to the wall. But we must keep in mind that most of this money is air-money, money created out of thin air in this credit economy that trades time for commodities. Time is money: We trade a portion of our future time for money in the present; but it isn't really money. It's debt which must be redeemed in currency, hence the printing presses keep rolling. The currency itself means nothing; Confederate money would have value if enough people were willing to accept it.
Gresham's Law states that cheap money drives out dear money. There is a propensity on the part of Americans to hold dollars but not to save them. It's a conundrum, one that is unfortunately true in this case. While people will not save, most of the time because they are in so much debt they will nonetheless add to that debt rather than spend currency. The credit card is a form of cheap money while cash is relatively dearer. It's a foolish notion when one takes a realistic look at the situation. The consumer buys goods using a credit card and saving the cash, which he then deposits in a checking account from which he pays the credit card balance. The problem is that the credit balance soon outruns the capacity to accumulate sufficient funds in cash, the end result being default either of a payment or of the whole balance. People just have to get smarter when it comes to handling money. The present system of consumer credit stands Gresham on its head: cheap money ultimately becomes dear money when the time comes to pay off the credit card balances.
The dire prediction of a depression deeper even that the Great Depression seem somewhat far-fetched but bears consideration. What would it take for things to get that bad? One suggestion by some economists is the continued printing of currency by the Federal Reserve. But that's bee going on ever since the Fed was established. In fact the Great Depression in America was exacerbated precisely because the Fed drew down the money supply by one-third; that would have been the time to crank up the printing presses. The reason given for this move was to preserve the value of the dollar; in the long run this value has diminished greatly and is now worth about 4 cents, but that is a Comparative Value; Exchange Values have remained fairly constant the whole time. Looking at the present situation we see the prices of consumer goods falling, gasoline is now cheaper that it has been in a decade as people are cutting back on fuel consumption. What we are seeing in this sector of the economy, falling prices, is the way the market economy really works. And people are working, despite what the unemployment figures show. Yes, there's a lot of downsizing in corporate America but that doesn't mean anything at the grass roots level of the economy: people will still find ways to earn money, and there's plenty of money (currency) floating around out there.
In sum let me state that the dire predictions of the naysayers will come true only if the wealth of this nation is wasted and lies untapped. Money is anything that has value, and our greatest value is the will, energy, drive, and resourcefulness, of the people. There is nothing like crisis to bring out the best in people, and I believe that this co-called "meltdown" will spur people to rally to the colors, to finally admit that the form of government we have today is a failure and should collapse, to be replaced by a new system; one that adheres to the philosophy of the Constitution, to protect the sovereign citizen from the encroachments of a strong central government. We have made a lot of mistakes, but we have learned and the coming weeks and months, perhaps years, will provide ample opportunity to profit from the lessons we have learned. One of these is that the people can be victimized by the encroachments of even a weak central government, like the criminal regime of G. W. Bush and company.
Keep the faith.
Sunday, January 4, 2009
The Root of All Evil
That's what the Bible says about the love of money. Oh, money is nice but obsessive concern over it is a form of mental illness that claims many victims each year. The culprits in these instances are, for the most part, financial advisors. These are the people that offer advice on where to put your money so that it will grow. The most popular investment vehicles are 401(k) plans, IRAs, and Roth IRAs. In a word, these are pension plans and as recent history has shown plans of kind have been poorly managed, as has the rest of the economy. The employees of Enron were invested in the company and held stock as well as 401(k) plans; where are they now? What did they have left when the company went bust?
Nothing!
Pension funds have been looted for decades leaving many retirement age people with little or nothing to show for their efforts. And now the scare tactics financial advisors are using to get your money is fear over not having enough to retire on.
Here's a typical promo;
What an Independent Financial adviser Can do for You
When considering using a financial planner for your retirement financial plan, you will likely want them to look at your overall situation. However, financial planners can also help with a single issue -- though the advice should be given in the context of your overall goals, risk tolerance and needs.
Below are some of the ways people use retirement financial planners:
Integrated Planning -- Retirement Planning: With integrated financial management and planning, the financial planner will usually look at all details of your existing financial situation -- your assets, liabilities and how you currently and historically spend money and try to understand your overall goals -- both financially and personally.
The financial planner will take this information and create a detailed plan for achieving your goals of successful money management. Because so many financial concerns are inter-related and complicated (for example, making a particular investment could have beneficial or damaging tax consequences after retirement) it is essential that retirement financial planners know about all the investments and financial products you have that might affect your retirement plan.
Comment: Invite a stranger into your home, tell him all about your finances, and he will come up with a detailed plan to manage your money successfully, for which he will charge you a fee. The plan will always involve putting your money into investment schemes that will tie up your money for protracted periods of time, and which will penalize you for withdrawing these funds early, in the case of need. And you will have nothing to say about it. Your money will be managed by people who are basically interested in attaining their own goals, not yours. Just look at the record. There are more retirement age people working than ever before, and those who can't are struggling to make their fixed incomes stretch.
Budget Review: A financial adviser can help you analyze how you spend your money and make suggestions for improving your budget.
Comment: If you need someone to analyze how you spend money or how to develop a budget you are really in trouble. Learn to manage your own money, distinguish between needs and desires, and find economical ways to fill your needs; Goodwill Industries, the Salvation Army, Dollar Stores, and other thrift stores. Need new clothes? Try going around to dry cleaners and asking what they have left beyond the 30-day limit for holding items: just pay the cleaning bill and walk away with some real bargains.
Bottom Line: Manage your own money.
Tax Planning: There is no way around it -- taxes are confusing, daunting and have a big impact on your finances. A financial planner will understand the tax implications of the different kinds of financial decisions and help you optimize your tax situation -- now and in retirement.
Comment: There are over seventy million people who pay no income tax at all! In court case after court case the IRS has not been willing or able to cite any law that requires wag earners to pay taxes on their wages. So, you may be paying taxes under the fraudulent misconception that you are required to. Do you think a financial advisor will ever tell you that? If you have Capital Gains for which you are required to pay taxes, why not go directly to the IRS for information? Just make sure you document your inquiries clearly; with whom did you speak, what did he/she tell you? And get it in writing!
Bottom Line: Do your own research (the Internet is a great source) and act on your own knowledge. Tax laws are constantly changing and no one can formulate a plan that will suffice over much more that a year or two.
NOTE: It is important to understand the difference between tax planning and tax preparation. Tax planning tailors your financial situation to minimize lifetime tax liabilities. Tax preparation is preparing and filing the paperwork.
Comment:Makes sense.
Estate Planning and Retirement Planning: As if planning for how to pay for the rest of your life in retirement were not tricky enough -- most retirement plans also include provisions for what you would like to leave behind. A financial planner will help you with: living trusts, wills, powers of attorney, life insurance, trusts, heirs, charity and other estate planning issues.
Comment:Estate and retirement planning are long range estimates that are usually based on overly optimistic views and cannot predict future economic conditions. It's a best guess. Consider the current financial crisis; how many financial planners saw it coming twenty or thirty years ago? Again, more senior citizens are working today than ever before and many more are just scraping by. It is impossible to make accurate long term decisions in a market where investors and money managers only look ahead to the next quarter.
Bottom Line:Start budgeting as early as possible. If in debt start paying off the highest interest loans first, set 10% aside for savings, even if it's a dollar or two. One trick that Dave Ramsey talks about is to spend bills and save change. It works!
Insurance Analysis: When most people think of insurance, they think of fire insurance that enables you to recover after such a disaster or health insurance that helps cover your medical bills.
However, insurance can also be a powerful financial tool with a multitude of benefits -- helping with asset protection and quality of life as well as providing a legacy to your heirs.
No retirement financial plan should be created without considering insurance. Of particular importance is long term care insurance, which can help protect your retirement and estate from ruin that might result from expenses associated with unexpected illness or injury.
Comment:When I think of insurance I think about AIG, the world's largest insurance company that almost went bankrupt dealing in DCSs (Debt for Credit Swaps). These were highly leveraged speculative instruments that bond holders bought to hedge against losses. The problem was that the process was not regulated, so people who didn't even own bonds bought DCS coverage. It was like this; You buy life insurance. Your health starts failing so I buy a policy on you life. As you health continues to deteriorate all your friends, family, and neighbors buy policies. When you die the insurance companies have to pay out on every policy. As long as you remain alive the insurance companies are collecting premiums from all these people; die and they have to pay the claims of all these people.
Bottom Line:Take care of your health: it's easy to stay fit than it is to get fit once you've let yourself slide. Watch your diet, exercise, and stop worrying about the future. And, most important, save money. Long term care insurance might be a good idea but nothing to be concerned with when you are still in your twenties and thirties.Build your resources; if long term care look like a possibility, that's the time to get that kind of, well ahead of any true need. The premiums will be higher as you get older but will still be far less than all the money you would be spending on LTC insurance over twenty or thirty years.
Investment Planning: Advice and Monitoring of Retirement Investments: Financial planners can monitor how your investments are doing relative to the goals that you have set. These investments can include various financial products like stocks, bonds, mutual funds held in different types of accounts (taxable, tax deferred and tax free).
Comment:This is the clincher: put your money in the hands of others to manage for you. A fool's mission, especially as you have no way of knowing if your financial advisor is recommending investment vehicles to be put to brokers and mutual fund managers he knows and is receiving kickbacks on these deals from. It's very tempting and constitutes a serious conflict of interest.
Bottom Line: If you want to invest be smart about it. There are many local companies that would welcome your capital. Visit them under disclosure agreements; meet the managers, inspect the premises, look at the books, see what they have in the pipeline for expansion. When you are satisfied that it's a good prospect, structure your own deal. Offer them funds on terms that you want; how much in debenture bonds, how much in stocks, and most important; try to locate a company that has not yet gone public but intends to within a certain time frame. Make this a part of your agreement:they must go public at the specified time or you withdraw your investment.
Bottom Line: Be the captain of your own ship.
Nothing!
Pension funds have been looted for decades leaving many retirement age people with little or nothing to show for their efforts. And now the scare tactics financial advisors are using to get your money is fear over not having enough to retire on.
Here's a typical promo;
What an Independent Financial adviser Can do for You
When considering using a financial planner for your retirement financial plan, you will likely want them to look at your overall situation. However, financial planners can also help with a single issue -- though the advice should be given in the context of your overall goals, risk tolerance and needs.
Below are some of the ways people use retirement financial planners:
Integrated Planning -- Retirement Planning: With integrated financial management and planning, the financial planner will usually look at all details of your existing financial situation -- your assets, liabilities and how you currently and historically spend money and try to understand your overall goals -- both financially and personally.
The financial planner will take this information and create a detailed plan for achieving your goals of successful money management. Because so many financial concerns are inter-related and complicated (for example, making a particular investment could have beneficial or damaging tax consequences after retirement) it is essential that retirement financial planners know about all the investments and financial products you have that might affect your retirement plan.
Comment: Invite a stranger into your home, tell him all about your finances, and he will come up with a detailed plan to manage your money successfully, for which he will charge you a fee. The plan will always involve putting your money into investment schemes that will tie up your money for protracted periods of time, and which will penalize you for withdrawing these funds early, in the case of need. And you will have nothing to say about it. Your money will be managed by people who are basically interested in attaining their own goals, not yours. Just look at the record. There are more retirement age people working than ever before, and those who can't are struggling to make their fixed incomes stretch.
Budget Review: A financial adviser can help you analyze how you spend your money and make suggestions for improving your budget.
Comment: If you need someone to analyze how you spend money or how to develop a budget you are really in trouble. Learn to manage your own money, distinguish between needs and desires, and find economical ways to fill your needs; Goodwill Industries, the Salvation Army, Dollar Stores, and other thrift stores. Need new clothes? Try going around to dry cleaners and asking what they have left beyond the 30-day limit for holding items: just pay the cleaning bill and walk away with some real bargains.
Bottom Line: Manage your own money.
Tax Planning: There is no way around it -- taxes are confusing, daunting and have a big impact on your finances. A financial planner will understand the tax implications of the different kinds of financial decisions and help you optimize your tax situation -- now and in retirement.
Comment: There are over seventy million people who pay no income tax at all! In court case after court case the IRS has not been willing or able to cite any law that requires wag earners to pay taxes on their wages. So, you may be paying taxes under the fraudulent misconception that you are required to. Do you think a financial advisor will ever tell you that? If you have Capital Gains for which you are required to pay taxes, why not go directly to the IRS for information? Just make sure you document your inquiries clearly; with whom did you speak, what did he/she tell you? And get it in writing!
Bottom Line: Do your own research (the Internet is a great source) and act on your own knowledge. Tax laws are constantly changing and no one can formulate a plan that will suffice over much more that a year or two.
NOTE: It is important to understand the difference between tax planning and tax preparation. Tax planning tailors your financial situation to minimize lifetime tax liabilities. Tax preparation is preparing and filing the paperwork.
Comment:Makes sense.
Estate Planning and Retirement Planning: As if planning for how to pay for the rest of your life in retirement were not tricky enough -- most retirement plans also include provisions for what you would like to leave behind. A financial planner will help you with: living trusts, wills, powers of attorney, life insurance, trusts, heirs, charity and other estate planning issues.
Comment:Estate and retirement planning are long range estimates that are usually based on overly optimistic views and cannot predict future economic conditions. It's a best guess. Consider the current financial crisis; how many financial planners saw it coming twenty or thirty years ago? Again, more senior citizens are working today than ever before and many more are just scraping by. It is impossible to make accurate long term decisions in a market where investors and money managers only look ahead to the next quarter.
Bottom Line:Start budgeting as early as possible. If in debt start paying off the highest interest loans first, set 10% aside for savings, even if it's a dollar or two. One trick that Dave Ramsey talks about is to spend bills and save change. It works!
Insurance Analysis: When most people think of insurance, they think of fire insurance that enables you to recover after such a disaster or health insurance that helps cover your medical bills.
However, insurance can also be a powerful financial tool with a multitude of benefits -- helping with asset protection and quality of life as well as providing a legacy to your heirs.
No retirement financial plan should be created without considering insurance. Of particular importance is long term care insurance, which can help protect your retirement and estate from ruin that might result from expenses associated with unexpected illness or injury.
Comment:When I think of insurance I think about AIG, the world's largest insurance company that almost went bankrupt dealing in DCSs (Debt for Credit Swaps). These were highly leveraged speculative instruments that bond holders bought to hedge against losses. The problem was that the process was not regulated, so people who didn't even own bonds bought DCS coverage. It was like this; You buy life insurance. Your health starts failing so I buy a policy on you life. As you health continues to deteriorate all your friends, family, and neighbors buy policies. When you die the insurance companies have to pay out on every policy. As long as you remain alive the insurance companies are collecting premiums from all these people; die and they have to pay the claims of all these people.
Bottom Line:Take care of your health: it's easy to stay fit than it is to get fit once you've let yourself slide. Watch your diet, exercise, and stop worrying about the future. And, most important, save money. Long term care insurance might be a good idea but nothing to be concerned with when you are still in your twenties and thirties.Build your resources; if long term care look like a possibility, that's the time to get that kind of, well ahead of any true need. The premiums will be higher as you get older but will still be far less than all the money you would be spending on LTC insurance over twenty or thirty years.
Investment Planning: Advice and Monitoring of Retirement Investments: Financial planners can monitor how your investments are doing relative to the goals that you have set. These investments can include various financial products like stocks, bonds, mutual funds held in different types of accounts (taxable, tax deferred and tax free).
Comment:This is the clincher: put your money in the hands of others to manage for you. A fool's mission, especially as you have no way of knowing if your financial advisor is recommending investment vehicles to be put to brokers and mutual fund managers he knows and is receiving kickbacks on these deals from. It's very tempting and constitutes a serious conflict of interest.
Bottom Line: If you want to invest be smart about it. There are many local companies that would welcome your capital. Visit them under disclosure agreements; meet the managers, inspect the premises, look at the books, see what they have in the pipeline for expansion. When you are satisfied that it's a good prospect, structure your own deal. Offer them funds on terms that you want; how much in debenture bonds, how much in stocks, and most important; try to locate a company that has not yet gone public but intends to within a certain time frame. Make this a part of your agreement:they must go public at the specified time or you withdraw your investment.
Bottom Line: Be the captain of your own ship.
Friday, January 2, 2009
Happy New Year I Think
Well, it has arrived without incident: the new year. It's amazing how optimistic some people are at the start of this year, as if tearing a sheet of the calendar is going to make any difference. But maybe this time will be different. There are signs.
First of all the beginning of the withdrawal of our forces from Iraq is underway. This news didn't appear on WHATREALLYHAPPENED.com and I think that's too bad. What really happened is that the United States turned the Green Zone over to the Iraqi government. It's our way of claiming victory when we have truly been defeated. Of course Baghdad is far from secured, violence still runs rampant, and the fact that our casualties were lees in 2008 is largely due to the fact that our troops didn't venture out from their fortified positions very often. The bill for this fiasco will end up costing the US taxpayers THREE TRILLION dollars.
Then there is the fact that in eleven more days we will inaugurate a new president who doesn't seem to be the shining star that many suppose. After all, he was shoved down our throats by the corporate controlled media. It was either him or that nut case John McCain and the beautiful Sarah Palin. Personally, I like Sarah and think she might have been a great president. Seriously. I mean in political terms as we have come to witness them: it's not that Sarah would have to be particularly adept at running the government, she just wouldn't have been as bad as the last guy. Better is often defined in politicalspeak as "not as bad." But Sarah would have made some difference. Most of the world leaders are men. Put a bunch of men together and they will usually act like a bunch of rectal orifices; squabbling, bragging, cussing, and threatening. But when a woman shows up and the difference is astounding. These jerks turn on the charm, watch their language, and act almost human. Imagine the scene at a summit meeting. There's president Palin looking chic, hair done just so, and smelling good. When it's her turn to speak she turns on the charm, flashes that beautiful smile: "Guys, do you think you could help us get some more oil?" Who could say No to those gorgeous eyes? And photo ops? Sarah could get everybody interested in politics once more. "Gosh, fellas, we have to raise taxes again." Guy is bars all over the country watching her on television: "Anything for you, baby!" And how's this for a foreign policy coup? The Sarah Palin calendar sent out every year to all the world leaders.
The Bushes are moving to Dallas of all places; this should cause a huge spike in shoe sales. Dallas is a nice city, too nice for the likes of George W; besides, we have the Cowboys, that's bad enough. A couple of weeks ago circumstances got out of hand where I work. I had too much territory to cover, not enough time, and more problems arose to make matters even worse. In explaining the fiasco while offering suggestions to avoid future instances, I described the experience as a "Cowboys game." Everyone understood my meaning.
The economy is still in the toilet and the bigwigs on Wall Street and Washington are praying that the Chinese don't flush it. But down here on the street things look pretty good. Things are getting cheaper as businesses try to stay afloat by slashing prices. Retail concerns who actually go under sell their inventories to liquidators for pennies on the dollar; so, if you are not in a lot of debt, have an income and savings you should do alright. Like Dave Ramsey says, "Money's fun when y'got some!" It's going to be a lot of fun.
Obama will take residence in the White House and will quickly have to come to terms with the idea that he is the president of the United States, not Israel. The boys on the hill and he will have to stop kissing Knesset ass, especially after the pogrom that's still going on in Gaza - and which has attracted condemnation worldwide. The old saying about absolute power corrupting is playing out now. Israel wants to attack Iran - or they want us to attack the place for them - go ahead! Try it! Iran doesn't have nuclear weapons but their friends in Moscow and Beijing have plenty of them. But even on its own, Iran has a powerful military and it's getting better every day. Who is fool enough to believe that the Arabs are just sitting idly by? Under the Bush regime we were all living in a fantasy world; time to wake up and face reality. Next, watch Saudi Arabia turn on us because of our support of Israel. Dangerous times ahead.
Finally, one professor of political science has predicted that the United States government will collapse, and that the continuous 48 states will be divided into four nations. Hmmmm.
Happy New Year!
First of all the beginning of the withdrawal of our forces from Iraq is underway. This news didn't appear on WHATREALLYHAPPENED.com and I think that's too bad. What really happened is that the United States turned the Green Zone over to the Iraqi government. It's our way of claiming victory when we have truly been defeated. Of course Baghdad is far from secured, violence still runs rampant, and the fact that our casualties were lees in 2008 is largely due to the fact that our troops didn't venture out from their fortified positions very often. The bill for this fiasco will end up costing the US taxpayers THREE TRILLION dollars.
Then there is the fact that in eleven more days we will inaugurate a new president who doesn't seem to be the shining star that many suppose. After all, he was shoved down our throats by the corporate controlled media. It was either him or that nut case John McCain and the beautiful Sarah Palin. Personally, I like Sarah and think she might have been a great president. Seriously. I mean in political terms as we have come to witness them: it's not that Sarah would have to be particularly adept at running the government, she just wouldn't have been as bad as the last guy. Better is often defined in politicalspeak as "not as bad." But Sarah would have made some difference. Most of the world leaders are men. Put a bunch of men together and they will usually act like a bunch of rectal orifices; squabbling, bragging, cussing, and threatening. But when a woman shows up and the difference is astounding. These jerks turn on the charm, watch their language, and act almost human. Imagine the scene at a summit meeting. There's president Palin looking chic, hair done just so, and smelling good. When it's her turn to speak she turns on the charm, flashes that beautiful smile: "Guys, do you think you could help us get some more oil?" Who could say No to those gorgeous eyes? And photo ops? Sarah could get everybody interested in politics once more. "Gosh, fellas, we have to raise taxes again." Guy is bars all over the country watching her on television: "Anything for you, baby!" And how's this for a foreign policy coup? The Sarah Palin calendar sent out every year to all the world leaders.
The Bushes are moving to Dallas of all places; this should cause a huge spike in shoe sales. Dallas is a nice city, too nice for the likes of George W; besides, we have the Cowboys, that's bad enough. A couple of weeks ago circumstances got out of hand where I work. I had too much territory to cover, not enough time, and more problems arose to make matters even worse. In explaining the fiasco while offering suggestions to avoid future instances, I described the experience as a "Cowboys game." Everyone understood my meaning.
The economy is still in the toilet and the bigwigs on Wall Street and Washington are praying that the Chinese don't flush it. But down here on the street things look pretty good. Things are getting cheaper as businesses try to stay afloat by slashing prices. Retail concerns who actually go under sell their inventories to liquidators for pennies on the dollar; so, if you are not in a lot of debt, have an income and savings you should do alright. Like Dave Ramsey says, "Money's fun when y'got some!" It's going to be a lot of fun.
Obama will take residence in the White House and will quickly have to come to terms with the idea that he is the president of the United States, not Israel. The boys on the hill and he will have to stop kissing Knesset ass, especially after the pogrom that's still going on in Gaza - and which has attracted condemnation worldwide. The old saying about absolute power corrupting is playing out now. Israel wants to attack Iran - or they want us to attack the place for them - go ahead! Try it! Iran doesn't have nuclear weapons but their friends in Moscow and Beijing have plenty of them. But even on its own, Iran has a powerful military and it's getting better every day. Who is fool enough to believe that the Arabs are just sitting idly by? Under the Bush regime we were all living in a fantasy world; time to wake up and face reality. Next, watch Saudi Arabia turn on us because of our support of Israel. Dangerous times ahead.
Finally, one professor of political science has predicted that the United States government will collapse, and that the continuous 48 states will be divided into four nations. Hmmmm.
Happy New Year!
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