Like most things in life, we usually make snap decisions about buying a car. We go to a dealership to “look at cars”, and two hours later we are excited to discover we are driving our shiny new car home. Has this happened to you? It has to me.
Unfortunately, this is the worst possible way to buy a car. $250 per month may sound affordable, but nothing could be further from the truth. $250 per month does not come close to the cost of owning and using a car.
This article on Yahoo finance really got my attention. It’s about how the state of Connecticut is about to run out of money. It’s interesting because many states are in dire financial straits, but most people are, as usual, blissfully unaware.
Recently I did some research about bonds, and was interested in purchasing some. I discovered that municipal funds are supposed to be among the safest bonds that you can buy! I thought, “Isn’t that funny. Many states and cities are going bankrupt, but people think these bonds are very safe.” It sounds like the same game the ratings companies have been playing for decades: give the bond a AAA rating even if it is risky.
Why are municipal bonds more risky in this financial environment?
China has replaced Japan as the second most powerful economic force, according to this article at Yahoo. As China gets better at producing more high tech stuff that the world consumes a at furious pace, it’s growth will only continue. How long before it becomes the #1 economic world power?
I still hear many people talk about “cheap labor” in China. Although it is true that the lower labor cost makes it easy to create stuff cheaply, this is a dwindling advantage. As more and more stuff is created by machine, labor cost becomes less and less important.
The Social Security system, or more accurately Social Insecurity, is a great example of government mismanagement. Instead of collecting more money than it pays out, and investing the money it has collected, the government is now paying out more money than it collects. And instead of investing to get rich, it simply spent the money to make us poorer. To the tune of $2.5 trillion.
This article on Yahoo has some interesting facts about Social Insecurity. The article neglects to mention one of the biggest problems with the system. And that is the fact that people are living longer. It is estimated that people are living as much as half a year longer with each passing year. That means that in 20 years people could be living 10 years longer. Does the government factor this in to the Social Security payments estimates? No.
After reading this article on Yahoo, I really started thinking about how the global economic environment has changed. China is on track to be the biggest and most powerful force in the world. What does that mean for the U.S.?
One thing that I have noticed is that many people like to dismiss China as not being able to compete with America. They say, “Oh, China will never overtake America. Our technology is just too good.” Or some other nonsense. These are the same people who say, “Buy American. We need jobs.”
Thanks to Robert, I found a great new resource about America’s precarious financial situation and the future financial chaos. It is a movie called I.O.U.S.A. What better way to learn about economics than through a video?
Curiously, embedding the movie is disabled, so here is the preview instead:
After reading this article on Yahoo about the ever-growing national debt, I took a look at the U.S. National Debt Clock. Not only are we having record deficits each year, but the debt per American has reached unsustainable levels.
As you can see, the debt has reached $42,698 per American! And, $119,524 per taxpayer. The average savings in America is a small percentage of these figures.
On of the reasons that our economy is in a precarious position is that it is composed mostly of spending. Specifically, it is created by the desire to consume ever greater amounts of newer and bigger stuff. And we don’t need most of that stuff.
The American Dream
Contrary to popular opinion, most people only spend about 30% of their money on things that they really need. People don’t need a cell phone. They don’t need new clothes or to go out to eat. They can survive just fine on cheap food like pasta or rice or vegetables.
The challenge is that we grow up thinking that if we can buy just one more thing then we will be happy. And the problem is exacerbated by easy financing. The cell phone is a perfect example. If you sign up for service, you can get a deal on the phone and start using it now.
After reading this article, it reminded me that the U.S. will not be the most powerful country forever. The article says that U.S. debt is not as safe as everyone thinks.
Image courtesy of The Heritage Foundation
America has had a free ride for the last hundred years. America has had the most natural resources, the most immigration, strong investment in industry, and, most importantly, the ability to print money without limit. Why? Because the dollar has been the world’s reserve currency.
That means that the demand for U.S. debt has been unquenchable. Whenever a country or individual wanted to invest in a safe way (whatever that means), they would buy dollars denominated U.S. debt. Whenever the government needed money because it did not manage its finances responsibly, it would just issue more debt.
After reading The New Empire of Debt, it felt like my eyes were opened to a whole new perspective about government, money and wars. This book describes the current situation in America as just one of many empires that have risen to great heights, and then subsequently collapsed.
It’s the same story over and over. The Romans built the greatest empire of their time. The Spanish developed the new world and became the richest country in the world through the acquisition of gold. Most recently, Hitler attempted and nearly succeeded to achieve the same goal. Now it is our turn.
Each government has a great reason why they have the right to take over and consume the other countries. Sometimes it is because the other people are undeveloped barbarians. For Hitler’s government, it was because their race was better. Now, for America, it is because all people deserve to live like Americans.
The Singularity is Near by Ray Kurzweil is the book that started it all. If you want to know about the future, it is the best book I've found. Absolutely fascinating.
Rich Dad Poor Dad by Robert Kiyosaki. This is one of the most popular personal finance books of all time. A must read for anyone who wants to become financially successful.
The Millionaire's Secrets is one of my favorite financial books of all time. It's an allegory about a guy who has a terrible job, and how he overcomes challenges to achieve his dreams.
The One Minute Millionaire is a great book about how to become a millionaire. Written by Mark Victor Hansen and Robert G. Allen, this book combines an inspirational story with practical everyday skills.
The Art of Learning is the fascinating story of Josh Waitzkin, the world champion in both chess and Pushing Hands. His style is mesmerizing, and the strategies for learning are priceless.
The Alchemist is one of the best-selling and most inspirational books of all time. Anyone who has ever had a dream in life needs to read it. Perhaps my favorite book of all time.
Love is the Killer App is a powerful, step-by-step book about how to have a wonderful experience and spread love in any working environment. Think the office has to be a source of bad energy? Think again.
The 4-Hour Workweek is a powerful book full of strategies about how to get more done in less time. For anyone who is looking for leverage or wants to achieve success quickly, this book is absolutely invaluable.
, it felt like my eyes were opened to a whole new perspective about government, money and wars. This book describes the current situation in America as just one of many empires that have risen to great heights, and then subsequently collapsed.
is one of my favorite financial books of all time. It's an allegory about a guy who has a terrible job, and how he overcomes challenges to achieve his dreams.
