Friday, December 3, 2010

Paul Mladjenovic on the Max Keiser Report

I had the opportunity to speak about the silver market and other issues on the widely-followed Max Keiser program a few days ago.

To get straight to the interview, go to 14:45 point.

Happy holidays...

Paul Mladjenovic

Saturday, October 23, 2010

Gold and the Great Depression; the Great Myth

October 24, 2010
By Paul Mladjenovic
Copyright 2010 Paul Mladjenovic. All rights reserved.

As I peruse the usual financial sites that I am also fortunate to be on, I noticed an article that made a reference about gold and the Great Depression. The writer normally covers investing and the financial markets but this time he veered into a topic that I have had a keen interest in since my college days; the Great Depression.

Just know that the causes and issues of the Great Depression are not bygone events; They are very relevant to today’s economy and financial markets.

I will try to keep this article short but I read something in his piece that compelled me to address it. He writes:

“…We no longer have a gold standard, which is a GOOD thing.
The gold standard of years past…was largely to blame for the Great Depression.”

Now, keep in mind that I normally think that this writer offers good commentaries and I wish him well. Readers will find his views on financial markets very useful. However, I can’t let items like this pass by without commentary. Let me state the main point of my essay:

The Gold standard had NOTHING to do with creating the Great Depression.
Absolutely NOTHING!

Blaming the gold standard for the Great Depression would be like blaming a seat belt for a multi-car crash. It defies common sense and logic.

In fact, had the federal government adhered to a gold standard, it would have curtailed the dangerous over-production of fiat currency. Remember that the first event of the Great Depression was the collapse of the stock market in 1929. This event was largely due to the government’s reckless creation of easy credit and a currency bubble (sound familiar?). If America’s central bank, “the Fed”, was constrained by a gold standard, a bubble would not have been created in the first place. A gold standard puts a “straight jacked” on reckless currency inflation.

We must also keep in mind that the Great Depression was not a singular event…it was a series of events induced by federal government blunders that hurt (and suppressed) economic activity for over a full decade.

Massive, stifling regulations (such as Smoot-Hawley) were implemented along with oppressive tax rates (hitting 96% by World War II!) that kept the economy struggling throughout the 1930s. From massive stimulus spending, the government burden grew beyond the economy’s ability to carry it (does that also sound familiar?).

In addition, federal wage policies made hiring employees too expensive and this forced unemployment to stay at artificially high levels for years. It can not be emphasized enough; depressions are NOT caused by a private, free market economy. The culprit is government.

Lastly, the next persistent myth was that that World War II got us out of the Great Depression.

Wrong! Wrong! Wrong!

World War II only gave us the ability to give the unemployed a uniform and a gun and ship them overseas.
War doesn’t solve economic problems…it creates them. If war actually helped an economy then the answer is simple; produce a million bombs and then dump into in the ocean! Wouldn’t that create prosperity?! Of course not!
War is actually the most obvious example of the “broken window fallacy” that the great Henry Hazlitt so ably described in his book, “Economics in One Lesson” (available at

Before we make the same destructive mistakes (which have been happening in recent years anyway, it seems), we need to understand the truth because the causes and symptoms of depressions and recessions. A good place to start would be to go the Mises institute website ( and get a copy of Murray Rothbard’s excellent book, America’s Great Depression.

The bottom line is that if America (our government, actually) adhered to a gold standard, we would be much, much better off than we are now.

The sooner we learn the lessons of history (and the value of gold and a gold standard), the sooner we would be much more prosperous.

Until the government its their act together (never?), we need to take measures to protect our personal prosperity. Accumulating gold and voting for those that want to severely limit the government’s role in meddling in our private economy are good for starters.

Paul Mladjenovic, CFP is the author of the ebook “Financial Firewall: How to Protect your Money and Investments in the Age of Financial Chaos” and he also does national seminars on investing and financial planning concerns. He is also the editor of the free financial newsletter, the Prosperity Alert ezine, which is found at

Thursday, October 7, 2010

Come Hell or High Water…Discipline is Profitable

October 7, 2010
By Paul Mladjenovic
Copyright 2010 Paul Mladjenovic. All rights reserved.

Yesterday (Oct. 6th) gold hit an all-time high of $1,349 (spot price) while silver hit a 30-year high of $23.19. Today, Gold and silver are pulling back from these record highs as profit-taking is occurring.

In recent years, you and I have constantly heard about the problems with precious metals. We have seen and heard much about the corrections and bearish forecasts. When a particularly strong pull-back occurs, the critics tell us “the bubble has popped” or “the bull market in gold and silver is over”.

I have heard from students and readers about their worries about gold plummeting or how the price of silver cratered. We all remember the second half of 2008. Gold held up well but silver was massacred! Silver was over $20 during the spring of 2008 but massive panic selling forced the price of silver to a mind-boggling low of $9.17 by November 2008 (using the data at Kitco).

In 2008, Silver started the year at $14.93 and ended at a dismal $10.79 for a disheartening plunge for the full year of about 28%. However, as of yesterday, silver over the past 24 months had risen by 120%. Of course, you know gold’s performance during that time. The precious metals had proven their “mettle”. Those that were buyers (especially in bullion and quality mining stocks and ETFs) in recent years and stayed the course were rewarded with strong gains. Short-term speculators were hammered but long-term investors prospered.

In 2008, Gold was one of the few investments that ended up. It started the year at $846.75 and ended the year at $869.75 for a gain of about 3%. In a normal year that is nothing to crow about but don’t forget how bad that year was; most investments were down by double-digit percentages. Many stocks ended up in the graveyard of forgotten securities like Bear Stearns and other financial firms (R.I.P.).

How many investors panicked and sold their quality holdings at the bottom of the plunge? Investing means that you choose wisely and logically and then have the discipline to stay the course.

A student of mine was quite disheartened when she bought a silver stock at $14 during the first half of 2008 only to see it lose over 50% of its value in the subsequent months. During that horrific period, the best stocks joined the worst stocks in a terrifying plunge. However, when the recovery took place, the best stocks regained their footing while bad stocks stayed down for the count.

Fortunately, that student did not panic and her silver stock is up 80% since she acquired it. yes…discipline can be profitable.

For us, the lessons are clear. In recent years, precious metals have been a good place to put our money. If you choose good investments, they will make it through the market storms that occur. Unfortunately, the market storms have gotten very strong in recent years and the volatility and tumultuous activity will continue and probably get worse. For investors, that means not only diversification and patience (and aspirin) but also discipline.

This does not mean being complacent and hands-off with your investments. It just means that you monitor them and see if they still make sense as the market goes through its roller-coaster path. It the investment has strong fundamentals and nothing is a direct threat to it, in due course it will do well.

What is the outlook for precious metals and their related securities (stocks and ETFs)? The fact that the economy is still very shaky and the central banks of the world will continue to pump up their money supplies bodes well for gold and silver. Yes… they will continue to have un-nerving corrections.

As I tell always tell my students, bull markets zig-zag upward while bear markets zig-zag downward. Precious metals (along with commodities in general) are in a long-term, historic bull market. Their fundamentals have been strong in recent years and that strength should continue.

The wise investor uses the corrections in a bull market to accumulate more positions. In the end, the disciplined and patient investor wins.

Get Paul Mladjenovic's free financial newsletter, Prosperity Alert found at

Find out how to Profit from Gold, Silver and other commodities with Paul's
audio seminar “How to Profit from the Commodities Super-Boom”.
Find out more by CLICKING HERE.

Thursday, September 16, 2010

Government vs. Gold

By Paul Mladjenovic
September 16, 2010
Copyright 2010. Paul Mladjenovic. All rights reserved.

Some recent headlines look ominous…

“Healthcare bill reveals hidden tax for precious metals transactions”

“Congress starts hearings on gold”

When I wrote the book Precious Metals Investing for Dummies, I included a chapter on the treatment of certain assets as “strategic assets” that garner the attention and involvement of both our government and governments abroad. Gold is certainly in the category of “strategic asset”. Oil is another example of a “strategic asset”.

What do I mean when I write “strategic asset”. It is an asset that goes beyond mere economics. Most “things” have some type of economic value certainly. Grains, copper, zinc, lumber and thousands of other useful resources certainly have economic value. But some assets—such as gold, oil and even silver—tend to have a higher profile and are more intertwined with the destinies of governments. Certainly these assets tend to be “strategic” since having enough of this asset gives a nation some clout as it interacts with other nations. As nations compete on the world stage, some assets take on a value given certain conditions and events.

A good example of what I am talking about is oil. During the late 1970s, an energy crisis hit the West. The U.S. and other countries became exceptionally dependent on foreign oil. The lion’s share of oil rested with Saudi Arabia and other members of the Oil Producing & Exporting Countries (OPEC). Very quickly, OPEC had power on the world stage. Oil was indeed a great economic asset but it became a “strategic asset” when it was used to leverage and influence conditions and events with the non-OPEC world.

I think that oil is still a strategic asset and in the next few years will regain its strength as a strategic asset. Right now, gold is very quickly becoming widely-acknowledged as a strategic asset.

Don’t get me wrong…I think that throughout history, gold usually had a prominent spot and recognition as a strategic asset but sometimes it burns very brightly in that spot to the world-at-large. Why?

In general, governments—specifically central banks—see gold in a negative light. Sometimes, it sees gold as a threat. In today’s world, gold is indeed a “threat” to many in the world of government. That brings us back to those headlines at the beginning of this essay.

For many governments (including ours), they see gold as a “competitor” to their chosen currencies. They don’t like this and this is why there have been so many incidents in world history when governments sought to push gold into obscurity or to ban or outlaw the metal.

A good example is Zimbabwe. A few years ago the government banned citizens from owning gold. That was done at a time when they were hyper-inflating their currency into oblivion. Basically, the citizens couldn’t own something that held its value…they were forced to trade in a currency that was losing value literally by the day (and even hour!).

Most certainly you will see more anti-gold actions by governments across the globe since most of the governments of the world are busy growing their money supplies to cope (according to their logic) with burgeoning debt and fiscal problems. It’s as if government acted liked a spoiled kid saying “if you can’t play with our toys (fiat currencies) then we will take away what you have (gold)”.

Right now, many citizens are turning to gold because it is a good way to diversify oneself when “paper assets” such as bonds, stocks, mortgages and …yes…currencies…are growing more suspect. But when government encroaches on the world of precious metals, what should one do?
Points to consider:

* Keep buying gold. But be diversified when you buy it. get some bullion coins (such as gold eagles and gold maple leafs), but now may be a good time to also consider gold numismatic coins as well. Why? Because modern governments tend to leave collectibles alone since they usually target bullion coins and bars. I don’t have the space to give further details but one can find more detailed assistance on these matters in places.

* I would certainly suggest that you get very familiar with the writings and works of reliable pros such as David Morgan, Jay Taylor, James Turk, Roger Wiegand, Peter Grandich, Jeff Christian, James Dines, Howard Ruff and many others that write at this website and related ones. Their insights and guidance are great!

* I am usually very hesitant to mention numismatic coins because they do REQUIRE more diligence when buying. When you buy numismatic coins you have to be very aware of matters such as authenticity, condition, rarity and so on. Organizations such as the American Numismatic Association can also offer guidance.

* Lastly, please make your views known to your representatives in Congress. Americans and others should be able to buy and sell gold and silver and other precious metals with little interference from politicians and bureaucrats. Write them…call them…visit them! Just let them know that precious metals are an important part of a person’s ability to prosper in the age of financial uncertainty and chaos.

Find out more about how to protect your wealth and financial security.
My latest audio ebook, “Financial Firewall: How to Protect your Money and investments in the age of Financial Chaos” is at

Wednesday, August 25, 2010

Headlines Sound the Alarm about Deeper Economic Problems

by Paul Mladjenovic
August 25, 2010
Copyright 2010. Paul Mladjenovic. All rights reserved.

The following three headlines are alarming symptoms of the economic insanity unfolding before our eyes:

1. “Philly requiring bloggers to pay $300 for a business license”

2. “LA unveils $578-Million school, costliest in the nation”

3. “Record Number Of Americans Using Retirement Funds As Source Of Immediate Cash”

Yes, those are actual headlines. They may seem like random and disjointed stories but really they are connected to the same economic and financial crisis that is here now and threatens to get much worse.

Philadelphia is forcing bloggers that make little or no money cough up $300 for what is annoyingly labeled a “Business Priviledge Tax”. The struggling city is searching for new revenue to pay for their over-spending. This silly tax may yield some modest revenue for the city but the unintended consequence will be to chase away budding entrepreneurs. In other words, they will get much less revenue than they think. This is at a time when they desperately need to attract and encourage entrepreneurs.

Many politicians and pundits forget that “demand and supply” is a reference to “consumption and production”. Our country is awash with people that consume and “demand”. However, those that supply us with goods and services (production…meaning ”entrepreneurs and businesses”) are struggling. We need to encourage production as much as possible since this is THE major path to greater economic strength and stability.
History tells us that skyrocketing demand (especially by the public sector) and stagnating or shrinking supply (a private sector that keeps diminishing) is a recipe for economic disaster. That disaster is unfolding right now. Anyway, let me continue…

The second headline is also galling. The Los Angeles school district is spending eye-popping amounts of taxpayer money while the school district and the city itself is drowning in a severe fiscal crisis. To add insult to injury, this particular school system is among the worst performing in the country in terms of student performance and drop-out rates. The politicians and bureaucrats in that once-great city just don’t get it.

The third headline tells us that a record number of folks are strapped for cash and dipping into their 401K retirement accounts. This tells us that the private sector is indeed hurting. I am sure that they realize that taking money out will possibly mean tax penalties in the short-term and a smaller nest egg longer-term. I am sure that they are not doing it because it is a good idea; they are doing it because they need the money.

There are many, many more stories like these across the country. The forecasts that many of you have read from my prior essays months and even years ago are now reality. Very sad! These stories and reports are symptomatic of the deep economic crisis that we have in our midst today. They are also blaring reminders that government is oblivious not only to its own excesses but also to the pain that is being felt by those that support it.

Hundreds of local and state governments are spending lavishly and irresponsibly billions. The federal government is lavishly and irresponsibly spending trillions. Why not? It’s not their money…it is (was!) the money of hard-working and struggling taxpayers. The same taxpayers that tightening their belts…and removing money from accounts that were meant for the future. That future is now looking more uncertain.

Unfortunately for all of us, these are not short-term developments. Many states and municipal governments are pushing themselves (and their tax-paying citizens) toward economic crisis. Many of those collectively responsible for this massive and painful nonsense will only realize “the error of their ways” when it is too late.

To my readers, I say that we may not be able to save the world or change the future but we can do what it takes to protect ourselves and our loved ones. Some points to keep in mind:

Keep striving toward financial safety and economic self-sufficiency. If you are dependent on a third-party (a company or government agency), it would serve you well to…

• Keep accruing cash & precious metals like gold and silver

• Generally avoid municipal bonds or (at the very least) consider only AAA-rated municipal bonds.

• Find new ways to generate income in your spare time.

• Review your investments with those that are familiar with today’s economic problems.

Build your “Financial Firewall” as soon as possible because coming events will be unkind to the unprepared.
Paul Mladjenovic is the author of “Financial Firewall: How to Protect your Money and Investments in the Age of Financial Chaos” and his website is He is the author of “Precious Metals Investing for Dummies” and he edits the free financial ezine, Prosperity Alert.

Friday, August 13, 2010

Inflationary Depression Forecast Revisited…We are Half-Way There

Going back a few years ago, I made a forecast that America would be heading toward an inflationary depression. I made that forecast during 2007 and early 2008 when the federal government’s policies were very bad.

Today in 2010, the federal government has replaced the bad policies of a few years ago with much, much worse policies today. It is mind-boggling how bad these policies are and it is astonishing that most politicians and many economists don’t see the obvious dangers.

A forecast of an inflationary depression is actually two forecasts since a “depression” and “inflation” are technically two separate events. Therefore, I have to make clear that we are talking about two separate forecasts.

It is an old saying that the “road to hell is paved with good intentions”. Well, in recent years, that road has been changed to a super-highway! America was put on that super-highway a few years ago and right now we are traveling at break-neck speed toward the financial abyss.


I believe that my forecast of a “depression” is accomplished. If you think that our experience of 2008-2009 was a garden-variety recession, I would ask you to re-consider that. The trillion-dollar spending policies enacted during the late Bush yeas and now the Obama years are extraordinarily dangerous. The federal government (and the state & local governments, too) are spending beyond our means as well as theirs. Bankruptcies, foreclosures, business contraction and unemployment are certainly at depression-level. Talk of a recovery is wishful thinking since the effects of still more bad policies are on the horizon. Look at what we have right now:

1. Unemployment is at 17%. I am not talking about the much reported yet highly inaccurate “official unemployment rate” which is a sham; I am talking about what is called the “U-6” employment rate that the Bureau of Labor Statistics compiles. It is a much less reported yet more accurate measure of unemployment. This statistic includes those counted in the “official unemployment rate” and adds in those that dropped out of the job search; the so-called “discouraged” unemployed. U-6 also includes those that are “under-employed” which means those that want full employment but have had to settle for part-time employment.
2. Foreclosures are at all-time highs.
3. Bankruptcies are at all-time highs.
4. Personal debt is still at record levels.
5. Government debt is at a mind-boggling all-time high and still soaring.

Then couple the above list with what is coming:

1. The tax-cuts enacted in the past decade are set to expire by January 2011. If this goes as planned, the effect is a tax increase that would deliver a body-blow to an already weak economy. A tax increase is nothing more than money taken by force by the government from the private economy. Basically that would mean less income and less invest-able capital for the private sector as the government forcibly siphons these resources and redirects it to a bureaucracy that is already the biggest in American history.
2. Congress and the president’s economic team have made noise about a “Value-Added-Tax” which is dumb during good economic times and quite stupid during bad economic times. Even the name is idiotic since taxes don’t add “value”…it merely increases the price or cost of that particular product or service.
3. The same folks are still considering pushing through what is called “Cap-and-Trade” legislation that would raise energy costs greatly since the legislation is nothing more than a huge hidden tax on energy usage. This legislation would do little (nothing?) for the environment but it would do much harm to our economy.

Therefore, consider the depression here and now. If taxes, regulations and other burdens and risks are not decreased immediately and substantially, then this depression will continue.


Some readers have asked about the prospects for inflation. I am on record that I think that inflation is not an “if” but a “when”. As the federal reserve keeps creating trillions of dollars out of thin air, there will be consequences. Technically, they are indulging in “monetary inflation” but of course most people think of inflation by its symptom which is “price inflation”. Since many observers don’t see price inflation, they assume that deflation is winning the day and will be here for the foreseeable future. This is wrong.

If you have read my prior essays on inflation, I point out that inflation will become evident when two conditions occur:

1. The excessive creation of money (again, this is “monetary inflation”)
2. …When this money circulates through the economy (also referred to as “velocity”)

If the government creates trillions of dollars and these dollars do not circulate, then velocity will not occur. But just keep in mind that “velocity” occurs where there is DEMAND. This is a key reason why I am a long-term bull on commodities in general and “human need” commodities in particular. I believe that this is such an important consideration for investors that I even did a national seminar on commodities investing.

There are many areas where there is simply no substantial demand (such as housing and autos). Money will not flow there in this economic environment. However, money does flow to areas of “human need”.

For example, a recent report has shown that the price of wheat has gone up 71% during the past 12 months. I think that similar price movements (or higher!) are in store for many essentials. Commodities tied to “human need” will definitely see their prices continue to zig-zag upward.

I also believe that gold and other precious metals such as silver will continue their bull market. Why?

I consider gold and silver to be “human need” essentials in today’s economic environment. As inflation unfolds among essential commodities, people will need a “store of value” as the world’s major currencies keep on being over-produced. When people start to see that the dollars they hold (or other currency) start to lose value as the government over-produces it, they will then see that having cash is not a “safe harbor”; inflation will erode its value.

They will then seek to replace currencies that are “depreciating” or losing value and shifting their resources to that which holds value…gold and silver.

In fact, as people world-wide see the problems with fiat currencies (dollar, euro, etc.) and with paper assets (stocks, bonds, etc.), they will migrate into those things that will hold value or appreciate over time. The flight will be from “paper” to “stuff”. “Stuff” like precious metals, food, water and other essentials.


The corollary to that (and this goes back to my forecast) is this…


We have a huge world population and their needs will be addressed. When you couple this demand with expanding money supplies across the globe, rising prices will be the result.

The stage is being set for historic price inflation…in those commodities that are “essential”. Investors need to prepare.

Investors can learn about investing in human need from Paul Mladjenovic’s audio seminar “Cash in on the Commodities Super Bull Market”. He is the author of Stock Investing for Dummies and you can get his free financial newsletter, the Prosperity Alert at

Wednesday, July 21, 2010

Job Creation versus Job Destruction

Copyright 2010. Paul Mladjenovic. All rights reserved.

We all want to see more jobs. As soon as possible and for everyone that wants a job. And even though I have touched on this subject before, it is an important topic that needs further attention.

At both the public and private levels, the talk is about “jobs” and doing “everything we can to create jobs” but the great tragedy is that federal economic policy makers (and many state level economic policy makers) simply don’t understand how to create jobs and are in fact enacting policies that destroy jobs. The reason why these policy makers are harming job creation and spurring on job destruction is really quite simple:

1. They have never run a business.
2. They have never met or managed a payroll.
3. They have never worked in the private sector.
4. They have never created goods or services.
5. They were educated by people with no business experience or knowledge.
6. Many are ideologues that understand politics but not real economics.

In addition, these same decision-makers don’t understand (or don’t care to know) the difference between “private jobs (VERY necessary) and “public jobs” (funded by private jobs!).

With that said, let’s try to clear the air about how jobs get created and how they get destroyed.

Point#1: Understand why “private jobs” are more necessary than “public jobs”.
Many politicians and bureaucrats crow about how government allegedly “creates jobs”. But the ONLY jobs created by government are public jobs and the ONLY way these public jobs are created is by destroying (inadvertently I will add) private jobs. Private jobs provide tax revenues that help to fund public jobs. \

When the government adds a “public job” (such as an administrator, fireman, teacher, policeman, soldier and so on), it must first get the resources from the private sector (via taxes or government debt). This, in turn, crowds out the resources to create a private sector job (retail, manufacturing, etc.). As private jobs shrink due to government growth and public jobs increase due to more spending by government, you set into motion a dangerous dynamic that is unsustainable long-term.

The bottom line is that more private jobs are necessary if we are serious about a healthy economy and a sustainable government budget. So how are private jobs created?

Point# 2: the first and most important job is the entrepreneur.
The first and most important job (from an economic policy point of view) is the entrepreneur. This is a small business person that is the starting point of all business. The entrepreneur is a risk-taker that is seeking profit by providing (or hoping to provide) goods and services for a profit. Profit is CRUCIAL for business start-up and expansion. Without profit, there is no incentive to start and grow a business. For those that vilify the idea of profit, they miss this point entirely and forget that Profit is the key to a healthy, growing economy that ultimately creates the private jobs that are necessary for a healthy and sustainable government sector.

When an entrepreneur reaches profitability, then job creation becomes necessary for the enterprise to keep growing. In the world of supply and demand which many policy makers keep ignoring, the entrepreneur is the visible and necessary engine of “supply”(production). We must remember that supply and demand are embodied in the functions of “production and consumption”.

Consumption (demand) is VERY easy since all of us have wants and needs. We all want more stuff! The trick is…production (supply). Production is very, VERY hard. Don’t believe it? Become an entrepreneur and start a business from scratch! You will quickly find out that it is both risky and hard work. When I teach my home business seminars, I usually advice my students to start part-time from home if possible.

When the entrepreneur succeeds, the hard work and risk does not end. Managing an ongoing business in today’s economy (mostly devastated by short-sighted, blunderous trillion-dollar government policies!) is a risky and difficult endeavor. Getting and keeping employees while satisfying customers and government rules, regulations, mandates and a plethora of business and payroll taxes is VERY difficult.

Therefore, if legislators and government policy makers are truly serious about “getting the economy back on track” and “job creation”, they must make every effort for business start-up, growth and expansion (again, this is production) as EASY AS POSSIBLE. Lower the costs and barriers of entrepreneurship and business expansion!

This includes (but is not limited to) tax cuts, regulatory reform and cutting the red tape, paperwork and bureaucratic hurdles that usually stymie business start-up and development. Cutting (or better yet abolishing) corporate taxes would be a huge boost for business expansion and private job creation.

Unfortunately, government at this moment is unwittingly (purposely??) enacting job destruction policies. Right now, public employees are paid far more than private employees for comparable work and if you do the math, you will see that every 2 public jobs created destroys at least 3-4 private sector jobs. Whether we like it or not, the bottom line is that government (rightly or wrongly) siphons money, jobs and resources from the private economy. Should taxes go up in 2011 (as scheduled), this will only shrink the private economy and accelerate private job destruction.

Point# 3: Private jobs lost today end up with public jobs lost later on.
As the private economy shrinks, this, in turn, will mean less tax revenue for the federal and state governments. Also, as the unemployment ranks swell, that means more government spending on unemployment benefits and public assistance. That results in growing government budget deficits and expanded government borrowing. If and when this continues, this will inevitably be unsustainable and will result in a painful economic crisis.

Those “public jobs” that were created earlier will then start disappearing as well. The resulting scenario will end up being very similar to what has happened throughout history (Greece is only the latest example).

What readers should consider:
The more self-sufficient you are the better. I tell all my readers, clients and students that a business (easily done in your spare time from home) should be considered an economic necessity. It is also why I am self-employed and why I teach about starting a home business. Whether you are unemployed or not, you should launch a business in your spare time. The current economic situation is warning you about this right now!


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Thursday, July 15, 2010

Forecasts for the Economy and Financial Markets 2010-2012

by Paul Mladjenovic

Copyright July 2010. Paul Mladjenovic.
All rights reserved.

Good or bad, everyone likes a forecast. Usually, forecasters like to issue them at the end or the beginning of the year but I thought that now would be a good time to review past forecasts and issue some new or updated ones.

Entering the fray with forecasting can be a dicey pursuit. No matter how confident you are about the outcome of your prognosticating, the unknown variables can pop up at any time. As much as possible, I embark on forecasts that I believe are not an “if”…but a “when”. I may get it wrong in the short-term but the final outcome is in the long-term.

One of my first essays with forecasts was in the Spring of 2004. In that piece, I had seven specific forecasts. What were they and how have those forecasts fared? Here they are along with my commentary (keep in mind that they were made March 2004).

1. The Dow will go below 6,000.
As of July 2010, this one was wrong. Or was it? The Dow hit a low of 6,500 in March 2009. Not quite 6,000 but this was “close enough”. It was very dicey to forecast the Dow since I believe (along with many others) that the Federal Reserve and the Treasury have been known to intervene in attempts to “manage” this widely-watched barometer. When I made the forecast in 2004, the Dow was much higher and few expected it to fall that drastically. In the world of hand grenades and horse shoe tosses, this one was close enough.

2. The dollar will drop at least another 25%.
This one came true by early 2008.

3. Gold will hit $1,000 an ounce.
This also came true in early 2008.

4. Silver will hit $50 an ounce.
I was way off on this one but I will consider this forecast as a “work in progress” since I ultimately expect it to hit (and exceed) $50. I think that it should have already passed $50 but I am sure that if you have followed the great research by Ted Butler and David Morgan, you will understand that the silver market has been greatly hampered and that has caused silver to be grossly undervalued. In any case, After six long years, this forecast will have to be officially considered a miss (for now!).

5. The real estate/ mortgage bubble will pop.
This is a “big hit”. I even did seminars in 2005 about what to do to avoid the troubles (or profit from) the popping of the biggest real estate bubble in history. The wreckage from this major event sent shockwaves through Wall street and many financial markets worldwide. The real estate market will not have a healthy recovery for at least a few years.

6. We will have a severe recession.
This is also a hit; the recession that became termed “the Great Recession” actually started in December of 2007 and was not considered technically done until 2009.

7. We will surpass 2 million bankruptcies & foreclosures.
This forecast was also a “hit” as we passed 2 million bankruptcies and foreclosures in 2007.

Of the 7 forecasts, 5 were very accurate, one was very close and one was not. All things considered, not a bad forecasting record. When you add in the public forecasts from my national seminars (such as the sub-prime crisis and the commodities bull market), the accuracy rate is actually much higher.

In 2008, I did another forecast article and provided 6 forecasts; here they are again:

1. You will see an inflationary depression that will be evident by 2010-11.

2. Unemployment in the private sector will soar into double-digits by 2010.

3. State and municipal governments will be federal bailout candidates during 2010-2011.

4. Commodities will start the next leg of their long-term bull market starting in 2009.

5. We will see oil hit $200 as Peak oil becomes obvious to all during 2009-2012.

6. International conflicts over natural resources will hit the headlines during 2009-12.

As you can see, most of the forecasts made in 2008 are still “a work in progress”.

Forecast #1 is halfway here; the depression is here and the second part of the forecast (inflation) will be coming with a vengeance. Stay tuned.

On Forecast #2, the official unemployment rate did hit 10% but it recently fell to 9.5% due to statistical shenanigans. Keep in mind that another (more accurate) unemployment rate (the so-called U-6 rate issued by the Bureau of Labor Statistics) is still in the neighborhood of 17%. That is definitely depression-level!

For Forecast #3, this is coming to pass right in front of our eyes. States like California and Illinois are fighting off bankruptcy and hundreds (thousands?) of cities, towns and counties are struggling with solvency issues. Many of these municipal governments have received federal “stimulus money” but technically consider this as “bailout money”. Consider this forecast (at this point) a “hit”.

In Forecast #4, I predicted that commodities would turn around in 2009 after the drubbing they took in late 2008 and this forecast is generally a hit. Commodities may pull back in the short term and do lots of zig-zaging but the bottom line is that fundamentals are solid and the long-term bull market is intact. Seeing this market turn into a mania is a matter of time.

In Forecast #5, I made the call some years ago that oil would hit $200 but it had peaked at $147 in the summer of 2008 before plummeting to about $32 during late 2008-early 2009. It has since recovered and (as of early July 2010) it is in the $75-$79 range. This forecast was a “miss” in 2008 but I consider this new forecast to be a “work in progress” as I expect world-wide oil demand (and geo-political factors) to push the price of oil to $200 by 2012. Stay tuned on this one.

In the last forecast (#6), wars over natural resources have not officially broken out…yet. but a struggling world-wide economy coupled with belligerence from hostile governments ranging from Venezuela and Iran to Russia and other countries is a potent and dangerous state of affairs. As the world population continues to sky-rocket and natural resources continue to dwindle, a major conflict will come about sooner or later. Again, stay tuned.

Here is a partial list of my forecasts (the full list appeared in this month’s Prosperity Alert newsletter):

1. Gold will head to $2,000 and beyond during the next three years
2. Silver will hit $25 during the next 12 months and soar to $100 by 2012
3. Oil will be $100 by 2011 and onward to $200 by 2012-2013.
4. IF THE TAX CUTS EXPIRE…we will have a “greater depression” start by 2011.
5. The Federal deficit will hit $2 TRILLION during 2011-2013.

Can these forecasts be wrong? Sure. Anything is possible. However, I try to stick to events that have a near-certainty of happening (again, events that I believe are a “when”…not an “if”). It is not a case of wishing any of these things. We don’t wish for hurricanes but they will happen and you do have to ready for them.

What should people do to give themselves greater financial safety in the coming months and years? Keeping this in mind, I did a new audio program entitled “Financial Firewall”. There are many things that you can do to either protect your money (or even profit) from the events that are unfolding now or are coming. Start preparing before the next crisis hits.

Paul Mladjenovic is a CFP, national seminar leader and the author of “Stock Investing for Dummies” and his website is He is the editor of the free newsletter Prosperity Alert and his newest audio-book is “Financial Firewall: How to Protect your Money & Investments in the Age of Financial Chaos”.

Wednesday, June 2, 2010

The Economic Impact of the Horrific Oil Spill

June 2, 2010. By Paul Mladjenovic.
Copyright 2010. Paul Mladjenovic. All rights reserved.

As I watch from a distance the great catastrophe in the Gulf of Mexico, I think with great concern what the impact will be above and beyond the monumental environmental impact for the immediate areas.

Beyond the corporate and governmental blunders, blaming and dithering, we have to recognize what must be done and also what we face as a society.

First of all, I think that all of us must heed the call to action by the governor of Louisiana. A massive mobilization of resources and manpower must take place immediately. Our Federal government should send the national guard and the navy to the Gulf of Mexico to help contain and mitigate this massive spill. We can not afford to hesitate. This oil spill is the worst in history and left unchecked, it would poison far, far more than the fishing industry in the Gulf of Mexico. It means far, far more than merely higher prices for gas or seafood.

This oil spill can easily decimate the ecology of the nearby bodies of water too. What would happen if the Mississippi river became toxic along with the Caribbean sea and the Atlantic ocean? Do you think it can’t happen? One engineer pointed out that as little as a quart of motor oil could poison 250,000 gallons of water. What would happen if millions and millions of barrels of oil seeped across the hemisphere’s many bodies of water?

The impact on ocean life (and those dependent on ocean life) is indeed horrific to think of. But the reality is unfolding right before our eyes. What will happen to agriculture? The world’s supply of clean drinkable water?
Yes…think about the logical after effects of this growing calamity.

At this point, all parties must be mobilized. All efforts must be enacted immediately. This is not just about British Petroleum and the White House. It is about all of us both in the United States and the neighboring countries getting immediately involved.

It is not just about placing blame, seeking punishment and passing laws and penalties. This is also about personal and economic survival. The Oil spill will have a significant effect on the entire economy. I don’t care if you live in Hawaii or in Oregon…you will be affected.

Among what you will see in the coming months are the obvious (such as rising prices for energy and seafood) but also…

• Rising unemployment. What will happen to businesses and jobs dependent on the Gulf of Mexico?
• Rising state deficits in the immediate region. The pool of taxpayers will shrink as the pool of dependents rise. What happens to, say, once-independent fishermen that can no longer fish?
• Rising federal deficit. The deficit can easily rise to $2 trillion from the economic fall-out from this horrific spill.
• Rising prices for corn, cotton, wheat, etc. General agriculture will be gravely impacted as water problems arise. The end result will be diminished supply coupled with ongoing demand.
• Higher taxes. The vicious cycle will keep growing as politicians use the occasion to agitate for more taxes on an already over-burdened economy.
• Indirectly, there is no positive impact on stocks and bonds but any that does materialize will certainly be negative.
• Many unintended consequences (inflation?) as yet unseen both here and internationally.

Calling your representatives to demand action (physical…not legislative) is the first step. If we are going to pay for bloated government then we might as well get some vital clean up services for the money!

In your personal strategy, some quick points…

• Buy storable food NOW. Yes…cans of tuna…you got it right. It will come in handy 6-12-18 months from now when you see what seafood (and food in general) will cost. That’s if you can get it!
• Do you have extra containers of water? You should always have a fresh supply on hand. Better safe than sorry (yes…I practice what I preach).
• If possible, have extra gasoline in a safe container tucked away in a safe spot if possible (check with local authorities about safety guidelines).
• Keep accumulating physical gold and silver. The US government will see to it that more dollars are printed up to deal with the added spending for the southern states.
• Commodities will keep zig-zagging up in price just as I had pointed out in my Commodities Super Boom seminar. With the oil spill, commodities prices will only strengthen more so as time goes on.
• Subscribe to my free newsletter (Prosperity Alert) at with strategies and resources on adding financial safety and new economic forecasts coming soon.

Right now I am completing a new audio seminar on financial safety (“the Financial Firewall program”) to help my students and readers learn how to keep their money and portfolios safe. The details will be available in the coming issues of the Prosperity Alert.



Paul Mladjenovic's new audio program, “Financial Firewall” which deals with financial & investing safety in the age of Chaos. Subscribers to the Prosperity Alert will be among the first to learn these proven, powerful financial strategies to protect your hard-earned money as economic risk and market volatility get worse. New subscribers will also get a free financial budgeting ebook.

Tuesday, May 11, 2010

Using the Same Economic Recipe Means Getting the Same Tragic Results

by Paul Mladjenovic
Copyright 2010. Paul Mladjenovic. All rights reserved.

As we all watch from a distance, Greece is crumbling under the weight of its own spending and statist profligacy. It is important to highlight why Greece is where it is and what it means for the United States:

Greece is in chaos and collapse because in recent years…

• Its government grew too big
• Its public unions demanded more and more resources
• Its private sector was (and is) being taxed more and more
• The government’s deficit is rising and rising
• The deficits were financed by more and more debt
• Higher and higher taxes resulted in less and less tax revenue
• More demand and less supply meant rising prices for goods and services
• The symptoms become chaos, violence, bankruptcy and collapse.
• Reality arrived in 2010.

Now, what are we doing RIGHT NOW in the United States? What is happening for the good ol’ USA?

• Its government is growing too big
• Its public unions are demanding more and more resources
• Its private sector is currently being taxed more and more
• The government’s deficit is rising and rising
• The deficits are being financed by more and more debt
• Higher and higher taxes are resulting in less and less tax revenue
• More demand and less supply will mean rising prices for goods and services
• If we are not careful, we will have chaos, violence, bankruptcy and collapse.
• WHEN WILL REALITY ARRIVE? Stay tuned…it is coming soon.

As all of us watch the federal government spend trillions and forcing the private economy to shoulder more and more burden, the ultimate results will be tragic.

It is time for financial safety. The next issue of the Prosperity Alert will cover simple strategies that should be considered by all…whether you are an investor or not. Buying gold and silver bullion is just one step but all of us need to take more precautions. The picture is not just “financial”…it will be much more serious than mere investments or money.

Watching Greece is personally quite painful because it is nothing more than a re-hash of the same voodoo economics that has destroyed many countries throughout history…including the land of my birth, the former “socialist paradise” of communist Yugoslavia.

Please understand that the recipe for economic collapse really requires two basic ingredients; The economic philosophy of John Maynard Keynes coupled with a “generous helping” of aggressive statism. Statism can range from welfare statism to socialism and right on up to the “high-octane” statism of communism and fascism.

In many essays I have strongly recommended “limited government” because that is what makes sense to a healthy economy. Government…the embodiment of statism…is a tremendous burden on the economy and it must be limited because government does not produce anything…it is a voracious, coercive CONSUMER.

If America is to avert national chaos, it will have to change the recipe as soon as possible. That recipe must start first with debunking Keynesian economics and dramatically shrinking government.

… Before reality hits with a vengeance.

Tuesday, May 4, 2010

Investing 101- Bull Market or Bubble? How to Know the Difference

By Paul Mladjenovic – May 4, 2010
Copyright 2010. Paul Mladjenovic. All rights reserved.

To build wealth (or to avoid losing it), it is obviously important to discern where to put your money and where NOT to put it. That discernment is greatly tied to understanding which securities or assets will have are experiencing bullish or bearish conditions. In recent years many investors were fooled into thinking that a particular asset class was in a bull market when in actuality it was a in a “bubble”, which is the precursor to a bearish decline.

For investors, a “bubble” translates into a temporary head fake of financial success followed by a painful bearish plunge. We have all seen them. The most obvious recent examples include the Internet & tech stock bubbles that popped in 2000-2001 and the housing bubble that popped big time in 2007-2008.

If investors had seen these bubble conditions coming, they of course would have reduced their exposure to that asset class and headed for the safety of the sidelines. But when a bubble is in its “pre-pop” stage it has all the looks and emotions of a torrid bull market that many are fooled into thinking will go on indefinitely.

For the record, I never bought Internet stocks during the late 1990s because I thought they were speculations and not true investments. And, I started warning about that inflating bubble in 1998.

As the Internet & tech stock bubble continued to inflate during 1999, I started to question my wisdom (sanity?) since those stocks kept rising while I looked dumb for avoiding them. Sometimes, bubbles can last a lot longer than we anticipate.

The same thing happened with the housing bubble that was inflating during 2002-2006. I told my readers and students that the housing bubble would definitely pop and be a very painful event. I made that forecast public in my national seminars and then on the Internet during 2003-2004.

In 2005, the housing bubble continued to inflate and…again…I felt (looked?) dumb. But I thought about a prudent rule when it comes to avoiding the wretched aftermath of an asset bubble that pops…


During those years (and still today), I always enjoyed the opportunity to ask someone in the financial industry (especially investment portfolio managers) the following question:


They should know…right?

I have also asked this question of students in my financial seminars. On average, the students gave more reasonable answers than most of the “financial experts”. For those of you that would like to know, here is the essential difference:


A bull market means that the price rise of a particular asset or asset class is driven by the natural, free market dynamics of buyers and sellers. As we know from “Economics 101” (or hope we know), when there are more buyers than sellers of a given asset (or product or service), all things being equal, the price of that given asset will rise. If there are more sellers, then of course the price of it will fall. In other words, “bull markets” are natural and healthy events that can easily last months, years or decades.

How about a “bubble”?

A bubble occurs when a normal bull market gains artificial stimulus typically from expansive credit and/or money supply infusions. This artificial stimulus usually comes from increased “injections” of new credit; new money creation which originates from governmental sources (such as a nation’s central bank or perhaps from other central banks). The artificial stimulus can also come when the central bank lowers (again, artificially) interest rates to levels below realistic market levels. It may also come from the government’s treasury.

The housing bubble had all the hallmarks of a bubble years before the public (and “experts”) finally noticed. The housing industry received massive injections of credit coupled with artificially low interest rates and artificially lax lending standards starting in 2001. These policies were aggressively applied by the Federal Reserve (America’s central bank), the US Treasury and by governmental entities (such as “Fannie Mae” and “Freddie Mac”). Of course, when plenty of “easy money” is chasing a finite supply of a particular asset (such as real estate), you will over-stimulate demand and cause prices to sky-rocket. And thus, a bubble is eventually created.

Bubbles may “feel good” for the early participants due to incredible price increases. However, as the great economist Ludwig von Mises observed long ago, bubbles may create an artificial “boom” but this euphoric event is followed by an equally jolting and painful decline…the “bust”.

For investors, it pays to be very wary of what looks like a “fantastic bull market”. Ask yourself if artificial stimulants are present (excessive credit, money supply increases, etc.).

A good example of an asset class that is currently in a bubble is U.S. Treasury bonds. Trillions of dollars (created) from the Federal Reserve and governments such as China have been pumped into these securities. These bonds have a very low, fixed interest rate and are very susceptible to dropping in value in the event of rising inflation and interest rates. More on this in future essays.

Are there any assets in today’s economy that are in a true bull market? Yes there are. A good example of a true bull market is precious metals such as gold and silver. Gold and silver have increased in value by over 300% since 2000.

Recently, a market pundit remarked that gold was a bubble, but this is not accurate. Why?

First of all, gold is not a bubble because there is no excessive credit or other artificial stimulant being pumped into the gold market. In fact, many central banks have even sold much of their gold holdings during the past decade. The bottom line is that there is no evidence that gold’s price has been driven higher due to government intervention.

But is gold in a bull market?

Gold is in a bull market given its performance and given the supply and demand fundamentals. According to industry sources, the worldwide supply of gold is tightening. Meanwhile, demand for gold is steadily rising as more and more investors and institutions see gold (and silver) as a proven store of value and hedge against inflation. In addition, gold is unique in that it does not have “counter-party” risk that is present in most paper assets (such as stocks, bonds, mortgage securities and mutual funds). Lastly, gold has had nine straight “up” years which certainly confirms its ability to retain and grow in value.

For more details about bull markets and bubbles and other events that affect your wealth-building pursuits, get the Prosperity Alert newsletter. You can get it free at

The bottom line is that investors need to keep vigilant about assets and keep asking questions about all the possible reasons why a particular asset’s price is rising (or falling). If you determine that artificial forces (beyond the scope of supply and demand fundamentals) are the main culprit to an asset’s price rise, then you can take steps to avoid the inevitable collapse that will eventually follow.

Monday, May 3, 2010

The Unfolding Danger: Greece Today…America Tomorrow?

By Paul Mladjenovic
Copyright 2010. Paul Mladjenovic. All rights reserved.

I have been analyzing economics and financial markets for over a quarter century and my analysis always stopped at “financial”. In other words, I do not follow trough usually past the financial theme. After all, as a certified financial planner (CFP), you usually think in terms of dollars and cents, interest rates and all sorts of financially-oriented concepts. I have always been concerned about the financial and economic impact of many different kinds of policies and events but in recent years I started thinking “outside of my own box.”

Perhaps what I find more unsettling that the financial impact of certain policies and events, is what happens afterwards. What is the social impact of bad financial/social policies?

After all, I don’t worry about the impact of good policies and good events since the impact is usually beneficial or at least not bad. However, it sunk in some years ago the following important observation:


When economies break down, you are left with people that have desperate needs. This was true in my former country Yugoslavia during the 1990s. It was true of the former Soviet Union during the late 1980s. It was true of almost every country throughout history.

As you watch Greece today, you see disintegration right before your eyes. In recent years, Greece’s government kept spending the country into today’s resulting chaos (think “Keynes”). The country may or may not be “bailed out” by the European Union. Of course, bailing out Greece means that other struggling countries will be forced to come up with the money to do so. What condition will those countries be in? After all, they are not in good shape today.

The next observation is also a very important one when we talk about heady topics like “economic collapse” and the resulting social disintegration:


That’s right…excessive and growing government is the #1 reason why economies collapse. Throughout history, various groups of people petitioned the government for money and assistance because they think that there is some endless pot of goodies called “government money”. Government does not have its own money…it only has what it can extract by force from others (taxes). In the case that it prints money, this is also not a “freebie”. Printing money leads to inflation and inflation is nothing more than an insidious stealth tax than consumers ultimately pay. Runaway inflation also leads to a currency collapse.

Throughout my life, I have always strongly called for limiting government. Yes…the main reason is that I have seen over and over again, the dangers of growing or unlimited government. Whether you call it “socialism” or some other “-ism” like communism or totalitarianism, it is still in the general realm of “statism” and this is something that must…MUST…be limited. Not only for the good of society but also ironically for the good of government itself.

The “good-hearted” among us like to see the government be there in those cases when individuals need a helping hand and this is fine. The problem is when the situation grows out of control. At that point, no one gets any help. It becomes desperate as government itself becomes a casualty of its own excesses.

Is America next? If America continues on its current path, the answer is a sad yet resounding one…YES.

For America’s sake, it needs to reign in government at all levels. It needs to drastically cut spending, reduce taxes and scale back the blizzard of regulations that are choking economic activity at all levels.

The sad truth is that the people in power now are not doing this at all. They are in fact escalating their efforts with massive trillion-dollar spending, rising taxes and producing more bureaucratic burdens for us.

Just look at the healthcare reform and the financial reform acts. These monstrosities are thousands of pages of inane, confusing and counterproductive bureaucracy with lots of economic harm and very little good.

As we face the abyss up ahead, we have an overzealous government at the driver’s seat and it is accelerating forward. Sadly, our short-sighted politicians don’t seem to care. God help us!

What we can do as individuals…

1) Keep up your individual efforts to accumulate physical gold and silver and get your “financial house in order”. Just because the government is pushing us toward bankruptcy and chaos, that doesn’t mean that we should do the same. Keep managing your costs, lowering your debt, etc.
2) As I have mentioned in prior essays, support those candidates and policies that lower the size, scope and reach of government (at all levels).
3) Keep building up your network of friends and allies. That will come in handy later on.

Also, take a moment to sign up for the Prosperity Alert newsletter since I will be adding more resources and strategies for coping in today’s economy. In a forthcoming issue, I will make some economic forecasts to keep you “ahead of the curve”. Take control and …take care!

Taking the right steps now will help you and your loved ones get to the other side with greater safety.

Monday, April 26, 2010

The Epic Economic Battle of Our Time

By Paul Mladjenovic
Copyright 2010. Paul Mladjenovic. All rights reserved.

As we look at the headlines that are swirling around us…

“Potential for financial system crisis is still feared”
“Greece has continuing economic problems”
“The Federal government is considering Value-Added-Tax”
“California fighting off bankruptcy”
“Federal government bureaucracy growing fast”
“Unemployment is persistent difficulty for economy”
(…and so on)

These seem to be all disjointed headlines. A patch of problems here… a crisis over there… and some difficulty over here. Worry and concern seem to be everywhere and for good reason. Prosperity seems as unreachable as the stars.

What will hopefully dawn on people is that there is a common thread throughout all this upheaval. It is really the epic economic battle of “Freedom vs. Statism”.

Statism is the idea that “the State” should be more and more involved in the economic and personal lives and businesses of general society. Statism is the growing use of government power and bureaucracy in an attempt to force certain economic outcomes. More statism is about more coercion, control and confiscation ostensibly in an attempt to allegedly “solve economic problems”. We see statism in obvious and not so obvious ways. We see growing statism at the federal level and also at the state and local level. We have seen it in the prior presidential administration and we are definitely seeing it in the current one.

There is the statism that you see…

• More federal involvement in the auto industry, the banking industry, Wall Street, etc.
• More government control, coercion and confiscation in the healthcare industry
• More state taxes and more state spending followed by yet more taxes.
• More government debt in places ranging from California and Illinois to Greece and Spain.

And then there is the statism that you don’t immediately see…

• inflation and currency crises due to government mismanagement of the currency.
• The multi-trillion-dollar growth of unfunded liabilities (such as Medicare).
• The back-room deals for financial firms that will end up costing taxpayers dearly.

I am sure that you can come up with your own examples. The point is that the “big picture” tells us that all of this is part of the tapestry of the larger battle that we should be aware of; the one between freedom and statism.

In the economic world, freedom is a reference to the “free market”. The free market is simply peaceful, voluntary exchange between buyers and sellers. For a nation, it is millions of people and businesses trading value for value in a voluntary way. The exchange is typically money for goods and services but the hallmark of this exchange is that it is about peaceful exchange…that is the essence of a free market…FREEDOM.

The net result of this free exchange is economic growth. The buyers get goods and services while the sellers get paid for their cost of production plus a profit. The profit, then, is utilized for growth whether we realize or not, whether we acknowledge it or not. The bottom line is that this activity is about PRODUCTION. Production is a critical part of a healthy, growing economy. Without the production of goods and service, what consumption can there be?

In that voluntary exchange, profit is the crucial key to growing that business in particular and the economy in general. Profit is the catalyst for job creation, innovation and business expansion. The primary beneficiary of this private growth and expansion is the government. As profits grow and jobs are created, this ultimately results in greater tax revenue for government. But what if government…the state…grows faster than the economy’s ability to sustain it? You must remember that statism and government is not merely paperwork, taxes, laws, regulations, bureaucracy and what we see. Keep in mind that statism (as embodied in government) is CONSUMPTION BY FORCE.

The embodiment of statism (government) siphons its resources by force from the economy. If it is kept at a reasonable (low) level, then both the free market (the economy) and the government can co-exist just fine. If government is kept at a reasonable level, general prosperity is relatively easy to achieve. However, this is not the case today. Far from it!

I came from a now-defunct communist country (the former socialist paradise of Yugoslavia). My family and I learned that painful economic lesson all too well. When you tear away “communist rhetoric”, what you have is an economy totally run by government bureaucracy where “consumption” is king and “production” is basically decimated. What you had left was a country where the general populace was hungry and constantly in need of the basics of life. You had an economy that was top-heavy in “wants and needs” unfulfilled and totally lacking in the means (production!) to fulfill those wants and needs (translation: Poverty!)

The Yugoslavian government thought that an easy way to fix the problem was simply to flood the economy with “more money”. After all, the government (statism) was in charge of printing money. Surely you can make everyone better off by printing trillions of “dinars” (the currency at the time) and give the economy some good old-fashioned stimulus…Right?

Wrong. It didn’t solve the crisis of production. Of course, what it did “produce” was hyper-inflation. By now, the people had enough. Social chaos and conflict ensued and this led to civil war and total breakdown. Yugoslavia was no more by 1994. At the heart of all this was a case of statism gone too far.

The lesson is that freedom and a healthy, thriving free market is critical…CRITICAL…to the long-term success and viability of an economy. And yes…it is even critical for the government’s own well-being and for the well-being of those that are dependent on what it offers.

What worries me is that this lesson is being ignored right now in America. I can’t change that. But I can certainly inform some people about what personal strategies would be needed. You can stay informed by getting a free subscription to the Prosperity Alert newsletter.

For more immediate information on specific strategies, you can view my recent essays or just take note of a few points (among others) that I remind my readers and students about:

1. Keep accumulating gold & silver physical bullion. Inflation and currency troubles are on the way so diversify away from potential currency issues (remember that currencies are managed by government).
2. If you are in a high-tax, high-spending state (such as California), explore the feasibility of moving to a lower-tax, limited-government state.
3. Assess your lifestyle and situation and find out where you are vulnerable when it comes to “the necessities of life”. I will cover more of this topic in future issues of the Prosperity Alert.
4. Regardless of your party affiliation, vote for lower taxes and limited government….the country depends on you to make the right choice!

I guess the amazing thing about this conflict that I write about…”Freedom versus Statism” is this:
If freedom wins, that is good for both freedom (and prosperity) and government as well. However, if statism wins, that would be bad for freedom in the short-term but it would ultimately be bad for government in the long-term.

The question is… will we learn this lesson the easy way… or the hard way?! Stay tuned…


Paul Mladjenovic, CFP is a financial seminar leader, author of Stock Investing for Dummies and the editor of the Prosperity Alert newsletter. FREE BONUS to new subscribers: Get a free 56-page ebook on budgeting to help you gain control over your finances! The tips and strategies in this ebook are more needed than ever! Get it today by subscribing to the Prosperity Alert.

Thursday, April 22, 2010

Raising taxes is stupid, stupid, STUPID…and what to do

By Paul Mladjenovic
Copyright 2010. Paul Mladjenovic. All rights reserved.

The rumblings coming out of Washington and out of many state capitals is about growing deficits and many politicians and commentators are talking about raising taxes. The talking points include…

1. Many states are talking about raising tax rates to increase their revenue.
2. Unless renewed, federal income tax cuts are set to expire Jan’11: Higher taxes next year.
3. More politicians are talking about instituting a European-style VAT tax.

Of course, many of the politicians and pundits will find some bonehead economist that either thinks raising taxes is a “good idea” or a “painful necessity”. What nonsense! Any economist that thinks that raising taxes in the midst of the worst economic conditions in our lifetime is a good idea should be fired for incompetence. This “economist” is better off in a new job where he can say things like “Would you like fries with that?”

All the government deficits in our country (Federal, state, etc.) have not been due to a lack of taxation.


Government at every level gets sufficient revenue to run its necessary operations. The problem is that politicians spend and spend and spend to increase their elect-ability. They spend money to curry favor with public unions, influential corporations and many that simply want the fruits of other people’s labor. Look… government officials over-spend money freely because it is NOT their money. They over-spend because money from taxes does not come voluntarily…


When politicians run deficits, they have no constraints or incentives to shrink spending. Why should they? If they have a revenue shortfall, they know all they need to do is to FORCE TAXPAYERS TO PAY MORE.

You now come to the biggest difference between a business and government. Business is a “voluntary” entity; if a business wants your money, it must please you enough so that you VOLUNTARILY give it money. Business must provide goods and services to survive and make a profit. Consumers are not forced to buy these goods and services from any particular business; remember that there is choice and competition. In the free market, the one paying has the greater power.

Government, on the other hand, is a “coercive” entity. In government finance, the one paying to support the government (the taxpayer) does not have power. If a taxpayer gets frustrated and feels that taxes are too high…well…too bad! The government doesn’t care and they don’t have to care because…again…the money they get is through FORCE.

The problem for government is that at the personal level, taxpayers are not stupid. They will not sit idly by and willingly get plundered. Taxpayers will find legal (and sometimes illegal) ways to hold on to the fruits of their labor. The most common responses that over-burdened taxpayers do are…

1. Employ tax-fighting strategies and hire experts to decrease their tax burdens.
2. Work less!
3. Produce less!
4. Leave! In recent years, high-tax states have seen a growing number of taxpayers go elsewhere.
5. Fill in the blank___________________. People can get creative with tax avoidance.

This is where the stupidity of tax increases becomes obvious to all. Tax increases unleash lots of unintended consequences. People spend more of their time and effort figuring ways to escape punitive taxes rather than using the same time being productive and innovative in more sensible economic pursuits.

Government officials keep seeing time and time again that increasing tax rates does NOT result in more revenue. These near-sighted officials don’t realize that higher tax rates punish economic growth and job creation. When businesses and employers are struggling with high tax rates and stringent compliance regulations and paperwork burdens, they don’t have the ability to hire (or keep!) employees. Money that is forcibly shifted from the private sector to the public sector only makes the revenue situation worse, not better for government.

When you hurt the private sector, you are killing the golden goose. A or struggling or shrinking private sector ultimately means less revenue for government, regardless of how high tax rates go. It becomes a vicious cycle. The end result is that government deficits become unmanageable and sources of tax revenues are sucked dry and then there is no choice but to reduce the size of government…either by consent or by the force of financial collapse. Had the reduction of government happened much sooner, much economic pain would be avoided.

Keeping tax rates low is not just good for taxpayers. Ultimately it is good for government as well. In turn this is good for those dependent on government assistance. It is no coincidence that most of the very-high tax rate states have the deepest deficits while most of the states that are in fairly good shape have relatively low taxes. A good example of this is the comparison of California and Texas. California has high taxes and high spending and it is in danger of collapse. Overall, Texas has low taxes yet it is in good shape given today’s economy.

The bottom line is that raising taxes…
• Does not increase revenue
• Is not moral, ethical or practical
• Does not make any economic sense
• Is bad for the private sector
• Makes matters worse…not better.

Seriously, how can you grow and sustain a prosperous economy if you keep taking more and more money from production (the private sector) and forcibly shift it to consumption (the public sector)?

In a word, raising taxes is STUPID. But until common sense returns to Washington and the state capitals (don’t hold your breath!), we as consumers and taxpayers must deal with it.

What to do…
1. Find ways to cut your taxes. I have recently set up to address this. I will keep adding tax-fighting resources and I will alert folks through

2. Start a home business. A home business is a great way to save big on taxes! This is why I have taught a class on starting a home business for over 20 years since I think that a home business is a powerful financial planning & wealth-building tool. You can find my class at There are other ways, of course, but starting a home business can be easy and inexpensive to do.

3. Vote for low taxes. I don’t care which party or person you choose, just make sure that on the singular issue of government fiscal policy that they are STRONGLY in favor of lowering taxes and government spending. The National Taxpayer Union (NTU) is a good place to start and they are at

A good example of a pro-taxpayer, pro-smaller government candidate is one of my favorite real estate experts, David Corsi. I have known him for over 20 years and guys like him are badly needed in the rat-infested halls of Congress (Dave’s site is it out).

The NTU compiles more information on what politicians and candidates are doing in regards to tax matters. Get their free email alerts. Be informed for the coming election.

Look… it is crisis time for our nation. The economy is struggling big time yet…federal and state governments are lavishly spending at mind-boggling levels…the worst in our history! Economic pain is certain now.

Even if tax rates were raised to 100% and they also pulled out the gold and silver fillings in your kid’s mouth, they would STILL be trillions in the hole! The profligate and irresponsible spending has gone beyond disgusting and raising taxes will NOT help government but it definitely WILL HURT the economy and those that support government…millions of honest, hard-working taxpayers like you and I.

It’s an election year… tell them “NO” to raising taxes.

Wednesday, April 14, 2010

The Fatal Flaw of Democracy is HERE and NOW...and What to Do

Few things summarize America’s economic plight today as much as this centuries-old quote:

“A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing…."

No one is exactly sure who actually said it and if it is an accurate quote. That is irrelevant. The important point is that the quote resoundingly points to the fatal (economic) flaw of democracy. This fatal flaw should be evident to all as they watch today’s “big picture”.

Our current deficit (and future deficits) now exceed $1 trillion. The government’s growth as a voracious consumer of America’s resources is alarming. Additionally, most state governments are spending beyond the citizenry’s ability to pay for it. Yet, it is also much of the citizenry that voted for this dangerous profligacy!


Our country is at the point that it can not sustain the government’s out-of-control growth. It is indeed a massive tragedy that is now unfolding and millions that have grown dependent on government largesse are now being set up for tremendous economic pain. How may they react?


I have often written and lectured about how government causes much more economic pain than it has ever relieved. The juggernaut can not be stopped from wreaking its havoc on our society and even the best election results in November’10 will at best slow it down. We have to treat the coming meltdown as a hurricane:

We can not stop it. We can only prepare ourselves and the people we care about.


1. Become as self-sufficient as possible.
2. Reduce your exposure to the general stock market.
3. Accumulate physical gold & silver.
4. If possible, move safely away from major cities.
5. Lower your living costs as much as possible.
6. Increase your savings.
7. Start a pantry and have extra necessities on hand (just in case!)
8. Learn about (and apply) ways to secure yourself, your family and your property
9. Develop strategic relationships with others. Gain more friends and allies
10. Add more sources of income (such as your own home business).

The list is actually longer but this is a start. Look…I am not a “doom and gloom” guy. I enjoy life and I am grateful for what is in my life…a wonderful family, good friends and a business that I enjoy. But I also have to view the world, the economy and the unfolding events REALISTICALLY.

Look…I can write some of this from my personal experience and background. My former country (socialist Yugoslavia) collapsed into social chaos in 1994 after extreme economic disintegration. Places like Greece certainly seem headed that way. Our economic house is not immune to Washington’s trillion-dollar wrecking ball.

Think about it…If millions of people are dependent on trillions with debt that can’t possibly be paid, what will logically follow? What does history tell us?

These are extraordinary times that require extraordinary planning. Therefore, the prudent thing to do is…


More on this as I continue to prepare educational & informational programs to help my students and readers do some prudent planning (financially and otherwise). A good place to start is at where I have many information-packed seminars on business & financial matters.

Some good specific programs for your consideration are…

• Learn how to generate your own income with the Home Business Goldmine audio seminar.

• Learn about safe investing and financial planning in the $50 Wealth-Builder audio seminar.

• The newest program is the full audio seminar Profit from the Commodities Super Boom.

My webmaster is hard at work to help make these (and other) programs available as reseller opportunities too so that you can make money along with me. Stay tuned for more details later.

In a few days I will email to my Prosperity Alert subscribers some information on how to save on your taxes for 2010 (it is too late to make changes for your 2009 taxes but there is plenty you can do with 2010!). Stay tuned for that as well.

In the meanwhile, do the right thing by the people you love. When you get a chance, I would most appreciate your thoughts on what type of educational programs that you would like to see me do for you. You can email your suggestions at Thank you and be well!

Saturday, March 20, 2010

Who will Bail out the Taxpayer?

The federal government has been on the bail-out warpath in recent years. They have used taxpayer money to bail out auto makers, unions, banks, Wall Street brokerage firms and other entities. They have (and are) using taxpayer money to the tune of TRILLIONS for state governments and for massive social & military spending. The craven polticians and bureaucrats in Washington have no problem with historic, profligate spending that is heading toward mind-boggling and unsustainable levels.

The spending is reaching obscene and criminal highs and it is making the public very nervous. One of the biggest reasons for the tea party phenomena has been the alarming trillion-dollar growth of the federal government. Most of the state governments are also spending beyond their means.


Tax-payers across America are tapped out. As of this moment, our federal government is on track to make matters much worse (if that is possible!).

Healthcare reform is scheduled for a vote. If it passes in its current state, it will FORCE taxpayers to pay more taxes. Much more! Since these taxes would be enacted immediately, the painful effect on an already weakened economy will be severe. WHO WILL BAILOUT THE TAXPAYER?

In addition, federal taxcuts enacted during 2001-2003 are scheduled to expire in January 2011. WHO WILL BAILOUT THE TAXPAYER?

Our founding fathers thought that "A person has the right to the fruits of one's labor" was so obvious that they didn't bother to expressly include in the Constitution. How tragic! they had no idea how rapacious and profligate our politicians would become.

Today, the most trampled "right" in America is the right to the fruits of one's labor. But what will happen when those "fruits of one's labor" are taxes away? What is left? Who will be left to pay for all the spending?

History tells us very clearly:
Every nation that has experienced a financial collapse did so because its government grew beyond the ability of its citizenry to pay for. They taxed too much, they borrowed too much and they spent too much.

Yes...much of it was done "with good intentions". In the past, those good intentions paved a path to hell. Today, however, that path to hell has become a super-highway.

Your Personal Strategy:
Find ways to cut your taxes. For decades I have taught my students that a home business is an economic necessity. I think that everyone should start a home business to add another income source to their financial situation but the second reason is that a home business can help you save thousands in taxes.

There are lots of good tax guides and you can CLICK HERE here to find one of my favorites.

In the April 2010 issue of my newsletter, PROSPERITY ALERT, I will cover some ways to save thousands on your taxes. Get a free subscription HERE.

I wish all of you continued success...

Paul Mladjenovic

Friday, March 5, 2010


Today the federal government released its unemployment report for February 2010. The official unemployment rate held steady at 9.7%. Some economists welcomed this as a sign of a stabilizing economy. Perhaps someone should tell these economists that the official unemployment rate is misleading. It is a sign of horse crap. Why?

The official unemployment rate LEAVES OUT those folks that are discouraged and have ceased looking for work. It also leaves out those that are “under-employed”; those that no longer have full-time jobs but have settled for part-time work. In other words, the official unemployment rate…


The moment an unemployed person drops out of the job search process because they are discouraged and have ceased looking, they are no longer officially counted as unemployed. They end up in a more obscure (but more accurate) statistic referred to as the “U-6” unemployment rate. In the same report, this down-played rate is over 16%!

Some of you may remember an essay I did a few years ago where I criticized the “core rate of inflation” which was an official government statistic which tracked inflation but totally left out “food and energy” from its calculation. Some humorously jabbed the core rate of inflation and described it as “the rate of inflation…excluding inflation”.

The statistical wizards at the federal government have done to unemployment reporting what they did to inflation reporting. It is time for some observers to call the official unemployment what it should be called: “the core rate of unemployment”. That way the satiric observers among us can describe the official unemployment rate as “the rate of unemployment excluding unemployment”.

Personal strategy: Unemployed or not, I think that everyone should their God-given talents and abilities to start their own business. It could be home-based and done in your spare time. Don’t just diversify your investment portfolio, diversify your time and effort with active strategies for earning money. Take a look at the audio seminar Home Business Goldmine which you can download instantly at

If you have lost your job or you worry about your current job, you have the ability to generate income. A part-time home business is a great way to start. I am in the process of creating both free and low-cost resources to help folks earn money so feel free to stay informed with my developments at