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!