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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Wednesday, July 21, 2010
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 www.RavingCapitalist.com. 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”.
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 www.RavingCapitalist.com. 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 http://www.SuperMoneyLinks.com 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.
-------------------------------------
COMING SOON!
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.
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 http://www.SuperMoneyLinks.com 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.
-------------------------------------
COMING SOON!
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.
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…
IT IS BETTER TO GET OUT A YEAR TOO EARLY THAN A DAY TOO LATE!
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:
WHAT IS THE DIFFERENCE BETWEEN A BULL MARKET AND A BUBBLE?
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 IS A “NATURAL EVENT” DRIVEN BY FREE MARKETS.
A BUBBLE IS AN “UNNATURAL” EVENT DRIVEN BY GOVERNMENT.
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 http://www.SuperMoneyLinks.com.
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.
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…
IT IS BETTER TO GET OUT A YEAR TOO EARLY THAN A DAY TOO LATE!
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:
WHAT IS THE DIFFERENCE BETWEEN A BULL MARKET AND A BUBBLE?
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 IS A “NATURAL EVENT” DRIVEN BY FREE MARKETS.
A BUBBLE IS AN “UNNATURAL” EVENT DRIVEN BY GOVERNMENT.
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 http://www.SuperMoneyLinks.com.
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:
ECONOMIC DISINTEGRATION LEADS TO SOCIAL DISINTEGRATION
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:
THE #1 REASON WHY ECONOMIES COLLAPSE IS BECAUSE GOVERNMENTS
AND THEIR SPENDING (DEBT AND INFLATION) GROW OUT OF CONTROL.
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.
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:
ECONOMIC DISINTEGRATION LEADS TO SOCIAL DISINTEGRATION
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:
THE #1 REASON WHY ECONOMIES COLLAPSE IS BECAUSE GOVERNMENTS
AND THEIR SPENDING (DEBT AND INFLATION) GROW OUT OF CONTROL.
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.
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.
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