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10 Reasons Why This Is An Excellent Time To Finish Your Basement

Mon, 13 Jul 2009 14:00:00 GMT

They always say the best way to invest is to buy low and sell high, even though that means buying and selling at exactly the opposite time that everyone else is.

The same idea holds true with other investments like building a house or finishing your basement. A few years ago, everyone was building and it was difficult to resist the trend, but if you did than now is the time to take advantage the many skills and suppliers that were created during the housing boom and have yet to go out of business.

To take advantage of this opportunity, a few weeks I hire a contractor to finish the basement of my home and here are some of the things I’ve learned.

10 Reasons Why This is an Excellent Time to Finishing Your Basement:

1. Availability of skilled carpenters

The housing boom created a training ground for carpenters to sharpen their skills and the housing correction has caused only the very best carpenters to remain in business. This is perhaps the best time to take advantage of highly skilled carpenters that will be difficult to find in a few years. Many carpenters will change careers and will no longer be available. The few that stick it out will be expensive as they raise prices get back into the black.

2. Projects can be completed very quickly

The housing contraction has created a glut of skilled carpenters with little work, making them available very quickly. A typical project can be completed in half the time because over supply of skilled workers. Also city inspectors, which are usually half of the delay, are much more available.

After one week, my project had run through several subs including the wood framer, electrician, plumber, heating installer, sheetrock installer and the tapers were half done, plug two inspections very completed. On top of that, the cabin builder, flooring installer and ceiling installer all stopped over to ask when they are scheduled to complete their part. This project is moving alone much faster than I anticipated.

3. Willing to work with you

Contractors are much more willing to work with you on special situations. For example, if you brother or your friend is a electrician or plumber, contractors are much more willing to work with your friend rather then their sub-contractors because they are must more desperate for your project.

4. Lower wages, 20%

In talking with my contractor, he said that many of his sub-contractors have already dropped their prices two or three times, about 10% each time. That means that the labor part of my basement project is running about 20% cheaper than it would have cost me just a few years ago.

5. Lower material prices, 20%

Material costs are also down about 20%. Many of the materials that are used in new homes are in abundance because of the many manufacturers that were built up during the housing boom and are still over producing based on the drop in demand.

Everything from wood studs, plywood, sheetrock, windows, trim, carpet, flood tile and cabinets are available in abundance. A few years from now, many of these manufactures will stop producing and these products will be expensive and in short supply.

6. Easy credit is still available

Because of the banking bailout, thousands of banks are still in business and are under a lot of pressure to lend people money towards new projects. Home equity loans are still very easy to get with virtually no hassle at very low interest rates, although I would be careful not to get a loan based on prime interest rates because they are likely to climb for years to come.

7. Low interest rates, 4-6%

Another option is to consider refinancing your home while interest rates are still low and using the money to remodel your home. Of course many have already extracted and spent the equity in their home during the housing boom and are now underwater without any money to extract, but if you are one of the few, this is a good option because inflation is going to reduce the value of your loans so now is the time to borrow as much as you can and invest in something that you can enjoy.

8. A good way to get rid of your dollars

This is also a good time to get rid of your cash if you have a lot of cash that you pulled out of the market during the market correction last year. Cash is going to lose value sitting in a CD or bank savings account as inflation speeds up. But don’t remodel with the intention of making money by selling your home. That is not going to work because housing is at best going to level off over the next several years as inflation takes hold.

9. Property taxes will not increase very much for several years because your property value will not increase

I don’t think property taxes will be increasing very much for several years even with the additional upgrade to your home because the actual value will not increase very much until the million+ homes on the market are sold. That is likely to take years. Therefore the city assessor will not be able to increase your property taxes by very much, in fact many cities will be forced to lower property taxes.

10. Cheaper than moving into a larger house

If you have an unfinished basement and are looking for more space the other option is to move into a larger house. But, I think that is going to be much more expensive than finishing your basement, when you add the purchasing, financing and moving expenses.

Bonus: Use the additional space to expand or start a home business

Another great advantage of the additional space of finishing your basement is the opportunity to expand or start a home business. Having your own business puts you on track to someday become financially independent from your job.

I plan to use one of the additional rooms of my finished basement to expand my business and perhaps hire an intern.

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Minimum Wage To Destroy the Economy and Millions of Jobs, Should Be Dropped

Fri, 10 Jul 2009 16:47:00 GMT

The federal minimum wage is set to increase from $6.55 to $7.25 on July 24th.

This change will raise hourly wages for millions of workers in 29 states that have minimum wages lower than $7.25 an hour. This amounts to an increase of 10.7%.

Minimum wage is always destructive to the economy it’s just harder to recognize when the economy is growing. But it’s going to be devastating to the economy in a deep recession.

This increase leaves businesses who employ millions of low skilled workers with two options: 1) Increase prices or 2) layoff more workers - inflation or more unemployed.

The very concept of minimum wage is support by the public as a way to force businesses not to take advantage of them and protect their jobs. But the results are just the opposite. Minimum wage cause employers to replace workers with computers and machines and labor from other countries.

Here Are Some Other Effects of Minimum Wage:

Reduces Options for ‘on the Job Training’

Minimum wages reduce the options of on the job training and forces workers to attend collage for additional skill training. Many skills can be learned on the job. For example, when I was 14 I started working at an auto body shop. My job was to sweep the floor, clear the paint guns and cut up the cardboard boxes. I started at $1 per hour.

Over the several years that I worked there, I learned the skill of auto body and how the entire business operated. If the owner was forced to pay me more money he probably would never have hired me and I would have never learned that skill.

My only option for learning that skill would have been attending a community college and paying several thousand dollars for the training. Millions of workers who are now looking for new skills could be gaining those skills on the job rather than having to borrow money (with government loans) to attend a college – if minimum wage was dropped.

Increases Crime

When I started my first job at 14 years of age, I had a lot of energy and time on my hands. That job saved me from getting into trouble by giving me something to do. Without work and bills coming due, many will turn to crime as the recession deepens. Minimum wages increase crime.

Reduces Customer Service

Low skilled workers increase customer service. Wouldn’t it be nice to get a live person on the phone when you call a business or service instead of an answering machine or a computer? How about someone to pump gas in your car? How about help finding something in a retail store or another waiter to fill your water?

Minimum wages reduce customer service as employers are forces to replace low skilled tasks with computers and automation machines – or just less service. For the same money, you get less service and fewer options for service.

Reduces Productivity, which Reduces Wealth

There is only one way to increase wages and that is to increase productivity. Minimum wages gives foreign manufactures a competitive advantage and allows them to sell products at lower price then our manufactures. This increases outsourcing an increases foreign debt as our exports drop below our imports, causing a negative trade deficit.

Each month that we have a negative trade deficit is another month that wealth is being transferred out of our nation. Minimum wage in bleeding our nation of wealth.

Increases Government Dependent and Assistance

The millions of workers that cannot find jobs because employers cannot hire at minimum wages without losing money, are forced onto government assistance. This further compacts the problem as each day these workers sit idle, is a day they are not productive and their skills become less valuable.

If minimum wage was removed, millions of workers would still be employed – at lower incomes, but at least they would have work to keep making their mortgage payments for buying food until they find other higher paying jobs.

Minimum wage is just another form of government central planning of the economy. No one in government is smart enough to adjust wages in the economy; just an Alan Greenspan wasn’t smart enough to manage the economy from the Federal Reserve.

The free market is the only system that is capable to set labor wages and if the government was willing to trust the market, there would be no minimum wage. Controlling wages is again a power grab and is used by politicians to gain votes for labor unions that want to protect there high wages – even at the expense of millions of lower paying jobs.

Forcing Higher Wages on the Global Economy is Impossible

Minimum wage in an attempt to force employers to pay higher wages to their employees, but in a global economy that is impossible. Wages are competitive on a global scale. Forcing wages higher causes unemployment or higher prices. Both end up causing lower wages.

Unemployment leads to an increase in employment in foreign nations, which drives up foreign currencies and decreases the value of the dollar. Therefore, when you get a job at the forced higher wage, the dollars you earn are worth less value – in effect resulting in a lower wages.

Higher prices lead to a decrease in exports, driving a higher trade deficit and a lower demand for the dollar, having the same effect – resulting in a lower wages.

It is a fantasy to believe that federal minimum wages can increase the wages of workers.

Let Wages Drop To $3

If the politicians realized what they are doing to the economy, they would completely drop the federal minimum wage. This would put millions of people back to work, off the streets and off government assistance. It would increase productivity, manufacturing output, drop prices, increase exports and reduce the trade deficit.

Eventually, when the government gives up and turned back to the free market for help in the deepening recession (and the sooner the better), low skilled wages may drop to $3 per hour. That is exactly what we need to give the nation a chance to compete with foreign labor and strengthen a weakening currency.

The sooner the government stops its failed attempts are controlling the economy with burdensome policies like minimum wage the sooner the economy can begin to recover. Hopefully, that doesn't take another ten years or we will end up with a decade long recession.

The additional economic growth would perhaps save the dollar from its coming collapse.

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Political Humor: You Asked for Change

Thu, 09 Jul 2009 14:02:00 GMT

The other day I found a humorous little note floating around on the Internet and I just keep thinking about how realistic it is becomming that I had to share it.

This note is a little unfair because the roots of the economic collapse can be traced back to Clinton and Alan Greenspan, but it does provide a solution to the budget cuts that every business is facing.

“LETTER FROM THE BOSS.....

As the CEO of this organization, I have resigned myself to the fact that Barrack Obama is our President, and that our taxes, and government fees will increase in a BIG way. To compensate for these increases, our prices would have to increase by about 10%.

Since we cannot increase our prices right now due to the dismal state of the economy, we will have to lay off six of our employees instead. This has really been bothering me, since I believe we are family here and I didn’t know how to choose who would have to go.

So, this is what I did. I walked through our parking lot and found six ‘Obama’ bumper stickers on our employees’ cars and have decided these folks will be the ones to let go. I can’t think of a more fair way to approach this problem. They voted for change; I gave it to them.

I will see the rest of you at the annual company picnic. "

Before the election, I questioned how dangerous Obama could be for the economy, but the public was willing to take the risk to make history- and history is what we are making.

The economy is desperate for a smaller government with lower taxes and a positive monthly trade balance. Instead, we have a government that is out of control while businesses continue to shed jobs by the millions.

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Commercial Real Estate To Plunge, Construction With It

Wed, 08 Jul 2009 16:07:00 GMT

I thought the real estate meltdown was contained to sub-prime mortgages, according the Ben Bernanke in May of 2007.

Somehow the real estate meltdown has now reached prime mortgages. Prime mortgages are the least likely to default, yet prime mortgages have reached record high defaults.

Business closings have also increased the available office space and that has pushed down the prices of renting office and retail space since the beginning of the year.

Today I read that ‘Apartment Vacancies in U.S. Reach 22-Year High’

“The second quarter job losses cut tenant demand and more units came to market.”

“Vacancies climbed to 7.5 percent from 6.1 percent a year earlier, New York-based real estate research firm Reis Inc. said today. The last time landlords had so much empty space was in 1987, when vacancies reached 7.6 percent as the Standard & Poor’s 500 Index plummeted 23 percent in the last three months of that year. “

Where Are People Living?

For a long time, the theory that I’ve been hearing it that apartments are going to be great investments because people can no longer afford houses and many will be looking to rent apartments.

That logic doesn’t seem to be holding true. With a million+ homes for sale and apartment vacancies at record highs, then where are people living?

What is happening is that people are moving into smaller living spaces. Thirty years ago the average family home was 850 square foot and that number climbed to about 1150 square foot in the last decade. Now people are being force to live in less square footage then they have been used to.

People are moving in with relatives, parents and friends as they look for jobs. Children are moving back in with their parents and bringing there families with them.

A generation of spenders is looking to the baby boomer to live with, especially the ones who have their home paid off. The idea of paying off your house verses investing in the stock market seems to be the best investment advice that nobody was giving. This recession is re-educating the next generation about the value in paying off your house.

Way Too Many House and Apartments

The reason we have too many houses on the market is because of the sub-prime mortgage correction, created by the Federal Reserve with low interest rates and government monopoly giants Freddie Mac and Fannie Mae.

This is the clear reason behind the millions of homes that are in foreclosure, flooding the market and collapsing the prices by 50%.

Few people realize that the governments' failed economy planning has also created a similar problem with too many apartments. Many of the apartments that were built in the last few years, were built primarily because interest rates were so low and people had to live somewhere.

But the market is already flooded with apartments and the climbing unemployment rate means customer demand will continue to decline. That means that even if you can build an apartment at zero percent interest, you will still have trouble created a positive cash flow.

Construction is about to take a turn for the worst as rising unemployment will put more downward pressure on rents. All US real estate looks to me like a bad place to invest for the next several years.

In a few years the only construction projects that will be underway will be government funded - with borrowed money of course. The only other construction that will remain will be maintenance and remodeling, but even that will be slow and crowded with competition.

Many construction workers will find this recession too deep to hold on to their careers.

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The Most Pragmatic Way to Deal with the Economy is to be Realistic

Mon, 06 Jul 2009 21:52:00 GMT

True, the economy is getting worse everyday and the end of the recession is an illusion.

The most pragmatic way to deal with the economy is to be realistic, but rational decisions can only be made with stable and predictable cash flows, coupled with healthy economy indicators.

The first thing to realize is that the booming economy was a phony. But that assertion leads to uncertainty, because it leads to the question of what is the real economy?

If the economy was a phony, then consumer demand was phony. And if consumer demand was phony, and all major economic indicators (like the CPI, GDP) that are based on consumer demand were phony. And what is the real economy? What is the real consumer demand?

The answer to that question is the answer to your business survival. But without stable prices and predictable incomes nothing seems to be certain.

My company is reluctant to create projections of the rest of 2009 because of the uncertainty in the market. Management is struggling to create the 2010 budget without admitting that whatever they put on paper is merrily a guess. The only thing they are certain about is that we must live within our means.

Within Your Means

With the economy indicators in flux and no one certain which nations will rise and which will fall from the global recession, some early indicators seems to be pointing to the BRIC (Brazil, Russia, India and China) nations.

As is turns out, these nations have had unstable employment, limited government support of capitalism and have been dwarfed by the US economy for that last several decades. These unsecure conditions caused families in these nations to save up to 30% of there incomes, just as a lengthy stable economy in the US caused many families save nothing.

Out of necessity from limited credit and unsecure employment, the BRIC nations saved their money and lived within their means. Much of there saved money ended up getting borrowed to US consumers through bank investments.

The result is that unstable economic and political conditions in other parts of the world helped create a US economy bubble with a massive expansion of credit. Now, the tables are turning and the US is realizing just how difficult it is going to be to pay back all the money we borrowed from the savers of the world.

“Green Shoots” - and – “Money Trees”

It appears that as the new economy collapses, the old fundamental principles that date back to the beginning of time are the only stable indicators that can be trusted. The cornerstone of every economy remains ‘you reap what you sow’ and the ‘borrow is slave to the lender’.

Yet, the political powers continue to tell everyone that everything is ok, so that the public doesn’t realize the mess we are in and start saving 30% of their income. To avoid the dramatic drop in GDP that we will soon be facing, the government is borrowing and spending money faster than ever before in history and talking about an economic recovery with ‘green shoots’ and ‘money trees’.

There is no way to harvest what you don’t plant. Talk is cheap no matter what anyone says, we will not be able to rebuild the economy on any foundation other than ‘you reap what you sow’ and the ‘borrow is slave to the lender’.

The question is, when are we going to stop eating our seeds and start planting them? The only green shoots that I see are the one's in my garden.

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Entrepreneurs Are Worthy of Their Profits

Thu, 02 Jul 2009 17:13:00 GMT

A missing ingredient in the economic recovery is a genuine belief in entrepreneurs and their efforts to create wealth.

Many of the government policies over the last few years and recently undermine the principles that support entrepreneurs.

Yet, the politicians are puzzled as to why the economy continues to shed jobs. The June unemployment numbers show that employers cut more jobs than expected and the unemployment rate climbed for the ninth straight month to 9.5%.

The administration somehow believes that the economy is suppose to create jobs, while simultaneously passing laws the hinder its ability to grow.

The Spirit of Anti-Capitalism Is Strong

The spirit of anti-capitalism is at its highest level in American history. The only reason that anti-capitalism ideas are peddled is to gain power. You see, to believe in capitalism is to believe that free market enterprise is the best tool to build wealth. That business owners should be free to operate their business without government intervention or government control.

That is not the case as Obama has done everything but declared war against private business. But the spirit of anti-capitalism didn’t start with Obama, it started with Clinton and extended through the Bush years and how Obama is extending the war. Reagan was that last President that actually believed in capitalism.

Anti-capitalism is a power grab. Expanding the government to control the economy is sometimes called central planning. Central planning does not work, because no one in politics (even Alan Greenspan) has ever proved to be smarter than the free market, which is based on consumers making free decisions based on products they want and prices they are willing to pay.

Without a free market, the strength of the economy cannot be trusted (like the phony GDP during the boom years) because central planning results in boom-bust cycles that usually ends very badly. Capitalism results in economic balance, stability, predictability and slow growth.

Capitalism leaves nothing for elected officials to offer the public. The only way to offer the public something more then slow and predictable growth, is for elected officials to take control of part of the economy.

The idea is that if most of the economy is run by capitalism, then the government can take control of a small part of the economy without affecting the entire wealth producing engine of capitalism - while giving the public something to get excited about and vote for.

The problem lies in the fact that even a small step away from capitalism, leads to a path of socialism and as more and more of the economy is taken over by central planning - soon there is not enough capitalism left to produce wealth - and that is what we are facing today.

This process is well documented in Friedrich Hayek's book “The Road to Serfdom”. This is also why many economist are split of two primary views of the economy, while politicians are only interest in one.

What About Businesses that Have Boomed?

The spirit of anti-capitalism is difficult to recognize because many businesses have boomed during the boom years, of Clinton and Bush. But now that the phony consumer based economy is collapsing and the businesses that were making all the money are now going bankrupt, it is clear that they were build on over-consumption, which was based on the misguided efforts of the governments central planning.

The spirit of anti-capitalism can be traced back to Clinton who created Freddie Mac and Fannie Mae. These entities were created to take control of the housing industry away from the free market so that the government could ‘juice’ the economy by increasing the number of homeowners.

This ideas and many others like it are sold to the public as a ways for the government to protect the ‘victims’ of big business and ‘unfair’ business practice that keep poor people from purchasing homes.

The consequences of government central planning of the economy are nothing but a disaster – as the housing market has declining by 50%. At the same time, many mortgage finance businesses were run out of business because they could not compete with the government supported enterprises of Freddie Mac and Fannie Mae.

The mortgage finance business owners that were run out of business by the government central planning were the real jobs that were producing wealth. Those jobs were destroyed and replaced with government jobs that are now paid for by tax payers – with bailout money.

Entrepreneurs Are Worthy of Their Profits

The real economic recovery cannot begin until we elect new leaders that understand that central planning destroys the economy and the economy is best served by free market enterprise.

We need leaders that believe entrepreneurs are worthy of their profits, without the government taking away their profits with more regulations and higher taxes.

The spirit of anti-capitalism is getting stronger every day and is the basis of the recent ‘Cap-and-Trade’ and ‘Government Health Care’ legislation.

If you look at the underlining ideas behind much of the programs that the government is expanding into, you will find anti-capitalism.

What is an Entrepreneur To Do?

The only way to make money in the US is to become a company that the government uses to control the economy or create a business in an industry that the government has yet to target to control – and the list is getting shorter every day.

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How To Prepare For a Long Recession, Start Savings 50% of Your Income

Wed, 01 Jul 2009 15:26:00 GMT

If the government will not stop spending the nation into bankruptcy, than we need to do it for them.

If several million people do this together, this would be one of the most peaceful revolutions in modern history. Than perhaps we could reverse the results of the governments’ actions and save the nation from a depression or worse hyperinflation.

This is not a joke. Create a budget and run the numbers. Then start reducing expensed until you get to a point where you are saving 50% of your income and living on the other 50%. That’s what it’s going to take to survive the lengthy recession that we are facing.

In a few years everyone will be saying they should have done this, but if you start it now you will be much better off. If you don’t hear this anywhere else, it only shows how clueless the nation has become.

If 50% seems impossible, than start with 10% and set a time period like 6-months for yourself to reach that goal. Then set a goal to reach 20% and so on until you get to 50%. It is estimated that 30% of the average US family budget is spend on entertainment and extras. The average family can cut 30% before making major life changes. This also means that getting to 50% will demand a major lifestyle change.

US is Drunk With Credit

The US is drunk with years of expanded credit and when the world takes the whisky away, we are going to have to sober up and come to grips with the hangover – and the fact that we spend all our money when we were drunk is going to be a hell of a headache.

The US tab is growing by trillions and soon the bartender is going to cut us off. Then, we are going to have to pay back the money we pissed away only at higher interest rates. The political leadership is literally selling the nation into financial slavery. They have committed the next decade of work and the work of our children to our debtors.

We will soon be facing four recessions stacked on top of each other, with real estate, the stock market, the dollar and bond market all declining at the same time. Our debts are too high for interest rates to stay low and increasing rates will result in a much larger crisis because the Federal Reserve has painted themselves into a corner and they will not be able to stop the dollar from losing a lot of its value.

What Should I Do?

If you are convinced that the economy is headed towards a cliff, this is what to do. Itemize your expenses and calculate how much of your income you are spending. Then, start cutting back on everything you can until you get to 50%.

Here are several reasons why you will probably need to live on 50% of your current income as the recession lingers on for many years to come.

Inflation will significantly reduce the value of your income
Increasing interest rates will increase the cost of purchasing and paying existing debts
A layoff will reduce your income to unemployment or a lower paying job
Wage reduction in your existing job

I realize this is going to be very difficult, but starting now while you have yet to be effected by the above reasons will be much easier then after the fact.

It may take a few years to get to 50%. The key is to figure out where you are now and start tracking your expenses each month and charting your progress. Don’t worry about feeling like everyone else is still living it up because in the next few years everyone will join you and will be scrambling to downsize and minimize their lifestyle.

If you still owe a lot of money on your house without the cash to pay if off in the next few years and your payments are higher than 20% of your income, then I would sell it even in this environment. Sell it as fast as you can and rent a smaller house or purchase a smaller house that you could completely payoff within a few years.

Another option that millions will do is to move several families under one roof. Large homes are everywhere and it is going to take several incomes to pay for the cost and maintenance of these large homes. So, if you don’t like the idea of downsizing your home, consider getting renders.

Sell everything you can and cancel as many services as you can to get to 50%. Here is an article with some ideas of what to start cutting back on.

25 Things to Consider Cutting Back On

What About the Economy?

If you are worried about the effects on the economy by reducing your spending, realize that it is going down anyway. That idea is based on the bogus economic ideas that got us into the massive debts that we are in. No matter what you do, the service economy and much of the production economy is going to collapse because it was built on a phony economy based on over-consumption fueled by credit expansion.

New businesses will be created to fill needs of real demand. It will take many years to recover from the reckless expansion of credit that has fueled the economy for the past decade.

What the economy really needs more than anything else is to get out of debt. Consumer, nationals and municipal debts are and will remain the biggest burden to turn around the economy and find a bottom to the recession. Until we are free from our debtors, the economy will never be free to grow.

Get out of debt and get your spending under control.

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Its Official, Alan Greenspan Is To Blame

Tue, 30 Jun 2009 20:12:00 GMT

Alan Greenspan was the Chairman of the Federal Reserve from 1987 to 2006, where he became the leading authority in guiding the US economy for the last two decades.

He is often praised for his handling of the 1987 stock market crash and the economic boom of the 90s.

But, in recent years Alan has been criticized by some congressional leaders and economists who pointed out how his monetary policies of low interest rates and praise for sub-prime lending vehicles led to the dot-com burst and the housing bubble.

Alan Greenspan is a brilliant man, if you read his biography.

Yet, at the bottom of the page it says,

“Alan Greenspan is blamed by the followers of the Austrian School for creating excessive liquidity which caused lending standards to deteriorate resulting in the housing bubble of 2004-2006 and the market meltdown beginning in 2008. Currently the American Federal Reserve follows a modified form of monetarism, where broader ranges of intervention are possible in light of temporary instabilities in market dynamics. “

I am in this camp. The Federal Reserve’s intervention in the economy is the primary cause of the US recession that has spread into a global recession.

The reason that the global economy has been pulled into the recession is because of the tight coupling of central banks resulting from decades of trade agreements (since WWII) and the increase in the ability to invest around the world brought about from advancements in technology.

Because of this, Alan Greenspan’s role at the Federal Reverse became must more as his policies became the foundation of the global economy.

Banker Poll: Greenspan to Blame

In a recent British-based poll where 200 wealthy bankers, fund managers and investors were asked to pick a person most responsible for the crisis, Alan Greenspan as the clear winner.

“Gary Jenkins, Head of Fixed Income Research at Evolution Securities, wanted a more specific scapegoat and ran a poll of about 200 mostly fund managers and investors asking them to pick their credit crisis culprit.

“Former U.S. Federal Reserve Chairman Alan Greenspan was the clear winner, picking up 35 percent of the votes. Once considered one of the world's greatest central bankers, he has been widely criticized over the past year for low interest rate policies that helped fuel the credit boom.

Former U.S. president Bill Clinton figured quite prominently with about 10 percent of votes, and British prime minister Gordon Brown also got quite a few. “

Expansion of Credit

The Federal Reserve is suppose to operate as an independent agency so that they can guide the economy without facing political pressure to ‘juice’ the economy for the short-run and instead focus on long-term economic stability.

Somewhere along the way, the political pressure over took the ability of the Federal Reserve to operate without a political influence. Alan Greenspan sold out to the political pressure of congress and the administration to ‘juice’ the economy and keep the GDP growing so that the politicians could continue to increase spending - and get re-elected.

The housing boom of the last decade was perhaps the largest example of neglect as Alan repeatedly refused to acknowledge to his critics that he was creating a huge bubble that allowed a massive expansion of credit – as consumers borrowed against their inflated homes by the trillions.

Alan Greenspan’s biggest failure was his belief that he could plan the economy better than people can on their own.

This is the grand illusion that has destroyed many nations throughout history, leading many to hyperinflation. The grand illusion is to think that economists can direct the economy better than people can on their own. Free market capitalism has been proven time and time again to be the best tool in the world to direct people into making wealth producing decisions.

What About Greedy Bankers?

Some like to point out that Wall Street creating the easy home securities like ARM and sub-prime loans, but realize that Wall Street would not have been able to create these things if Alan wouldn’t have allowed interest rates to drop well below market rates.

The second largest culprit is congress, as they created the mortgage giants Freddie Mac and Fannie Mae which provided Wall Street with the means to get unqualified individuals to purchase homes that they couldn’t afford.

Last year Freddie Mac and Fannie Mae when bankrupt because of these risky loans and instead of letting them fail, the government bailed them out, took them over and is still handing out risky loans that they should not be.

Some say Bernard Madoff got what he deserved from running a Ponzi scheme that caused many investors to lose millions. But what about the guys like Senator Christ Dodd and Senator Barney Frank who chaired the banking committee and helped create Freddie Mac and Fannie Mae into the disasters they are today – which has caused tax payers to lose billions. Shouldn’t these guys be in the jail cell next to Bernard?

Freddie Mac and Fannie Mae were created by the Democrats and the Clinton administration to make mortgages available to more people.

Many of Clinton’s white house directors also went to work for Freddie Mac and Fannie Mae and collected millions, like Franklin Raines, Jamie Gorelick and Jim Johnson (Obama VP search committee).

Senator Obama was the second most Senator to collect money from Freddie Mac and Fannie Mae.

A conversation about greedy bankers on Wall Street cannot escape a discussion about greedy politicians. Wall Street can only play by the rules created in Washington. The money trail goes all the way to the top.

To Alan Greenspan's credit, he warned congress that Freddie Mac and Fannie Mae needed more regulation and pose a great risk to the economy. The economic collapse could have been prevented.

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Cap And Trade Legislation To Deliver A Devastating Blow To the Economy

Mon, 29 Jun 2009 15:55:00 GMT

On Friday last week the highly controversial ‘Cap and Trade’ bill passed the House by a 219-211 vote, delivering a devastating blow to the staggering economy.

Obama promised no tax increases, but has delivered just that. This is a direct attack on the middle class families that are struggling to keep their jobs and make their mortgage payments.

The bill disguises the massive tax on the middle class by taxing all energy producing companies, which have no choice but to pass the additional cost on to consumer. The largest consumer of energy is of course the manufacturing industry.

Therefore this bill will force the staggering manufacturing industry into an even greater global competitive disadvantage. Factories ran at 68.3% of capacity in May, the lowest since the Fed started keeping statistics in 1967.

This bill will likely force many US manufacturers out of business, adding millions to the 5-6 million that have already lost their jobs since the beginning of the recession.

At the same time, this bill will cause household energy bills to double. I just cannot image what the politicians are thinking. They couldn’t have created a worse bill at this time. Why are they even wasting their time creating bills like this when they should be working on the real problems in our economy?

On top to that, this bill will create another government entity to administer this tax, which means more government employees doing unproductive and wealth destroying tasks. This is much, much worse than if the politicians just did nothing and let the economy recover on its own.

Here is a video:

In my opinion, Obama has become the single greatest risk to an economic recovery. This bill virtually guarantees the US economy will remain at a competitive disadvantage with much of the developing nations for decades to come.

This bill will cause millions of jobs to move out of the US. This is a devastating blow to the economy.

This bill is the exact opposite of what we need to do. We need to rebuild our manufacturing industry, to create jobs and bring money back into our nation.

We need to increase our exports and decrease our imports to bring the trade deficit back in the black. Then, and only then, can we dig our way out of debt and recover from this recession. Instead of creating more problems for our manufacturing industry, we should be removing previous legislation that hinder their growth. We should reduce the industries burden so they can increase production.

The way out is manufactuing.

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Why America May Never Recover From the Recession: Part 2: Israel Becomes the Center of World Conflict

Fri, 26 Jun 2009 16:05:00 GMT

Shortly after the rebirth of Israel, Israel will face overwhelming odds as the entire world gathers to plunder it.

This is Part 2 of an article series which takes a look at currency events in relationship to biblical prophecy to explain why America may never recover from the current recession.

In part 1, we looked at the rebirth of Israel described in Ezekiel 37. Now let’s look at Ezekiel 38, which says;

Ezekiel 38:11 “You will say, "I will invade a land of unwalled villages; I will attack a peaceful and unsuspecting people—all of them living without walls and without gates and bars. 12 I will plunder and loot and turn my hand against the resettled ruins and the people gathered from the nations, rich in livestock and goods, living at the center of the land."

“14 … 'This is what the Sovereign LORD says: In that day, when my people Israel are living in safety, will you not take notice of it? 15 You will come from your place in the far north, you and many nations with you, all of them riding on horses, a great horde, a mighty army. 16 You will advance against my people Israel like a cloud that covers the land. In days to come, O Gog, I will bring you against my land, so that the nations may know me when I show myself holy through you before their eyes.”

This passage indicated that in a time of peace (like perhaps after the Anti-Christ signs a peace treaty with Israel as prophesied) Israel will be attacked to plunder their riches. The 'might army' that attacks Israel will be very larger, like a 'cloud that covers the land', and obviously no other nation will oppose them. Israel will face overwhelming odds.

Ezekiel 39:11 “On that day I will give Gog a burial place in Israel”

On that day God alone will defend Israel and destroy the enemy. Many scholars have traced the ancester of Gog to Russia.

This passage also indicated that Israel will be very rich, because that is the reason they are attached, to plunder their riches. Israel's economy has been growing very quickly for many years and they have invented some of the best technology in the world. Almost all major companies, like Intel and Microsoft, have design teams in Israel.

At the same time, Russia has been gaining power because of it's natural resources and its controlling of natural gas in the entire middle-east.

Israel has recently discovered a huge natural gas reserve. This could be the riches that Russia and others nations are after. If Israel has a large supply of natural gas, Russia cannot control the price and will not be able to gain the geopolitical respect that they desirs.

America Does Not Defend Israel

This future event means that Russia with many other nations will have a large army and the funds to deploy them against Israel – without anyone to stop them. America does not defend this attack. Therefore, at this time America will either have turned its back on Israel or somehow collapsed as a world power.

It's not that I want anything to happen to America, I live here, but that is what the 'last days' prophecies seem to be saying. Something may happen very soon to America so that it no longer defends Israel in this event.

Perhaps the recession continues to deepen and America is forced to cut way back on its military budget. Over the next 10 years, the service industry would collapse as easy credit from foreign creditors dries up, causing as much as 70% of the economy to find new jobs. America may no longer have the financial support to fund its vast military or support Israel.

Based on Ezekiel 36-37, God will never again let Israel be destroyed and therefore if no other nation will protect them, He will show the world that He is protecting them.

Ezekiel 39:21 “21 "I will display my glory among the nations, and all the nations will see the punishment I inflict and the hand I lay upon them. 22 From that day forward the house of Israel will know that I am the LORD their God.” … 25 "Therefore this is what the Sovereign LORD says: I will now bring Jacob back from captivity and will have compassion on all the people of Israel, and I will be zealous for my holy name.

In order for God to show the world the He is personally protecting Israel, He could not let another nation get the credit for helping them. God must save Israel with an unnatural disaster so that there is no doubt that God has intervened on their behalf. A few before this, we are told that God will distroy them so that everyone will know that He is in the house.

Ezekiel 39:6 I will send fire on Magog and on those who live in safety in the coastlands, and they will know that I am the LORD. 7 " 'I will make known my holy name among my people Israel. I will no longer let my holy name be profaned, and the nations will know that I the LORD am the Holy One in Israel. 8 It is coming! It will surely take place, declares the Sovereign LORD. This is the day I have spoken of.

At the time of this event, America could not be a world power or no longer supporting Israel - which is doubtful because of the many political, economical, educational and business ties to Israel.

Center of World Conflict

In the ‘last days’ Zechariah 12:1-3 says, “And in that day will I make Jerusalem a burdensome stone for all people: all that burden themselves with it shall be cut in pieces, though all the people of the earth be gathered together against it.”

Current events seem to be pushing the world closer and closer to this day as most of the world has already turned against Israel, including the UN, Russia, Iran and all Muslim nations.

Where is America?

Eventually all nations will turn against Israel and only God will save them from destruction. Obama is in the process of trying the force Israel to divide Jerusalem and create a two state system within the land of Israel the God said he would never divide after he brings the Jews back into the land that he gave them.

This conflict could turn America against Israel or allow us to be ‘cut to pieces’. We are very close to seeing this prophesy come to past.

A recent poll showed that only 6% of Israeli Jews see US President Barack Obama's administration as pro-Israel, while 50% see it as pro-Palestinian.

Also, Russia's growing relationship with Iran and other Muslim nations, which include military and nuclear technology trade agreements, show how this event is very near. Iran has already committed to destroying Israel and Russia has shown the strength of its army and its interest in controlling energy resources last year when it attaching Georgia in an attempt to gain control over a strategic oil pipeline.

In part 1, I showed how the rebirth of the state of Israel is the beginning of many 'last days' events and these things that are coming make no reference to America as a superpower or even a world power. Perhaps America may never recover from the deepening recession as power is shifted to other parts of the world to bring about these prophecies.

In part 3, we are going to look at how the Anti-Christ will come to power when the nations are in extreme financial trouble – like they are now. Based on the tremendous wave of inflation that is coming from the monetary policy of todays central banks around the world, we may see a second wave of the global financial collapse that is much worse than the first, which would provide a scenario to fit this event. I will explore how the US fits into this in Part 3.

Why America May Never Recover From the Recession: Series Introduction

Why America May Never Recover From the Recession: Part 1: The Rebirth of the State of Israel

Why America May Never Recover From the Recession: Part 2: Israel Becomes the Center of World Conflict

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Developing Nations To Drive World Economy

Thu, 25 Jun 2009 16:56:00 GMT

In an interesting article today in the New York Times, the developing nations that hit a wall late last year now appear to be gaining strength.

The article brings the decoupling idea back to life, just as I said a few weeks ago.

“Despite fears just months ago that they would be among the biggest victims of the financial crisis, emerging giants like China, India and Brazil are set to rebound strongly next year, the Organization for Economic Cooperation and Development predicted Wednesday — as Europe, the United States and Japan lag.”

The downside to this is also just as I thought, as food and commodity prices will go through the roof – pricing US consumers out of the market.

“On the negative side of the ledger, emerging market-centered growth could spur higher interest rates in the West and Japan, and push up prices for oil and other commodities when the developed world could least afford it.”

Peter Schiff

Peter Schiff’s long-term investment strategy is playing out just as he predicted it would. The US is going to be left behind just as Japan was in the 90’s without a drastic change in policy to rein in spending and debt.

The growth of China, India and Brazil will also help the commodity nations like Canada, Russia and Australia. The US economy is not prepared for what this will mean.

The dollar will continue to lose value as the world realizes that they don’t need more shoppers, they need savers and producers. How can the administration and congress not understand what is happening?

We desperately need new leadership in Washington if we are going to stop the recession, rebuild a competitive business infrastructure and regain economic leadership. This is a fool’s game and we are the fools.

A declining dollar means we are losing wealth. Our personal finances are going to be effected. Our net worth will be decreasing in relation to inflation caused by the sinking dollar. Ben Bernanke is selling our birthright right under our nose, while we are sleeping.

More people need to understand what is going on. More people need to realize the impact that trillions of dollars in debts are going to have on our economy. We have dodged a bullet, only to take three more in the chest.

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Book Review: Secrets of the Millionaire Mind

Wed, 24 Jun 2009 15:48:00 GMT

T. Harv Eker is a self make millionaire who has turned his attention to helping other people understand how they can become millionaires.

This is an excellent book and Harv has helped thousands of people get over their bad ideas and bad habits about money with his book and training courses.

This book detailed Harv’s system to help people understand how to think like a millionaire.
A good summary of Harv’s research can be found on page 10,

“The vast majority of people simply do not have the internal capacity to create and hold on to large amounts of money and the increased challenges that go with more money and success. That, my friends, s the primary reason they don’t have much money.”

Through the book Harv shares several key money principles, here are a few;

There is no such thing as a really rich victim
Rich people focus on opportunities, poor people focus on obstacles
Rich people admire other rich and successful people, poor people resent rich an successful people
Rich people are good receivers, while poor people are not
Rich people are always learning and growing, while poor people think they already know
Rich people manage their money, poor people don’t

Harv explains that the surest way to stay poor is to continue acting like the poor, by complaining, not looking for opportunities, resenting the rich, not being a good receive, not continuously learning and not managing your money. Harv has great advice and these tips are essential to understand and change your thinking about money.

I have boiled down my summary of millionaire thinking ideas into this article, 10 Habits of the Prosperous.

Perhaps my favorite part of the book is what Harv says on page 119,

“Many poor people actually believe they are better people because they are poor. Somehow they believe they’re more pious or good. … Some people just don’t ever have the opportunity to have a lot of money. If you are one of the lucky people who do have that ability… Get really rich and then help people who don’t have the opportunity you did. That makes a lot more sense to me than being broke and helping no one. Of course there are people who will say, “Money will change me. If I get rich, I might turn into some kind of greedy jerk.” … Money will only make you more of what you already are. If you’re mean, money will afford you the opportunity to be meaner. If you’re kind, money will afford you the opportunity to be kinder. “

What I Didn’t Like

Harv has a lot of good information, but there were a few things that I have concerns with. To summarize my disappointment, like many other recent popular books, this book contains a mixture of truth and non-truth – and it’s very difficult to tell the difference.

The growing trend of self-help teachers over the last decade has me a bit skeptical. Even the mega churches are now more about self-help and personal growth than anything else. Just look at Joel Osteen’s new book “Better Life Now” from the Lakewood mega church in Houston TX. At least Joel gives credit to the true source of all these ideas of personal growth, which can be traced back to the Bible.

True Wealth

True wealth is not something that everyone can have. It’s just not possible for everyone to become rich. Yet, that is what Harv seems to teach with his idea that there is an abundance of money. On page 135, Harv says we need to believe that there is an unlimited supply of money, yet he says “I’m not an economist, but from what I can see, they just keep printing more of the stuff every day.”

On page 165, Harv says everyone should learn now to invest their money. The problem is that learning where to invest money, takes knowledge about economic trends. Harv’s success came from an economic trend. Without a deep understanding of the economy, success is reduced to luck. So, in saying that he is not an economist, Harv is saying that he just got lucky.

Harv acknowledges that luck plays a part in getting rich along with taking action, on page 80, “..no luck – or anything else worthwhile – will come your way unless you take some form of action.”

The problem is that you cannot build a repeatable system of business success based on luck. Harv also explains what is takes to get lucky, when he says on page 9, – “It’s not enough to be in the right place at the right time. You have to be the right person in the right place at the right time.”

Harv is right, they are printing more money all the time, but paper money is not wealth. So, technically if you are accumulation money as fast as the government is printing it, you are not gaining wealth. I am interesting in gaining wealth and gaining knowledge that can be used repeatedly, and that takes an understanding of the economy.

Harv should not be so afraid of being labeled an ‘economist’, because an economic understanding is key to building wealth in a world of governments that are constantly manipulating the currency and changing the playing field for many industries.

Personal Value

Harv tried to help people get over depression and realize there value when he says, “This unwritten rule simple states that if you do something wrong, you will or should be punished. Some of us were punished by our parents, some by our teachers … and some of us in the religious circles were threatened with the mother of all punishments, not getting to heaven.” page 112, which Harv says is bogus.

The Bible said that God has written the ability to understand sin on our hearts or within our mind. That is why we feel bad when we know we have sinned against God. This is not an unwritten rule and is impossible to remove from our mind because it is part of our nature.

The only way to get past this and realize our true value is to realize that we have been created in the image of God, but are sinners that fall short of the glory of God and therefore need to believe in Jesus and ask for God to forgive us of our sins (Romans 10:9) “That if you confess with your mouth, "Jesus is Lord," and believe in your heart that God raised him from the dead, you will be saved.”

This is not just a story, this is the truth. Without this, you can tell yourself you are worthy all day long – but to whom? Harv says that we don’t need to pray to God to accept us, we can pray to ourselves – page 115.

But prayer is a form of worship and praying to yourself is worshiping yourself as your own God. This is called humanism. There is no hope and no future in humanism. I’m not sure what religion Harv believes in or if he understands what he is saying. This is an example of how truth is mixed in with non-truth.

I find it amazing to read that the Bible even predicted Harv’s success as many will gather around teachers that teach this way;

"For the time will come when men will not put up with sound doctrine. Instead, to suit their own desires, they will gather around them a great number of teachers to say what their itching ears want to hear. They will turn their ears away from the truth and turn aside to myths. (2 Timothy 4:3)"

The Victory of Reason

There is victory in understanding your reason for being. The power of understanding that God loves you and has a plan for your life that is greater than your life, which includes a future beyond your time on earth – is the most powerful motivating factor any human can have.

That is why the foundation of Christianity led to the greatest economy in the world. For more about this, read “The Victory of Reason”

Entrepreneurship

Towards the end of the book, Harv gives some very encouraging words about how everyone should find a way to get paid for what they are worth. Harv suggests, “Personally, I believe just about everyone should own their own business, be it full-time or part-time. The first reason is that by far, the vast majority of millionaires become rich by being in their own business.” Page 127

I cannot argue with that last part, just being in business for yourself increases your likelihood of becoming rich.
On page 156, Harv says the rich find a way to get others to work for them. And again, I agree, but then how could everyone start a business and get rich? Who would work for them?

Many of the modern technologies that we have today were not invented by small businesses, but by large businesses that had enough money to invest in long term projects with thousands of engineers or scientists. Everyone cannot be rich and everyone should not try to start a business. That advice could lead a lot of people into bankruptcy.

Most of the large industries are also deeply tied to the political system, which means that many large businesses have competitive advantages that are highly protected by government regulations. Before competing with them, you need to also learn a lot about politics and need to know a lot of the right people.

Entrepreneurship is not for everyone and I wouldn’t recommend everyone trading a good job to try and start their own business. Good jobs are hard to come by because of geopolitical relationships coupled with government supported competitive advantages to protect jobs.

I realize that Harv is not suggesting getting into all of this big business politics, but it is an integral part of all business and without realizing it is to not understanding what you are getting into.

This is why one of my financial principles is “there are almost always good reasons behind why things are the way they are”. Understanding the reasons is the difficult part. The most important thing you can do when starting a business is to learn and learning can be very expensive.

When you start a business without a deep understanding of the industry you are attaching, realize that you will more than likely fail but will learn a lot about the industry along the way, and most of the time you will learn that you have no way of gaining a competitive advantage over the existing competitors without changing the rules.

Don’t quit your day job without a clear competitive advantage or an economic trend that you can take advantage of to attack a new market that has little competition (like Harv did).

Summary

Harv has some good practical advice, but realize he got lucky and you will probably not have his success in your personal finances. You are just as likely to get rich by working hard at your job, living below your income and investing wisely – dabbling in business when opportunities come your way.

Most of this book contains excellent advice about how to think differently about money. Harv is an excellent teacher and communicator. I recommend this book to everyone who wants to improve their personal finances.

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How Two People Can Work Together To Build One Career

Tue, 23 Jun 2009 15:54:00 GMT

This is an old strategy that has been discarded by the current culture, but I think it has a lot of potential if people realize its advantages.

Yesterday my company gave me my annual review. I didn’t get a raise, because we are on a wage freeze as I mentioned a few weeks ago. But, I was surprised by the many good things my manager had to say about my performance.

Performance is based on the other workers that are doing a similar task. From my point of view, my performance wasn’t much different than previous years. But, from my managers view my productively was much higher when compared with other employees doing similar tasks.

When I pressed my manager for an explanation, he simply said that others have not been able to respond to the additional responsibilities and stress of the economy as well as I have.

The recession has created a lot of stress and many people are struggling with a loss of income from their spouse or cannot work the additional hours needed because they are already committed to managing the family. As a result, they are not able to remain as productive. I have also had to work more hours in the last year then I have had to in previous years.

Apparently, I have been able to remain productive, not because I am more talented than the next guy, but because my spouse has the flexibility to help me. Recessions tend to add stress to jobs, and when a family has two jobs, the stress is doubled. The doubled stress results in lower productively.

My wife does not have an ‘income’ earning job, but she works just as hard as I do. She helps me with my side business and manages the home so I can work late hours when I need to. Our single-income family model is much more flexible and easier to absorb unplanned stress, whether from a recession or from within our extended family.

I can honestly say that my wife has helped my career more than anything that I have done. My promotions are a direct result of her work, which has brought a financial benefit to our family. At the same time, she is her own boss and enjoys doing whatever she wants to each day with more financial freedom than if she was dependent on a paycheck.

Competition Is No Match

As the recession deepens, the global fight for jobs is just getting started. Many nations will create protectionism policies to try to protect their jobs from other nations. The US stimulus package had a provision to ‘Buy American’ with the idea of keeping the jobs in the US. Russia, China and Canada have already followed with their own government policies to protect jobs.

Competition is going to continue to get fiercer within each company. This is a time to step up to the plate and increase your productivity and this strategy is excellent for doing just that. In fact, I could imagine someone taking this a step further and having several people working behind the scene to propel one person to keep their job. Maybe they already do this in other nations.

Examples

A few years ago I was talking to the husband of a friend of my wife’s. He was recently promoted to the Vice Precedent of Marketing at his company. When I asked what is wife does, he said that she stays home with the kids. That is when I became very suspicious of his wife’s involvement with his career. He wouldn’t say much more about it, so I asked my wife to ask her friend how involve she was with her husband’s career.

When pressed, she admitted that she helps with ALL her husband’s presentations and proposals, which are the primary deliverables of his job. This is an example of how two people can build one career and he now makes well into the 6-digits, which is probably more than double what he would be making without his wife’s help.

Another example is a good friend of mine that is a landscaper. He is the only person that any of his clients call when they need his services, but his wife is his secrete competitive advantage. She does all the invoices and accounting, helps with the designs and even negotiates with their suppliers.

Without her help, he would not be able to work nearly as many hours as he does in the field. With her help, he looks like a super human able to work harder than any of his competitors.

Wage Difference Between Sexes

This is one reason why the wage gap between the sexes remains. I think there are more wives that help their husbands’ careers than there are husbands that help their wives careers. In my observation, woman seem to naturally want to help their husbands look good and get a promotion, while husbands are more driven by competition and don’t want to encourage competition with their wives.

Single-Income Family Advantage

This is one of many ways that a single-income family has an advantage, even a competitive advantage over a dual-income family.

This is an excellent strategy to get ahead financially. This strategy can also be very helpful in keeping a job during the deepening recession. If you can manage the stress of the economy better than the next guy, because your spouse is helping you, then you are increasing your chances of keeping your job.

If your spouse has lost their job, consider putting that person to work behind your job to propel your career against the competition. Why risk the only income that your family has?

If you don’t have an official ‘job’, that doesn’t mean you cannot work. Don’t sit home and complain about not being able to find work when you could work for your spouse and help them increase their income.

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Ok, I’m Convinced The Economy Downturn Is Really Bad, Now What?

Mon, 22 Jun 2009 16:58:00 GMT

Yesterday, one of my readers told me that he is now convinced that the economy is heading into a very deep spiral that will take years to recover from.

He told me that I have convinced him that the economy is tanking and the financial media and political optimistic spin is nothing but BS.

He said that he is now looking for more ideas about what to do about it and would like me to write more articles regarding what do to.

You’re Welcome

The conversation was probably the closest thing to ‘thank you’ that I will ever get. After almost two years of pointing out how bad things could get and how the government’s plans are only going to make things much worse, I found a little redemption.

It’s not always easy going against the grain and against a very popular president to tell the truth about the state of the US economy. There are still a lot of people that believe in Obama so much that they think he can do the impossible – revive the economy and avoid a deep recession.

Yet, his promises and projections are beginning to fall apart. Before the passage of the $787 stimulus bill, Obama predicted that unemployment would peak at 8 percent and start to improve by the end of 2009. Unemployment is already at 9.4 percent and is not likely to see a bottom for many months or perhaps years.

The leading cause of the recession was and remains a decade of expansion of credit and the irresponsible actions of the Federal Reserve to lower interest rates. This will not escape the history books and it could have been prevented. Both of which were politically motivated and led to the massive distortions in the economy that resulted in over-production and over-consumption. The result is a crumbling economy.

What To Do

I have a lot of ideas about what to do, but 70% of my articles on this blog have been directed at convincing my readers that the recession is going to be very, very deep.

Based on this readers’ suggestion, I think it’s time to start talking more about what to do. Two years ago, very few people were interested in reading about how to save money or cut back on expenses, because they were convinced that the recession would be short lived.

The reason is because most of these ideas result in changing one’s lifestyle to accommodate a lower standard of living. Adjusting to a lower standard of living is a painful process and not something anyone wants to willing do unless they have to.

But the table has turned and now millions of American’s are looking for ways to painfully cut costs to survive the recession without losing the shirt on their back.

To most people, the first step is getting out of debt. That means making a list of the debtors that you own money to and figuring out what you can live without so that you can create a plan to pay off all debts. The next step is to figure out how much you are worth and create a plan to grow that every month.

Time Is Slipping Away

Time is running out, many have already lost a lot. This is not the time to ignore your personal finances. This is a time to get your finances in order as quick as you can. The sooner you face the music the more you will be able to position your family to manage the lengthy recession that is just getting started.

I believe the recession will get much worse before it gets any better and the risks of a currency crisis (with a sinking dollar) are growing every day.

I plan to write more articles about radical ways to prepare, like starting a business to secure your own income, completely paying off your house, homeschooling to reduce education expenses while giving your children a chance at competing in the global economy and living on a single income in a smaller house. These ideas and more will drastically change the culture and social fabric of America.

The most important thing to do is to realize what is really going on. The public needs to realize that the government has messed up the economy and we need new fiscal conservative leadership to radically reduce spending before the recession can be stopped. The public needs to realize that the nation is broke because of the social programs that we asked for. The free lunch wasn't free after all.

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Why America May Never Recover From the Recession: Part 1: The Rebirth of the State of Israel

Fri, 19 Jun 2009 14:00:00 GMT

One of the most amazing historical events in the last 100 years is the rebirth of the state of Israel.

This is Part 1 of an article series which takes a look at currency events in relationship to biblical prophecy to explain why America may never recover from the current recession.

After Israel was destroyed in 70 A.D. by Titus of Rome and scattered around the world for 2000+ years, the people of the land promised by God returned to re-establish the state of Israel – just as prophesied in Ezekiel 37.

Ezekiel 37 says that God will bring his people back to the land of Israel and bring their dried bones together and breathe life into them making them – a vast army. This process started in 1948 when the nation of Israel was again created and the Jewish people started migrating from all over the world into the land that God gave them, which was promised to Abraham by God and passed down through Jacob, Isaac and all the way to the Jews today.

Ezekiel 9-17 “9 Then he said to me, "Prophesy to the breath; prophesy, son of man, and say to it, 'This is what the Sovereign LORD says: Come from the four winds, O breath, and breathe into these slain, that they may live.' " 10 So I prophesied as he commanded me, and breath entered them; they came to life and stood up on their feet—a vast army.

11 Then he said to me: "Son of man, these bones are the whole house of Israel. They say, 'Our bones are dried up and our hope is gone; we are cut off.' 12 Therefore prophesy and say to them: 'This is what the Sovereign LORD says: O my people, I am going to open your graves and bring you up from them; I will bring you back to the land of Israel. 13 Then you, my people, will know that I am the LORD, when I open your graves and bring you up from them. 14 I will put my Spirit in you and you will live, and I will settle you in your own land. Then you will know that I the LORD have spoken, and I have done it, declares the LORD.' "

Ezekiel 21-23 “'This is what the Sovereign LORD says: I will take the Israelites out of the nations where they have gone. I will gather them from all around and bring them back into their own land. 22 I will make them one nation in the land, on the mountains of Israel. There will be one king over all of them and they will never again be two nations or be divided into two kingdoms. 23 They will no longer defile themselves with their idols and vile images or with any of their offenses, for I will save them from all their sinful backsliding, [b] and I will cleanse them. They will be my people, and I will be their God.”

This amazing event has taken place to the detail. Many other prophecies of the ‘last days’ could not happen without this event taking place, which proves that we are living in the ‘last days’.

His Return

In Acts 1:6-8, the disciples thought Jesus was going to stay on earth and restore the kingdom of Israel.
“…they asked him, "Lord, are you at this time going to restore the kingdom to Israel?”

As the king of the Jews, it was natural for a king to restore his kingdom. But, in Luke Jesus tells us He will not return until the time of the Gentiles are fulfilled.

"Jerusalem shall be trampled under foot by the Gentiles until the times of the Gentiles are fulfilled." (Luke 21:4) Jesus says that the end of the age of the Gentiles is accompanied by the Jewish re-establishment of Jerusalem.

Jesus will return, “When the Son of man shall come in his glory … then shall he sit upon the throne of his glory: and before him shall be gathered all nations . . . " (Matthew 25:31,32). Jesus will return and setup his kingdom in the city of Jerusalem.

Daniel also tells us that in the time of the kings of the revival of the Rome Empire, Jesus will restore his Kingdom and it will never again be destroyed.

Daniel 2:44-45 “In the time of those kings, the God of heaven will set up a kingdom that will never be destroyed, nor will it be left to another people. It will crush all those kingdoms and bring them to an end, but it will itself endure forever.”

The Future Of America

If the rebirth of the State of Israel is a precursor to the return of Jesus and at the time of His return the revived Roman Empire will be the only world power – then America could not be a superpower at this time.

But, maybe this is still hundreds of years away? The reason I don’t believe so is because the generation that is alive when Jerusalem is established will not pass away until Jesus returns, "Truly I say to you, this generation will not pass away until all things take place." (Luke 21:32).

If the generation will not die before these things have taken place, then we would have maybe 100 years from 1948 or 1967 when Jerusalum was retaken. Perhaps we have 40-60 years before the return of Jesus at which time the Roman Empire will be the only world power. That doesn’t leave a lot of room for America to return to prosperity and then fall apart again, while the EU (Rome) gains strength.

A more likely scenario is that America has already started declining and the European Union (the revived Roman Empire) is already strengthening. As the dollar sinks, the Euro will perhaps become the new Reserve currency of the world. This could easily happen in the next few years.

As I said in the introduction of this article series, the economic mistakes that have been made to bring about the global recession and that even bigger mistakes that are being made by economic leaders around the world are so obvious that they couldn’t have tried to create a worse case if they wanted to.

The only explanation that I can see is that God has led them to the horrific mistakes in order for the world to fall into a massive economic collapse, while allowing world powers to shift so that prophesies will be fulfilled. The establishment of Jerusalem was the trigger to bring about many shifts in the world that are shaking the foundation of economic and military world powers in a very short period of time.

The Lord is at work. He is moving across the face of the earth and He is bringing these things to past. Romans 13 says, there is no authority but of God and that he has placed them there. Many of the rulers of the world think they are in control, yet God is clearly the only authority under which He picks rulers and directs their decisions.

In part 2, we are going to look at how Israel has become the center of world conflict and how that corresponds to even more ‘last days’ prophecies and the US.

Why America May Never Recover From the Recession: Series Introduction

Why America May Never Recover From the Recession: Part 1: The Rebirth of the State of Israel

Why America May Never Recover From the Recession: Part 2: Israel Becomes the Center of World Conflict

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Obama Refuses To Interview On Fox News

Thu, 18 Jun 2009 17:29:00 GMT

Fox News is one of the largest media networks in the industry, yet the current president repeatedly refuses to allow many of his staff to interview on the network.

Presidential criticism is part of politics and every administration is criticized by the opposing party, but never before a president refused to discuss important issues with a major media network.

The strategy has been successful in keeping his critics from getting current information to talk about to policy makers that are shaping the economic recovery. Yet, this is the same president that has pushed for a new bill to force talk radio to be ‘fair and balanced’, giving equal time to conservative talk and liberal talk.

Here is what Neil Cavuto had to say about it yesterday. Video Link:

Here is the White House response. Video Link:

The Road to Serfdom

Controlling information is the one of the final elements of dictator control. In Friedrich Hayek’s, book “The Road to Serfdom”, he warns against the dangers of state control over the means of production. The collective idea of empowering government with increasing economic control inevitably led to the horrors of Nazi Germany and the Fascist Italy.

The last phase of socialism that Hayek talks about is the destructive influent of information that is counterproductive to the socialist’s agenda. Information must be controlled and the only way that I can see that being possible today with the easy publishing tools of the Internet is to make the publication of some information illegal – upon which publishers can be arrested and jailed. This is the case in many communist nations like China and more recently in Canada and is about to start in America with the ‘hate crimes’ bill that is a great danger to America.

Polls Show Obama Losing Ground

At the same time, Obama is running out of time as the recession continues to devastate the economy with more and more jobs lost. The latest NBC/WSJ poll shows 46% feel US is headed in wrong direction.

The democratic control of congress is going to lose a lot of power in the 2010 elections and Obama will not be able to get his policies through as easy, which is why they are using the word ‘crisis’ to push through as many policies as they can as quickly as they can. Like the trillion dollar stimulus package, energy policy and now the health care and banking reform policies.

All these radical policies have huge price tags which will need to be paid for by massive tax increases for years to come. But, the critics are kept quiet as the president pushes his ideas as fast as he can – under the false assumption that the US is a nation of abundant riches to pay for these policies.

All the while, pushing the nation closer and closer to nation bankruptcy.

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The Transition to Dual-Income Families Has Not Increased the Wealth of the Nation

Wed, 17 Jun 2009 21:28:00 GMT

You would think that the transition from single-income families to dual-income families that started in the 60’s and 70’s, would have led to a major increase in the wealth of families and the entire nation.

I realize that this is a controversial issue and maybe someday I will write a series of articles explaining more of my ideas about the issue, but for now the following video is a good introduction.

Today, many families are working much harder and longer hours than they did decades ago, yet somehow have less discretionary income.

The increase in income did increase the standard of living, but over time most of it when to government expansion. The more money in the economy the more the government could tax and grow. As much as family incomes have increased the expansion of government has extract that money even faster.

Where Does the Money Go in a Dual Income Family?

Here is an article that shows how discretionary income from a single-income family in the early 70’s was $19,500, compared to a dual-income family of the early 2000 of $18,100.

Here are some other important points of the article.

“So why are families today spending so much more? In a word, bigger houses and higher taxes”
“Even I was rather astounded by how really insignificant health insurances increases are compared to tax increases.”
“My conclusion is hopeful, though: economize on your house, and don't buy a second car, and a single-income family has a realistic chance of achieving the financial security and stability that so many dual-income families seek in vain.”

Here is a video of a research study conducted by Elizabeth Warren to understand why the middle class is not getting ahead and where the money of a dual-income family is going. The video is 1 hour long, but very interesting.

This video shows that the transition to dual-incomes has not resulted in greater discretionary income and the middle class is in more trouble today than ever before.

This was before the major collapse of the housing market and the ongoing recession. What the video doesn’t address is the fact that the US government used the increase in family income as leverage to expand and increase the taxes on just about everything.

The less income that your family can live on, the less you will have to fund the expansion of government and social programs that have steadily increased for several decades, which have brought the nation to its current financial collapse.

Because of this, single-income families are more likely to increase the wealth of the nation by limiting the government from further expansion. Like I said, this is a controversial subject and a lot of people have great faith in the dual-income family model. But the reality is that it has gotten us nowhere.

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Obama Tells California They Are On Their Own

Tue, 16 Jun 2009 21:05:00 GMT

In a surprising move, the White House said on Tuesday that California will have to solve their financial problem on their own by cutting their budget.

I don’t think Obama has any other choice with the recent Bond market weakness. If the government were to co-sign onto California’s debts, that would add further risk to the credit of the US.

The US credit rating is already at great risk from the trillions from the federal budget. If the US were to loose its AAA credit rating, the Fed would not be able to keep interest rate from rising very quickly and that could put the US as risk for defaulting on its national debt - which would be solved by monetizing the debt (otherwise known as printing money), adding to the wave of inflation that is already in the cards.

This could mark the beginning of the end of the last decade of social government expansion as the weight of the government social programs has tipped the scale and the California economy can no longer function under the burden of its own government.

In telling California that they are on their own, Obama is risking the state to default on their debts without massive budget cuts that will be very painful but very necessary. This is perhaps the first major step in the right direction as the government is finally starting to realize that there is nothing they can do to help the economy but get out of the way.

We need to cut the size of both state and federal governments and make way for the entrepreneurs to rebuild a viable economy based on real consumer demand. Obama is eventually going to have to make the same big cuts to the federal budget.

As California goes, so goes the nation.

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Some Thoughts On Starting a Business Based on the Economic Rebound

Mon, 15 Jun 2009 20:16:00 GMT

What economic rebound you might say? It’s true, there is no economic rebound in sight and it’s unlikely that we are going to see a rebound anytime soon.

But commerce will continue. People are going to continue to buy things that they need and want. Some businesses will see tremendous growth. For example, the garden seed business is booming with up to a 75% increase this year as people look to grow more of their own food.

The economy may never be the same as trends are changing very quickly. The question is what businesses will be growing for the next 5 to 10 years. That is the market that you want to start a business in.

Recessions are a great time to start a business because much of the leverage of larger businesses is removed as consumers change their buying habits. Recessions create opportunities that were not available before the recession began.

Three Types of Reactions

As consumers start to settle into the reality that the recession will last longer than they can hold their breath, they will have to decide how they are going to live. Consumers have three options.

Return to live like before the recession and assume the economy will recover
Reduce expenses without changing their lifestyle or suppliers
Completely change lifestyle and find new suppliers to meet new needs.

Three Types of Businesses

Based on these three types of reactions to the recession, there are three types of businesses that will benefit.

1. Old Businesses Based on Over Consumption

If you think that the recession will be short lived and consumers will soon return to their old ways, then a good investment or a good business to start would be in a market that has drastically declined. For example, you could purchase a automobile dealer for a very good price right now and when the economy turns around, you will be in a good position to grow your business.

The biggest problem with old businesses is that many of them are based on consumers having a lot of credit. Of course the objective of the government stymulus package was to hand out money to get us all spending again so that these businesses don't fail.

Without credit, many products cannot be purchased because very few people have any savings. Also, many products that were hot items during the boom years are in abundance (like cars, furniture, houses, etc.)

2. Old Businesses Based on Customer Habits and Loyalty

Some businesses will find that consumer habits and customer loyalty will save their business – that is if your product is continuously needed. Even some luxury products could manage to survive if their customer loyalty is strong enough. But, the longer the recession lingers, the further your customers will be stretched and the social pressure to break their habits will eventually overcome the social pressure to maintain their habits.

For example, if someone bought a new BWM every two years, their family and friends will be looking for them to continue this habit. If they don’t purchase a new BWM when two years are passed, then their neighbors, friends and family will start thinking something is up and the social pressure will be on this person to make the purchase or face everyone’s questions about why their didn’t.

Eventually, if the recession lingers, this persons’ co-workers will all change their habits to buy a cheaper vehicle and that will remove the social pressure of this person to purchase a BWM and lead to a change in their habit.

The businesses that are in this situation need to realize the window that they are operating in and they should either start investing in other lines of business or find a buyer for their business before the market collapses when customers change their habits.

3. New Businesses

This is the exciting one. As the recession deepens, more and more customers will begin to completely change their lifestyle and find new suppliers of new products to meet their new needs.

This is what has happen in the garden seed business, as mentioned above. Any business that can grow during a massive recession, based on new consumer demand has the potential to explode when the economy rebounds. And the longer the recession the better, because the longer that consumers change their ways the more likely they will become habits.

Creating a new business takes a lot of vision for what will happen 3-5 years from now so that the most accurate decisions about investments into the business can be made today to prepare the business for the growth that is coming, while avoiding the pitfalls along the way.

One of the biggest challenges are going to be trying not to compete with the government, because any industry that competes with the government is setup to fail. As the government grows into the lender of last resort for houses and cars, bankers are not going to be able to compete with the government.

This is why the health care insurance industry is terrified of the Obama health care plan, which includes a proposal for a government health care insurance provider. A government health care insurance provider would have a competitive advantage backed by the ability to set prices and operate at a loss and print money to make up the difference. No private health care insurance provider will be able to compete with these advantages.

With this in mind, stay away from anything the government is getting into, like health care, green energy, education, automobiles, etc.

The government involvement in all of these industries will eventually lead to a government sponsored monopoly (like Freddie Mac and Fannie Mae of the mortgage lending industry) - as competitors are run out of business.

This is a great time to start a business. The big question is what is the real consumer demand? What are consumers going to want to buy for the next 5 years? If the recession lingers, then a safe bet is to build a business model based on todays consumer demands and assume consumers will continue to turn from their old spending habits towards new markets.

The strategy is to be there waiting for them.

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Why America May Never Recover From the Recession: Series Introduction

Fri, 12 Jun 2009 17:08:00 GMT

The ‘last days’ are described in the bible as the days shortly before the return of Jesus.

Many economist today look as the current US recession as a short-term problem, which will eventually pass and the US will return to its prosperous ways.

Many believe that if the government can only make quick and thoughtful policy changes we will re-emerge from the recession – like we have in the past.

Few economist look past the talking points of Wall Street and the political optimism to uncover the real financial mess that we are facing. Few economists can even fathom how a nation of abundant riches just a few years ago, could suddenly be completely broke.

Abundant Riches

The truth is very difficult to realize without starting with the correct assumption. The assumption that we were a nation of abundant riches just a few years ago is completely false because that assumption is based on a phony economy that was build on over consumption and funded with foreign credit.

The so called abundant riches that we spent were not our money to spend. The US was actually broke a decade ago – but the previous decade of creeping socialism engulfed political thought and blinded them from making the hard decisions that needed to be made.

Allan Greenspan and company led to the financial meltdown that we now face with the idea that the Federal Reserve could juice the economy and avoid any downturn. The resulting housing and stock market bubbles have now popped leaving an unimaginable mess.

The Obama administration walked into a financial mine field, with industry after industry collapsing around them – and their assumption that the nation has abundant riches – only lead them to compound the problem by expanding the government and the currency supply – pushing us even faster to complete financial meltdown.

Big Picture

When the facts are analyzed and the big picture is truly understood – the magnitude of the financial collapse that the US is facing looks to be at best a 10-20 year point of recovery – much like the great depression of the 30’s.

The few economists that see this picture, like Peter Schiff, Thomas E. Woods, Ron Paul, Jim Rogers, and others – do not have a biblical prophetic outlook of the world – and therefore they all see a future in which the US could eventually do the right thing and return to capitalism and possibly remain a superpower.

Prophetic Perspective

The difference between me and these economists is that I have a keen interest in studying biblical prophecy and have found an alarming situation in which the US does not have 10-20 years to recover.

Even a quick study of biblical prophecy clearly shows that the ‘last days’ are upon us and the US is not recorded as a major world power during that period of time. Therefore, it is quite possible that the US will never recover from the current recession until the end of this age, which is marked by the return of Jesus to rule the world from Israel.

In this article series, I will attempt to explain the biblical prophecies that illustrate why I think the US is unlikely to remain a world power.

I like to write about biblical prophecies in relation to world economics because few people have this understanding and therefore this information gives me a uniqueness that is not easy to duplicate.

My plan is to write one article per week each Friday to complete this article series. Here are the titles of each article that I intend to write.

Part 1: The Rebirth of the State of Israel
Part 2: Israel Becomes the Center of World Conflict
Part 3: The Anti-Christ Comes to Power in the Mists of Extreme Global Financial Trouble
Part 4: Global Climate Changes Increase in Frequency and Intensity
Part 5: America is Not Recorded Among the World Powers at the End of this Age

An Obvious Setup

In essence, what I am saying is that the Lord God Almighty is directing the world down a path to fulfill these prophecies – just as He has throughout history to bring about many other prophecies. What I see today is none other then the setup of the worst possible global meltdown in history. The coming inflationary meltdown is so obvious that it cannot be blamed on foolish men acting alone.

The Lord has brought great dilutions to world leaders so that they would make the economical mistakes they have and continue to make to lead the world into a global financial meltdown – so that world powers will shift into the correct position for prophecy to be fulfilled.

It is important to realize that if any one of the prophecies of the Bible does not come true, then the Bible couldn’t be the true Word of God – which is claimed by God himself. Therefore, God would be a liar and His reputation would be damaged. Men are not in control of the global economy like they think they are.

God said He would gather the Jews together again as a nation in the last days because His reputation or His great name is at stake to fulfill His covenant with Abraham, Isaac and Jacob to make them a nation which all blessing would come to the world – which was fulfilled by the birth of Jesus – and now that nation has been restored to fulfill its final destination. (Ezekiel 37)

Few Are Listening

This is a fascinating time to study Biblical prophecy because so many prophecies are being fulfilled in a short period of time and it is much easier to follow along with historical events then at other period of history where few prophecies were unfolding. I hope you will join me and read along as I explore this subject in the articles to come.

The irony of this article series that there are also prophecies that say that men will have itchy ears in the ‘last days’ and will not be interested in hearing what the Lord is doing, but instead they will only listen to what they want to hear. Paul describe the apostasy that will engulf the church of Jesus Christ in the last days -- itchy ears.

"For the time will come when men will not put up with sound doctrine. Instead, to suit their own desires, they will gather around them a great number of teachers to say what their itching ears want to hear. They will turn their ears away from the truth and turn aside to myths. (2 Timothy 4:3)"

This is the reason Biblical prophecy is being ignored today. Most churches in America have turned to other self-help material because that is what people want to hear.

To make matters worse, the watered down modern churches have lost their ability to share the true message that Jesus told us about - that the universe is about His Kingdom. Many observers of the church today discard the Christian faith as nothing but a support system for weak minded people. While it is true that the Christian faith is a support system, it is also the only source of truth.

Without Christ, you are living your life in the dark.

The truth maybe hidden but none the less, it is still the truth. The God of the Bible is the only living God and His plan for the history of the world that He created is unfolding just as He planned.

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My Next Automobile May Just Be a Hummer

Thu, 11 Jun 2009 16:01:00 GMT

A Hummer is a pretty cool automobile and economic conditions are increasing my opportunity to get my hands on one.

When I buy a vehicle, I usually start looking around about one to two years before I make a purchase. That way I have time to find the perfect match for my needs at a price that I'm willing to pay.

I currently have two Ford Escapes’, one for my wife and one for me. A Ford Escape is a small SUV. We have three kids but have refused to join the mini-van trend. In college, I had a sports car, but living in MN is not easy without four wheel drive and a larger vehicle for halling kids around.

The recession is creating opportunities for some and losses for other. One of the keys to successful personal finances is to always look for opportunities. Last summer, when oil prices when to $145 per barrel, my friend bought a Chevy Suburban at a price that was never before imaginable.

The collapse of GM and the increase in oil prices are once again going to push down SUV prices - at least until the inventories are reduces, at which point prices are going to spike due to the increase in commodity prices which are used to produce these vehicles. GM is in the process of selling off the Hummer brand, which will further reduce demand as people worry about who will serve the vehicle warranties.

My wife doesn’t like a lot of vehicles and for some reason she likes the Hummer. I would prefer a black BMW, but then I would have to park it in the winter and I couldn’t take the kids anywhere. A Hummer on the other hand could do all of these and would also be larger then our Ford Escape – of course we would get the smallest Hummer the H3.

We don’t drive a lot of miles per year because we live fairly close to most of the places we travel too. That allows us to purchase a vehicle with higher miles for an even better price. I like to purchase a 1-2 year old vehicle with high miles and then drive it for 7-8 years.

This strategy seems to work out the best for our low mileage needs. The only way to put a lot of miles on a vehicle in a few years is highway miles. Therefore, most newer vehicles with a lot of miles are just bairly broken in - yet they sell for 1/2 or 2/3 the value if they were new.

Cost of Gas

Because we only drive about 8k per year (compared to the national average of 12-15k), we don’t have much of an impact with higher gas prices. For example, if gas goes from $2 to $3 per gallon, our additional cost per year is only, (8k / 22 miles per gallon * $3 per gallon = $1090) - (8k / 22 miles per gallon * $2 per gallon = $727) = $363.

A H3 Hummer gets 14 miles per gallon. If gas prices increase to $3 per gallon, then driving a H3 Hummer vs. a Ford Escape will increase our gas cost per year by, (8k / 14 miles per gallon * $3 per gallon = $1714) - (8k / 22 miles per gallon * $3 per gallon = $1090) = $624. That is about $52 per month. Over 7 years, a Hummer will increase our cost of gas by $4368.

Taken together, that is a lot of money. But any other larger vehicle will increase our cost of gas to some degree.

Total Cost Per Mile

Another matrix that I like to calculate is the total cost per mile. The total cost per mile is the cost of all expenses divided by the miles driven. For example, in collage I drove a small car for 7 years and averaged $0.33 per mile.

Here is my estimated cost per mile of a Hummer

Annual insurance - $600
Annual maintenance (tires/brakes/cleaning/oil changes/etc.) - $1200
Annual gas - $1700
Cost to purchase subtracted from selling price - $20,000 - $7,000 - $13,000
Yearly Cost of Ownership = $600+$1200+$1700 + ($13,000 / 7 years) = $5,360
Cost per mile = $5,360 / 8,000 miles = $ 0.67 per mile

In Summary, here is a list of reason I'm considering in purchasing a Hummer

- Collapse of GM, drop in demand – better price
- Increase in gas prices, drop in demand – better price
- Larger vehicle for growing kids
- My wife likes them
- Luxury vehicle

On the Other Side

Ok, so I could get a good deal on a Hummer, but as you know I believe the recession will continue to get worse and its very hard to tell when we will even see the bottom until the government reverses course on its monetary policy, which Obama is just starting to realize he is going to be forced to do.

So I like to dream a little. If the economy continues to worsen and my job become a victum of the recession, then I would regret making this purchase - and we may end up selling one of our other vehicles just to survive. The recession is far from over, but if the bond market collapses sending interest rates higher and gold and oil prices spike - as they are starting to, then my investments will payoff big time and I will have the money to purchase a Hummer in a year or two when we are looking to purchase a newer vehicle.

What you do think, would you purchase a Hummer?

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US Decoupling Is Underway

Wed, 10 Jun 2009 17:09:00 GMT

The idea that someday the US economy would no longer be the driver of global economic growth is often referred to as ‘decoupling’.

Many economist and politicians have dismissed the idea of ‘decoupling’ and instead hold on to the belief that the US will remain the global economic leader for decades to come.

Their assumptions are based on the fact that the US economy consumes much of what the world produces and remains the largest economy in the world. The US economy makes up 25% of the global economy.

Manufacturing

While the US manufacturing industry has maintained in a leadership position in several markets, like construction and agricultural equipment, it has been shrinking in many other markets for many years.

If true wealth is only produced by savings and production, then it will take a US manufacturing industry coupled with a renewed increase in the savings rate to lead the US out of the recession. But, with negative savings rate and trillions in consumer and national debts pilled sky high, along with a much smaller manufacturing industry then during the industrial revolution, the US is not likely to strengthen its economy or lead the globel economy.

China recently stated their distaste in the US budget plans to further borrow and spend trillions of dollars, in an effort to juice the US economy. This plan puts China is a difficult situation in which they are now considering their options to diversify their dollar based investments to avoid a loss in value of their investments.

China would prefer that the US cut spending and increase savings and production to lead the world back to economic growth.

Decoupling

The decoupling process that has been overlooked and discarded by many economists is accelerating. The theory of why decoupling would not happen is bases on if the US consumers are no longer consuming, then many of the producer nations will be in big trouble - unless of course, other nations begin consuming the products that the US was consuming in the past.

The two largest producers in the world, China and Japan, are seeing steady increases in their exports. But, how could this be if they are dependence on US consumers?

Japan Industrial Output Recovers, Up Most in 56 Years

China manufacturing sends stock futures sharply higher

What seems to be happening, as the US economy remains in recession, is that the economies of the world that have savings to spend are increasing their consumption.

The end result of decoupling could be very damaging for the US. Once the producer nations realize that the US consumers are no longer going to be their best customers, then they could reduce their investments in the US.

Much of these investments end up in the hands of US consumers – by way of credit. The longer the US remains in recession, the more decoupling we will see.

The process of decoupling is well underway. The nations that are wealthier then the US (in which wealth is defined as savings and production) have begun leading the world out of the global recession and are leaving the US behind in the process.

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10 Reasons Not To Use Credit Cards

Tue, 09 Jun 2009 14:00:00 GMT

The rapid expansion of credit that allowed America get into trillions of dollars in consumer debt over the last few decades has been made available by the easy use of credit cards.

The economic collapse could have been prevented were it not for the expansion of credit and the increase in supply of money by the Federal Reserve’s low interest rates.

But, now that we are hear – in the middle of the worse economy collapse since the great depression – we need to reverse course.

Wealth is produced by savings and production, which is why China is growing in influence and America is slipping. For the same reason, America led the world since the industrial revolution. True hope for a better economic future is found in saving money.

The economy is in desperate need of a sharp increase in savings to recapitalize the banks to provide much needed loans to new businesses – which are the source of new jobs.

The government should been running a public campaign to increase the personal and national savings of our great nation – along with removing tax and policy burdens that are hindering new business growth.

In a word, saving money is very patriotic and just may become as important in defending our nation from economic destruction as fighting with guns.

Much of the credit card industry investors are foreign banks and therefore increasing credit card debt is further selling our nation into financial bondage.

I have read many reasons that people like to use Credit Cards, but I believe they are doing much more damage then good, so here are 10 reasons not to use Credit Cards:

The expansion of credit is the source of the financial collapse, why expand it more?
The average person spends 18% more with credit cards then with cash
Credit cards increase your risk of identity theft
Credit cards can be more work to manage then they are worth
Credit card rewards are a trick to get you to spend more (and it works)
Credit cards easy to get behind on your monthly payments
Credit cards make it easy to make a quick bad decision
Credit cards are harder to keep track off then a checkbook, because you have to either collect recites or wait for the monthly statement or sync with an online budgeting software to balance your checkbook – which I have found to be a big investment in time and difficult to customize. The best option to manage your money on a weekly base’s is with a pencil and paper.
Credit cards add another monthly bill to worry about
Credit cards are a fast track to debt, which is financial slavery, not financial freedom

I hope this list convinces a few that using credit cards for consumer spending is never a good idea. Credit cards should only be used for business use, guided by profit and loss to increase the wealth of the business owners.

No economy can perpetually over consume. When consumers spend money on credit they are over consuming and periods of over consumption leads to periods of under consumption to balance how much a fixed group of consumers can consume before running out of money.

A limited amount of poeple, working a limited amount of hours, share a limited amount of money that can be spent through our life. Therefore our money supply or the wealth that we have as a nation is limited. A limited supply of wealth means that it is impossible to borrowing and spending our way out of debt.

We cannot over consumer our way out of a recession that is a result of over consumpion. With another 345,000 jobs lost last month, the situation is desperate to convince the nation of this bacis princible of economics.

Wise up and throw away your credit cards.

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How the Federal Reserve Created the Recession and How International Central Bankers are Making the Same Mistake

Mon, 08 Jun 2009 15:00:00 GMT

The goal of the Federal Reserve is to stabilize the economy, yet it has become apparent that their actions have only distorted the markets, creating booms and busts.

The primary tool by the Federal Reserve is its control over the Federal interest rates, which are used my all banks to borrow money. Control over bank interest rates makes the Federal Reserve a Central Bank. Central Banks are found in many counties although it has been a long standing debate as to whether a central bank is necessary.
If a government is willing to trust the interest rates that are set by the market, then a nation has no need for a central bank.

How The Federal Reserve Manipulates the Economy

The problem is when Central Banks act to manipulate their economies for short-term reasons like to pay for a war or for political gain. These short-term decisions to lower the interest rates to juice the economy have tremendous power in boosting the economy.

The side effect is that businesses are misguided into bad investments. Many businesses are created out of the boom that are not sustainable, yet that appear like good investments at the time. This is how nations over build houses and automobiles - we just did in the last decade.

The longer that interest rates are held lower than market rates, the more bad investments are made. The bust comes when the people begin to run out of credit to purchase the products that were over produced. This tipping point is the beginning of a recession and the beginning of the realization that many of the businesses during the boom yaers have been over invested in and are unsustainable (like GM).

The recession that we face today is a direct result of the artificially low interest rates of the last decade that the US Central Bank used to juice the economy.

Global Central Banks are Making the Same Mistake

The only way to fix the problem is to allow the bad investments to clear the market (let businesses fail) and then set the interest rates back to rates that are supported by the market – driven by profit and loss risk dynamics. But, instead of letting that take place, the US Central Bank has lowered the interest rates once again to near zero – and global Central Banks have followed.

It’s like when your car starts to slip on a patch of ice and you over correct the problem by turning the wheel too hard in the opposite direction only to realize that your car is now slipping even more in the other direction, at which time to turn the wheel even harder in the other direction and end up rolling over in the ditch. The second correction only made the problem worse than your first correction, just as the Central Banks are doing.

It’s time to abandon political party politics and find someone that can steer the economy back onto the road by letting go of the wheel before we end up in the ditch with the nation in total collapse.

Senator Ron Paul is the only politician who seems to understand the damage that the Federal Reserve has caused and that should be enough to listen to what he is saying.

Obama needs to abandon his political agenda and focus on long-term solutions to the economy. We needs record spending cuts rather than record spending increases. If he does not change direction soon, Obama is going to lead the nation into a Depression.

If the Fed continues to ignore the warning signs and carry on inflating the money supply, the risk of hyperinflation becomes severe. A deep recession is the only solution to the problem created by the Federal Reserve, to flush the bad businesses down the drain and allow new businesses to be built on predictable consumer demand.

This unnational disaster that is desperately needed is not politically popular to say the least, but is essential to rebuild the economy. But instead of facing a very bad recession caused by failed monetary policy, we have spread the fiscal madness around the world like a plague - leading the entire world into a sea of inflation.

Great Danger Is Just Ahead

Great danger is just around the corner for America and the rest of the world who have followed us into the snake pit of hyperinflation. Inflation is not like other economic problems that can be rationally dealt with. Inflation is not controllable and is very difficult to face.

Inflation is like trying to stay standing during an earth quake, when the ground under your feet is shaking. Inflation removes the most fundamental constants of an economy in stable prices. Unstable prices leads to unmanageable accounting, by governments, businesses and individuals. No one can calculate the cost of goods or services in an inflationary economy – because they are constantly changing.

This week I participated in several blog carnivals

They did an excellent job and as usual, there are tons of great articles. If you have the time, I highly suggest you skim through this week’s carnivals.

Carnival of Personal Finance: Vacation-time edition

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Cap-and-Trade Legislation Will Cost Millions of Jobs

Fri, 05 Jun 2009 13:58:00 GMT

The Obama administration is in the process of pushing new legislation through congress to add a new tax to all coal producers under the assumption that coal producers are behind the climate change.

The assumption is that coal producers are adding to the carbon emissions in the atmosphere that is perhaps causing the climate change. Despite the hundreds of scientists that disagree that with this claim, Al Core has pushed this message with a book and movie and has investing millions into green energy companies.

Al Gore used his political influence to lead the effort against carbon fuels. Gore was also a strong supporter of Obama, and would significantly benefit from the cap-and-trade legislation.

When questioned by Congresswoman Marsha Blackburn (R-Tennessee) last week, Gore replied that he gives every penny to a non-profit – that he of course chairs.

The cap-and-trade legislation is not going to stop carbon emissions just as cigarette tax does not stop people from smoking. If fact the government doesn't want to stop carbon emissions for the same reason they don't want people to stop smoking, because they would loose the tax revenue. This is just another way to increase taxes without increasing the income tax.

The legislation is estimated to cost the economy three-to-six million jobs – and cost each household between $1600 and $3300 a year in taxes.

Government Needs More Money

The real reason behind this legislation is that the government has run out of money and needs to find new and creative ways to tax people without increasing income taxes because that is politically challenging.

The government has expanding so large that it is beyond the support of the economy. The economy has toppled under the tax burden of the government and the government’s solution is to expand and increase the taxes even more. The cap-and-trade legislation is an unsustainable tax burned that the economy cannot afford.

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If All Hope is Placed In Obama and He Fails, Then What?

Thu, 04 Jun 2009 19:51:00 GMT

It amazes me that almost all financial media outlets have placed all their hope in Obamas’ economic central planning to revive the economy.

The critics of the largest budget expansion in history are being minimized on radio, TV and the Internet. It’s like if no one in the liberal media (who helped get Obama elected) wants to question the idea of expanding the money supply by trillions of dollars.

When the recession started, the Bush economic team was doing the same thing as the Obama economic team to a smaller degree. But, now that the 100 day honeymoon is over, no one wants to talk about the potential consequences of the monetary policy of the Obama administration.

Unemployment Continues to Rise

Tomorrow the unemployment rate is likely to reach 9.2% with another 500k jobs lost last months. So far 4.7 million jobs have been lost and all the financial media want to report is that the Obama stimulus has (perhaps) saved 150k jobs.

When will the media and the people wake up, smell the coffee and realize that the stimulus package is only making things worse and causing more long-term damage to the economy?

In an article today, I read states are proposing $24 billion in new taxes

"States are poised to pass as much as $24 billion in tax and fee hikes in coming weeks, as they struggle to balance their budgets amid the worst economic downturn since the Great Depression, a report released Thursday found."

How are consumers that our living on credit and underwater on their mortgages going to pay these tax increases?

Government Budgets Needs To Be Cut In Half

The big difference between the state government and federal government is that the federal government has the Federal Reserve, which is expanding the currency to pay for the expansion of the federal government. The states do not have a printing press and they cannot borrow money indefinitely.

Governments need to drastically cut spending and turn up the support for entrepreneurs to create new jobs. The trillions that Obama is spending to stimulate the economy is in many ways delaying the recovery. Taking money from successful businesses (through taxes) and giving it to unsuccessful businesses (like GM) does not allow the new businesses to get the capital loans or the employees that they need to build their business.

Also, the additional ‘red tape’ that the government is adding with new banking regulations and trade-and-cap (oil and coal) regulation and the governments influence in managing health care work against entrepreneurs. These new policies will increase the costs of energy, banking and health care.

The real ‘Change We Need’ is to get this big government guys out of office and elect small government guys. We need to elect small government guys at every level within the state and federal governments to reduce the burned of government on the economy so that the entrepreneurs can rebuild a marketplace with new jobs.

The federal government needs to take another look at the budget and instead of increasing the budget by 2 trillion; they need to cut the budget in half and make it as easy as possible for small businesses to get started by dropping all policies that hinder them.

If Obama Fails

Right now everyone seems to believe that Obama is going to pull off the largest upset of his life and turn around the economy by re-inflating the bubble economy. If he succeeds, we would only be facing another recession when the inflated bubble bursts again. And if he fails – which no one wants to discuss - but if he fails - we will soon be facing rising inflation, increasing energy costs and a sinking dollar, all on top of the recession.

In recent months the bond market is starting to tell us that the world is not willing to support our economic plans.

And there is no easy way for the Federal Reserve to extract the trillions that they put into the economy, which is essential to stop a massive wave of inflation that is headed towards our short line.

The price of oil and gold are already on a steep upward path. Very soon, the mainstream financial talking heads that everyone is listening to will be saying the same thing they said when the housing market collapse started, “What happen, and why didn’t anyone see this coming?”

The worst part about this is that many of the central banks around the world are following Obama’s lead and inflation their currencies as well. Now that no currency is backed by anything anymore, central bankers are free to inflate their currencies and that is what they are doing at an alarming rate.

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Should I Stop My Mortgage Escrow?

Thu, 04 Jun 2009 15:38:00 GMT

Last month I got a letter from the bank holding my mortgage saying that I can discontinue my mortgage escrow account.

Apparently there is a law in MN that says that after paying five years of a mortgage, the bank no longer has to manage an escrow account with a mortgage. An escrow account is a pool of money collected with a monthly mortgage payment that is used by the bank holding the mortgage to pay the property taxes and homeowners’ insurance premium.

An escrow account reduces the risk of a homeowner not paying their property taxes or homeowners insurance. Most banks will give a lower interest rate to borrowers if they agree to an escrow account because it lowers their risk of foreclosure.

So, the question is should I cancel my escrow account or not? Here are some of the advantages and disadvantage that I can think of.

Advantages of Escrow

The obvious advantage is that I only have to pay one bill each month and the bank takes care of saving some of the money each month in an escrow account and making sure my property taxes and homeowners insurance is paid.

Without an escrow, I will have to manage my cash flow so that I will have enough money to make my property tax and homeowners’ insurance payments twice a year when they are due - another bill to remember.

Disadvantages of Escrow

An escrow account increases my monthly mortgage payments by $200-$300. The escrow money is put in an account with the bank and therefore I lose the opportunity to invest this money and earn any income with it. This could also help pay off my mortgage sooner.

An escrow account causes my monthly mortgage payment to change with my property taxes. My mortgage payment is automatically withdrawn from by checking account, but I don’t like when it changes because I have to adjust by checkbook balancing with the new account. Today, whenever my escrow account is underfunded or overfunded because of a change in property tax, the bank changes my monthly mortgage payment to increase or decrease the amount of money that is collected for my escrow account. This is annoying to say the least. If I were to pay my property taxes separate from the mortgage payment by cancelling my escrow, then my mortgage payments would no longer fluctuate.

What would you do?

I am strongly considering cancelling my mortgage escrow primarily for the opportunity to invest this money and make an income before the money is needed.

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California to cut billions in Welfare and Healthcare

Tue, 02 Jun 2009 13:47:00 GMT

Last week California Gov. Arnold Schwarzenegger proposed eliminating welfare for 500,000 families and terminating health coverage for nearly 1 million children to help close the state's ballooning budget deficit.

Also among the proposed cuts are stops to college fee assistance for thousands of students, fewer vocational training opportunities for state inmates and the elimination of $70 million in funds for the state parks – which would essentially close 220 state parks.

The state is trying to close a ballooning $21-24 billion deficit.

Schwarzenegger's previously proposed cuts include laying off 5,000 state government employees and cutting billions of dollars from K-12 schools, and shortening the school year by a week. The governor had warned of major cuts if voters defeated last week's ballot measures, which they did.

He said that "if we don't make those cuts, I think we will face catastrophic consequences because the state would simply run out of money and get insolvent, which we cannot afford to do."

Raising Taxes

The governor has said he would not support further tax hikes after agreeing to $12.8 billion in higher sales, personal income and vehicle taxes earlier this year.

If they raise tax any higher, more people will simply migrate to other states that have lower taxes.

Federal Bailout

Later in the week, the governor asked the Federal Government to co-sign their bonds so they can get lower interest rates – because the state’s credit rating is very low. But, if Obama were to come to the rescue and co-sign their bonds with Federal dollars it would only put the entire nations credit rating at further risk and California would put off making the necessary cuts that are needed for long-term recovery from the recession.

Also, if the Federal government bails out California, several other states will line up behind them looking for their bailout and it will be next to impossible for the Fed to deny them. This would create a wave of state bailouts that would put the AAA credit rating of the entire nation at greater risk.

As I wrote a few months ago, California is going to have to make drastic government cuts.

And now that the bond market is weakening and the dollar in sinking, there is little the Federal government can do in borrowing more money. The only other option is to print the money and debase the dollar, which will solve the problem in the short run – but create massive inflation in the long run.

The best solution is for states to make the drastic cuts. For the sake of the survival of the nation from financial collapse, Obama should not help the states.

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The Last Shoes To Drop, The Bond Market Begins Its Long Evaded Crash

Mon, 01 Jun 2009 13:00:00 GMT

Government bonds are simply a promise to give your money back with interest sometime in the future.

Peter Schiff predicted years ago that the dollar will eventually sink, as the currency of the largest economy in the world is forced to pay for decades of over consumption.

Reading Peter's 2006 book "Crash Proof" is like reading a history of what happen in the crash of 08. Every detail of the subprime housing bubble inflated by years of low interest rates from Allan Greenspan led to the housing crash that started in 07 and the stock market crash of 08 was written before it happen. The only part of Peter's book that has not come to past is beginning to unravel before our eyes - the bond market crash.

In the last few months, the bond market has started to show some troubling signs and the dollar is dropping faster then ever before. Up until a few months ago, the bond market has been strong as the demand for safety has kept many investors invested in the bond market.

But now that the global economy is starting to show that it has not been as devastated as badly as everyone thought by the US recession, investors are moving trillions into foreign investments with more promising futures.

The US economy is in shambles, consumer are broke and inflation is about to run wild as trillions of new dollars start to circulate.

A collapsing bond market means higher interest rates. Higher rates will decimate anyone with any debt, whether they are individuals, companies or governments.

President Obama likes to believe the recession is only a temporary problem and that the US is 'abundantly' rich with wealth beyond any other nation. This is nothing more than presidential optimisum. The real econonmy cannot support the over consumption of the past decade, funded by credit expansion and massive debt.

The bond market crash that is just getting started is about to take the wind out of any hope of economic recovery. Interest rates have already begun climbing, which will further depress the housing market and push oil and gold prices up. Then, inflation will terrorize the economy with unstable prices. The true terrorists are in Washinton leading the nation to bankruptcy.

The recession is far from over, the housing market crash of 07, stock market crash of 08 and now the bond market crash of 09 – what could be worse?

If the government does not change directions quickly and stop increasing the money supply while expanding credit we could see a currency crisis in 2010.

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Open Communications Is More Profitable Then Keeping Secrets

Mon, 01 Jun 2009 04:08:00 GMT

Keeping secrets can sometimes seem like the right think to do to protect a secret that looks to be more damaging then sharing it.

Most of the time, information is not shared with everyone out of fear of what may happen if the information is known by other people. But a lot of times keeping secrets can be even more damaging.

Sharing Information Increases Profits

Publically traded companies must legally share financial information in order to protect their share holders and pay their taxes. But, almost all companies (public or private) share much of their financial decisions with their employees because they have found tremendous value is motivating employees through transparency.

Informed employees are much more motivated to work for a company that they believe they can trust and sharing information is one of the best ways to build trust between two parties. That increased motivation results in an increase in efficiency and eventually in profitability.

In the same way, family communications is essential for building a strong marriage. A strong marriage is built on intimacy and intimacy is built on openness. Sharing information without holding back builds trust and intimacy. Two people working together in a trusted relationship have the advantage of making better financial planning decisions then one, leading to a more financial success. Open communications can also help reduce the chance of a divorce, which is a very expensive process.

Hiding Information Reduces Profits

Hiding inflation from employees results in the exact opposite. Sometime it may seem beneficial to kept information away from employees in the short run, but in the long run is it almost always more damaging. Employees remember things for a long time. When employees find out that their company lied or mislead them, they loose trust and begin thinking of ways to move to a different company that they can trust.

Uninformed employees are also less motivated to work hard for a company that they believe is keeping secrets from them. The number one reason that people work for a company is for security. If they do not feel that their jobs are secure, they loose faith in the company and begin thinking that the company they work for will not be their long term employer. Productivity and profits begin to shrink when employees cannot trust the company they work for.

Even governments realize the negative effect of hiding information. One of President Obama’s campaign platforms was that he was going to increase the transparency of the Federal Government.

In the same way, keeping secrets in marriage is just about the worse thing to do. Without open communications on a regular basis, it becomes very difficult to trust each other. Without intimate and open communicate about life goals, how can two people make financial planning decisions based on common goals? They cannot. Therefore, secrets lead to separate goals with separate financial planning strategies that usually conflict with each other. It’s not hard to predict the end result, less financial success.

When to Keep a Secret

There is a time to hold back private or intimate information to protect someone or to protect a company. For example company trade secrets and patent rights are protected by law. Also, many time sales contracts are kept private to protect a company from its competitors.

Communication is one of the most powerful forces in human civilization and I’m not about to pretend that it’s always easy to know when to keep information secret and when to share it or who to share it with. Governments all of the world spend billions on agencies like the CIA to gather information about other countries who try to keep information secret.

Knowing how to share information is one of the most dominating characteristics of leadership. Whether you are leading your family or leading your business, investing in your communication skills is perhaps the best way to increase your personal finances.

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