Category Archives: politics

Pension? What Pension?

I read something interesting yesterday in the Wall Street Journal.  Turns out that states are facing a $1 trillion gap between the money they have promised pensioners and the money they have set aside to pay them.  That does not count the massive investment losses they faced in the second half of 2008, from which they have not recovered.

Did I say “interesting?”  Let’s try “criminal.”  I, for one, have not believed states would be able to pay pensions for some time now.  Some third-grade math was all it took.  The zeros were a little hard to manage until I saw this neat little analogy on the national debt clock web site.  If you were to spend a dollar a second, it would take 12 days to spend a million dollars.  Now, how much time would it take to spend a trillion?  (I’ll wait for you while you calculate this.)

Back?  OK.  The first thing you found out was that your calculator does not work with that many digits.  If you are math-compulsive, you got out a piece of paper and started to work.  If not, you waited for my answer: 32,000.


In other words, don’t wait for that gap to be filled.  Ain’t gonna happen.  Here’s why.  If states start to go bankrupt, something that was unthinkable until now, the money obviously will not be there.  But the Feds!  They can save us!  After all, they can always honor their obligations–by printing more money.  There, my friends, is the real problem and a good reason to be worried about your retirement even if you are not a public employee.

Historically, printing more money has been the favored solution of governments when things go bad.  They say they won’t do that, but in the end they always do.  From Ancient Athens to Zimbabwe in 2008, the result is always the same–a swift and ugly currency crash wherein money becomes worthless overnight.  Zimbabwe’s inflation rate reached 98%…PER DAY.  That means it took slightly over 24 hours for prices to double.

There is only one solution at the national level, and that is for politicians to face up to the fact that they have promised way more than they can deliver and cut expenditures.  Whew, that was a good one.  I crack myself up every time I say it.

There are some things we can do, however.  It is sometimes said that the best attitude when going into battle is to pretend that you are already dead.  Do what I do and pretend that your retirement is already dead.  Figure out how to retire without it.  One person I heard of recently bought two haircut franchises even though she is years away from retirement.  Why?  Because people will probably buy haircuts even when they can’t afford luxuries.  And inflation?  Well, if we experience true hyperinflation, all bets are off, but she still stands a better chance than most because her prices will rise accordingly.  If none of this comes to pass, so much the better.  She will have her company retirement and her franchise income.

Learn to make money in a side business or invest in things that stand at least some chance of surviving the coming earthquake.  If you think the politicians will save you, I have a business deal I’d like to discuss with you…


Terry is constantly amazed at how little people learn from history.  He is also amazed at what he saw in New Orleans in 1976, but that’s another story.


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Diversify Your Knowledge, Not Just Your Stocks

Unemployment is its highest in 25 years.  Some say the picture is much worse and is being masked by changes in the way unemployment is measured.  No matter where each of us is on the political spectrum, or whom we blame, we have to agree that times are tough and getting tougher.

Financial advisors almost universally recommend a “diversified” portfolio of paper investments: stocks, bonds, and mutual funds.  Before I go on, let me remind the reader that I am neither a certified financial advisor nor do I play one on TV.  I encourage people to learn more so they can make up their own minds.  This traditional advice may have had some merits at one time.  A few people probably made it just fine with such a plan.  Times are different now, and there are a number of reason to expand your thinking.

First, paper assets such as stocks can bonk.  “Bonk” is a technical term for what happened last fall.  Stocks fell as much as 40%  People who thought they were diversified got clobbered as their entire portfolios dwindled to a fraction of their former worth.

Second, the “value” of the stock market and other similar investments is partly an illusion.  When we put our money into such instruments, we are usually planning to use the money later.  If that money only buys a fraction of what it did before, the fact that the market is “up” is true, but useless.

Third, and this may be the clinker, the market depends on levels of buying and selling.  Since people who are retiring usually get their spending money out of the market by selling their stocks, the value of those stocks can be depressed when the number of sellers increases.  We are about to face a massive amount of selling for that very reason.  Baby Boomers will soon be retiring in droves.

This leaves us with a problem.  How can each of us build a more stable kind of wealth–the kind that at least buffers the vagaries of the stock market?



Learn all you can now about building supplementary income.  You will find that true diversification involves non-paper assets like real estate and precious metals.  You will learn why having a side business can help you build real, lasting value.  And, you will see that with some discipline and desire, you can survive the coming storm.

— Terry writes this blog because he loves you.  Well, maybe “love” is too strong a word, but he’s pretty sure he likes you.  At least he likes you well enough to encourage you to learn more about your finances.  Terry has not been on Oprah yet, but if he were, he would tell you to visit to learn out how to start your own business.

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The Coming Storm

What do you do when a storm is coming? If you are tired of hiding in the nearest ditch as the winds howl overhead, you might think about building a shelter while the sun is shining.

The sun is shining right now, believe it or not. For all the turmoil in financial, housing, auto, and insurance markets, business is pretty much moving along as always. By turning on the cash spigot, the Federal Reserve has pushed back the clouds–for a time.

The storm that is brewing has not been tamed, however. This morning, we hear that the deficit reached a record $1.6 trillion for the year ending Sept. 30. Over the next ten years, our national debt will increase by $9 trillion. All this assumes that the health care program now under consideration will not add to the deficit. Mmmmmmm…yeah.

When will all this come crashing down? And when it does, where does that leave you and me? No one can tell for sure whether our economic world will end in fire or ice. Death by fire, hyperinflation, seems the most likely to me. However, to to paraphrase Robert Frost, death by deflation will suffice.

Our economic world revolves around billions, perhaps trillions, of transactions that occur every minute around the globe. We have bread at the bakery only because our local baker can predict the near future. It makes no sense to buy dough to make bread if the price of bread can rise or fall radically in a matter of days. It is impossible to hire employees not knowing whether their wages will even buy a pair of socks next week.

The shelter we all need is between our ears. Those who learn to be entrepreneurs while there is time will survive, even prosper, as the economy melts or freezes. The rest will likely succumb to the elements. Whether we see an inflationary or a deflationary storm, a few basic things can determine which camp you fall into.

First, get interested in your finances. Many of us were raised soon enough after the 60’s to inherit a disdain for material things. We view with suspicion those who focus on wealth, thinking them shallow and self-centered. Horsefeathers. Money is one human value among many, but one without which the others soon dry and wither.

Second, pay off any unproductive debt. Unproductive debt is the kind that costs you money but does not make you any. For example, that car you bought during the Cash for Clunkers program is unproductive debt. And don’t try to tell me it will save you money over your old car. Run the numbers and see. Credit cards fall into this category as well, unless they were used to finance a business or other investment that makes more than you are paying in interest. By the way, read your statements closely. Banks are doubling and tripling interest rates, even on people with perfect credit. Productive debt can become unproductive debt overnight.

Third, expand your investment horizons. The lazy person’s retirement strategy–chuck money into a retirement account and forget about it–does not work any more. Learn which investments hold up better during hard economic times. Find out why holding only stocks, bonds, and mutual funds is extremely risky.

Fourth, make more money and keep more of what you make. I don’t look for the government to back off on spending. Instead, I expect them to raise taxes to unprecedented levels as they try in vain to save the economy. What are the easiest taxes to get? That’s right. Your salary and mine. Having an extra source of income from a business allows you to shield a larger portion of income from taxation.

When darkness covers the land, it is going to require every bit of wisdom and fortitude we can muster. No matter what happens, though, we human beings need each other. Smart people who learn now will be able to look around the rubble and see limitless opportunities. Others will wallow in self-pity wondering what happened. Which one do you want to be?

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Property: The Forgotten Freedom

I think of freedom in straightforward terms. Any individual should be free to do as he/she likes as long as it does not demonstrably impinge on the same rights in others. This idea is not new, of course, but it is largely misunderstood, especially with regard to property.

Were we all composed of pure spirit, with no need to feed, clothe, or shelter ourselves, property rights would be meaningless. Since we are mere flesh and blood, each individual needs to have control of certain things to survive. The reason is simple–most things we need are created, not found.

With the possible exception of air and sunshine, every material thing we need comes about because some individual, often in cooperation with others, has the ability, will, and desire to turn a beneficial idea into reality. Fortunately, the human race has also discovered that trading with others results in more material goods for oneself.

Who owns such wonderful things? In my view, the creator. From spear tip to computer chip, the rightful owner is the person who created it. If he/she contracted with others to create it, that contract defines who owns what fraction of its value.

Some people in society are more capable than others at producing certain things. No one wants to hear me sing opera or see me dance for Chippendale’s. Yet I do not begrudge the vocalists or 20-somethings with six-pack abs their due. Neither should they begrudge me my ability to write a book or teach a class.

Inevitably, some people on the whole are able to create more value than others. They own more things as a result of their benefiting others more. They are better off than others because they are better to others. It is their ability that enables others to benefit from the things they cannot create themselves. The more benefit they provide, the more they prosper.

This is disturbing to those who are less willing or less capable. In the name of “fairness,” they seek to take from the creators and give to those they deem more deserving. The most obvious example is the thief, motivated at a primal level to take by force what he/she either cannot or will not create.

Some people make a profession of taking from the creators and giving to others. They are called politicians. In addition to getting to pat themselves on the back for doing so much good for society, they get a generous cut themselves. Lacking the forthrightness of a thief, they mask their willingness to take from others by force in byzantine tax codes and arcane regulations.

What would our society look like if we were to refuse to allow either thieves or their governmental counterparts to take what each of us has created? Those disposed to believe in the fairy tale of a benevolent and fair government imagine hordes of the poor wandering the countryside, victims of arrogance and callousness of the elite. I see something quite different–the blossoming of a new human spirit.

When people are able to trade freely, they are able to tap their potential for creating value for others. Virtually all human beings have some capacity for doing so. In return, the less capable benefit from the more capable in two ways. First, goods and services are cheaper because capable people compete to provide them without fear of having a large portion confiscated by government. Second, the truly incapable, such as the severely handicapped, benefit from the benevolence of the wealthy. Humanity, for all its tendencies toward wanton cruelty and unjustified violence, has also shown a tremendous capacity for kindness and charity.

This Independence Day, we will all remember the precious rights our ancestors earned for us. Along with your ferocity in protecting your freedom of speech and religion, kindle a fierceness in protecting your property. You earned it, now fight to keep it.

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Killing the Goose

We all remember the story of the Goose and the Golden Egg. Anxious to become wealthy without working for it, the farmer eventually kills the goose because one golden egg a day just isn’t enough.

California voters just sent a message to their politicians that they will not become the second goose to die at the hands of the shiftless and lazy. By an astonishing margin, the general populace told Sacramento that increased taxes and smoke-and-mirrors borrowing will not fly. Let us pause to celebrate a victory.

Most Americans still believe that we each own what we create. To politicians, this is a novel idea. They prefer instead to think of wealth creators as being at their disposal. Not content with only maintaining essential services like police protection, they find in taxpayers a never-ending source of wealth to confiscate and distribute according to their notions of “fairness.” Of course, “fairness” is usually linked to re-election.

Fellow citizens, we are the geese and the farmer is trying to kill us. Like California, let’s send the message loud and clear that enough is enough.

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