Scamflation (n) - 1. Erosion of our purchasing power by devaluation of the dollar 2. Printing vast amounts of money to cover deficit spending 3. Manipulating the inflation rate to avoid increases in bond interest
Even though corporations are profiting handsomely from the high productivity (i.e. layoffs), our economy is under attack from the reckless spending by our government. Our national debt now stands near 85% of GDP and unless this changes quickly, we could exceed 100% within a few short years. Then, we will be in the same financial trouble as most of Europe. Below are three of the ways I feel our government is scamming the American public.
Scam 1 – The Shell Game
The scam is very subtle and most Americans aren’t aware of it. Government economists quietly changed the way they calculate the rate of inflation in 2000. In my opinion, this was done to reduce the appearance of inflation. The obvious reason is the interest payable on trillions of dollars of U.S. Treasury bonds. A small percentage increase for these bonds adds up to hundreds of billions of dollars in interest costs per year. Another reason is that automatic increases for entitlements (COLAs) are tied to inflation. That’s why people on Social Security didn’t get a raise in 2009.
What this means to you is that you can expect your standard of living to quietly erode, unless your income and investments are outpacing the true rate of inflation. This is why there are so many working poor and working homeless in America right now. Wages aren’t keeping pace with the real cost of living. And, basic services, such as health care and education, are rapidly outpacing inflation. So, workers are getting squeezed from both ends.
Finances are a serious subject. There are recessions, debt, bail outs and stock market crashes on the news every day. So, I thought I would lighten things up a bit and have some fun with finances. Below are some jokes, quotes and cartoons I rounded up for your entertainment.
Fast Money Jokes
A man said his credit card was stolen but he decided not to report it because the thief was spending less than his wife did.
The best way of saving money is to forget who you borrowed it from.
If you work in a bank you’re not allowed to bring home samples.
If bankers can count, how come they always have ten windows and two tellers?
I’d like to try day trading. I’d start by trading Mondays for Saturdays.
Did you hear about the investment banker who won the lottery? He was finally able to pay off his student loan.
I was eating lunch with a coworker this week and we were discussing college funds for our kids. Beyond the fundamental discussion of college savings plans and state versus private college was a more important question; are we even responsible for funding our children’s educations? Or, should they work their way through college, like we did? We both agreed working our way through college was one of the things that prepared us for adulthood. As parents, we want to set our children up for the future. But, how much is too much?
First Car
Bret's 1970 Buick Skylark
I rode a bicycle five miles each way to work and back, until I could afford a motorcycle. Then, I rode the motorcycle for a year until I could afford a car. I borrowed part of the money for the car, which I paid back promptly. I fixed it up with parts from a junk yard and paid for my own insurance. I even had to buy my own tools to work on the car. The Buick became an incredible sense of freedom and accomplishment for me. Having a car my senior year improved my high school experience dramatically.
I bought my kids reliable used cars, with their full agreement to keep good grades and to pay me back. Maybe I’m naive, but that turned out to be more difficult for them than I anticipated. After a while, I began to suspect they were trying to wear me down. Unfortunately for them, I believe your word is your bond and my requirements for teenage driving never wavered. I have to admit I was a little disappointed in my kids. I hoped they would have been more appreciative. But, most of their friends were given cars and I probably seem like a cheapskate for making them earn theirs.
Most people believe you have to “strike it rich” to become a millionaire. They think it is all based on income. And, for some millionaires that is true. But, the vast majority of millionaires didn’t get rich off of a very high income or a sudden windfall. Most millionaires became wealthy by earning and saving over a long period of time. I know that sounds boring, but it’s true.
Why Wealth Needs a Purpose
Photo by Wonderlane
What if you want to become a millionaire now, so you can live the good life?
You probably won’t stay rich for very long, because your wealth doesn’t have a purpose, except to be consumed. That’s what happens to athletes, musicians and lottery winners. They are often bankrupt within a very short time after becoming wealthy. The only thing worse than starting out poor is ending up poor.
In order to preserve that wealth, it must have a purpose. And, that purpose must be more important than the wants and needs of daily life. That purpose must be stronger than the lure of gold or the jealous look of a neighbor. Otherwise, your wealth will quickly disappear, taking all of your hopes and dreams with it.
Between the mayhem in the markets, the economic uncertainty in the world and a number of tragedies I have witnessed lately, I have been thinking a lot about my future. Despite working for years to mitigate many of these risks, there are still some things we have no control over. I have chosen to avoid every risk I can and to accept the unavoidable risks as a part of life. Some people I know expose themselves to risk constantly and they are paying a heavy price. There is a big difference between accepting problems and inviting them. Here are some of the things I have learned.
Income & Employment
Photo by Cyron
This morning, my coworker lost her job. I found out last night, because I work in IT. So, I had to come in early to deactivate her key card, collect her computer equipment and change her network password. We talked a little before she left and I could tell she was upset about the situation. I told her not to take it personal, but that wasn’t much consolation. There is very little loyalty between employees and employers. And, there is very little job security. It’s nothing personal. That’s just the way it is now.
Never count on your income. Millions of jobs were lost in this recession and many of them will never return. Sure, new jobs will be created, but they will likely be filled by people with a different skill set. And, because the government is broke, those jobs may be the next to disappear. Clinging to your income is futile, because the job market is changing. Put some money away and be prepared for this change. Stay flexible and keep your liabilities to a minimum.
The job market may change more in a decade then it has in a century.
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