Monthly Archives: July 2008

What does the $9.5 Trillion National Debt Mean to You?

We keep hearing over and over about our national debt. Does it mean anything to anyone anymore? $3 trillion? 9 trillion? 100 trillion?

It’s doubtful that any of these larger-than-life numbers have much of an impact on most people. It’s simply out of their reach to relate to debt this large.

However, it is having, and will have, a much larger affect on their wealth.

The first problem is servicing the $9.5 trillion of funded debt. Half of this is foreign-held (thanks to the “Rubinomics” of the Clinton years), as well as largely short term. With interest rates rising, this debt is becoming more costly to service.

What is happening is equivalent to the U.S. taking on the mother of all variable-rate mortgages!

So what does the government do to “keep up” with this mess?

Simply print more money! Of course, this devalues the dollar (as I have discussed), and in turn steals wealth from you, like a slow drain on your savings.

The U.S. government will then likely point the finger at foreign governments who would of course not be happy about the U.S. exporting inflation and essentially repudiating the debt.

As foreign investors begin to understand our economic problems, the actions they take to protect themselves will put even more pressure on our economy, and the U.S. dollar.

The U.S. government is essentially paying it’s Visa bill with a Mastercard. A 3rd-grader could figure out that this will catch up to them. The result of this stupidity of our government will be a drastic adjustment in exchange rates with currencies of other countries, making Americans much poorer compared to the rest of the world, restricting our ability to consume.

So the ridiculously huge national debt means a reduction in your quality of life, perhaps a dramatic one. However, you can avoid a lot of this by simply getting your dollars into real money (gold), get out of debt, and of course, following along with the advice given on this blog!

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Pulling out of E-Trade

With all that’s going on in the credit markets, and two more new bank failures on Friday, I am slowly taking my money out of my account at E-Trade and diversifying into physical gold and silver, as well as into my account at goldmoney.com.

Etrade had it’s share of problems last year when it had to be bailed out due to it’s own share of subprime loan exposure.

With the physical metals, you own real money, and don’t have to worry about dumb people running banks or the whims of politicians who make up new laws without considering the devastation it may have on your investments.

Of all the banks, it seems that Wells Fargo is the most solid right now, and I keep my checking accounts with them for everyday banking. However, Wells is the country’s 2nd largest mortgage lender in the U.S., and Warren Buffet says they could experience “unusually large losses”.

So no banks are truly safe, and by keeping your money in banks you are taking on counter-party risk, but we do know that real money will always have value!

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Taxes: The Fleecing of Society and What You Should Do About It (Part 1)

This is part 1 of a mult-part series on taxes, what they are, what they do to societies and individuals, and what you can do to escape them.

First, it’s important to define what taxes actually are.

Taxes are the #2 factor in economic life after income.  Taxes are simply theft under the guise of the State.  A good definition of theft is “the wrongful taking and carrying away of the personal goods of another.” This definition does not go on to say “unless you’re the government”! There is no difference between a gang of thugs, such as the mafia, demanding payments at gunpoint, and the IRS doing the same thing- meaning, the IRS is essentially a legalized mafia.

The propaganda surrounding what taxes really are has been swirling around the country at full speed since the inception of the income tax in 1913 (an alarming example of American propaganda is this government/disney video used during World War II to spin the meaning of taxation).  Usually, right before the April 15th deadline, promoters of big government and drinkers of the taxation-as-morality and taxation-as-necessity Kool Aid drum up the nonsensical and illogical arguments in favor of this legalized plunder. Supreme Court Justice Oliver Wendell Holmes once said “Taxes are the price we pay for civilization.”

Holmes must have had some extra servings of kool aid that day!

If a lie is big enough, and repeated often enough, it can continue to be accepted, no matter how illogical or against human nature it is.

In reality, the opposite of what Holmes said is true. Mark Skousen, economist and author, once said “Taxation is the price we pay for failing to build a civilized society. The higher the tax level, the greater the failure. A centrally planned totalitarian state is a complete failure of civilization, while a totally voluntary society is its ultimate success.”

You can get endless tips on how to cut your tax bill, but they are not nearly as important as the big picture- how taxes effect the economy and investments.

Income taxes reduce most people’s income by 20-60 percent.  Taxes also increase the cost of everything you consume. Take for example, gas prices. Here in California, about 1/4th of the price of gas at the pump goes to government!

When you add together all the taxes that we pay, including sales taxes, license fees, transfer taxes, stamp duties, property and inventory taxes, excise taxes, import duties and endless layers of government-mandated expense, the result is the “multiplier effect”.  Take a car, for example. With each part, there are several taxes imposed (iron ore to build it, railroad to transport it, the steel to build it, the auto manufacturer, the auto dealer each have to pay their own tax), and of course, all these costs are passed on to the consumer.

The cumulative effect of taxation is mind-boggling. Taxation simply prevents progress. This becomes clear in examples like Dubai, where there is no income tax, resulting in cutting edge developments like this ultra high tech building.

Of course, we do get some services from the taxes we pay, but these so-called benefits are almost always overpriced and sub-par in quality and satisfaction.  Beyond that, most tax revenue goes to pay for government debt, subsidies, welfare programs, and endless regulatory bureacracy that further prevents progress.

On top of all that, do you really want any services provided at the barrel of a gun?

In part two of this series, we’ll look at the future of taxation and what you can do about this madness.

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Bank Failures: Are They Coming to a Bank Near You?

We are told that the twin giants Freddie Mac and Fannie Mae are being “bailed out” by the “government”.  As I have discussed previously, this is just code for “money will be taken directly from the American people to prop up Fannie and Freddie for a temporary time”.

So what about other banks?

Of course, we have had the IndyMac failure which just keeps getting worse all the time, with the government now running the show.

Rumors swirl about other banks like Washington Mutual and Wachovia becoming insolvent.

So what we’ve come to now is going to be a purely socialistic system- where the government runs everything! If this weren’t bad enough, we now also have local and state governments suing financial institutions– and this even includes the big boys like Wells Fargo and B of A.

Do you feel safe? According to a CNN poll, one in five americans have no confidence in being able to get all their money out of their bank!

I’d get out now, rather than wait for the stampede. I’m slowly getting out of banks, and into goldmoney, where I can easily buy gold and silver and store it in vaults in London or Zurich. And pretty soon, goldmoney will be used much like paypal is today!

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Bernanke says…

“Look it’s not the dollar, the price of oil is rising in other currencies around the world” meanwhile they pull the quick one over on everyone by failing to mention that everyone else is inflating their currencies as well due to our own central bank’s urging. Just amazing that they get away with this.”

Bernanke also said today, in an exchange with congressman Ron Paul on the House floor, that he AGREES with Paul, that inflation is just a tax on people, and that Bernanke himself is the biggest taxer of all, bigger than congress! Now that inflation just took its biggest jump since 1991, this just may be a bit of an issue.

Well at least the Federal Reserve is coming right out and saying it. They are stealing money from us by inflating the currency. I wonder what would happen if everyone understood what Bernanke just said?  That yes, we are taking your money, what are you going to do about it?

The only real protection from this is to be in gold and precious metals. They can’t inflate gold, as there is a limited supply. As the dollar sinks further, and there is a run to gold, this would not be a good time to be in paper monopoly money!

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Fannie, Freddie and the Pending U.S. Economic Disaster

Fannie Mae and Freddie Mac are in deep poop!

Most people have no idea what this actually means to the economy or to their wealth.

Here’s an article detailing the latest in the saga of these mortgage giants:

Fannie and Freddie: A Run on the Bank?

excerpt- “Early Friday, their plunge accelerated — Freddie shares were off another 33% at one point, to $5.40, and Fannie down 29%, to $9.31. And down with them went the stock market, with the Dow Jones industrial average shedding more than 200 points, to dip below the 11,000 level at one point, the first time that has happened in two years.

Later in the day, rumors that the Federal Rserve Board might seek to aid Fannie and Freddie, as it previously has intervened with some investment banks, calmed the market. The Dow Jones average regained half of what it had lost, closing on July 11 at 11,100, down 1.1%. Fannie’s and Freddie’s shares bounced off their low points as well. FNM closed at $10:25, down 22%, and FRE at $7.75, down 3%. But extreme swings in the stocks are clearly still possible as traders react sharply to every news development.

Fannie and Freddie are crucial to the smooth flow of everyday American life. They are the cement that holds the nation’s housing markets together. The companies buy home loans from banks that issue them, repackage those loans as bonds, and either hold them as assets or sell them to the public. Roughly 70% of U.S. home mortgages pass through the hands of Fannie and Freddie. Together, they own or guarantee $5.2 trillion in mortgages. Without Fannie and Freddie, it could soon become all but impossible to buy or sell a home.”

This situation is really ugly no matter how you look at it.

As we can see, it will be nearly impossible for most people to buy or sell a home if Fannie & Freddie are not bailed out.  This is obviously a disaster for the U.S. economy.

If the Fed DOES bail them out, think about how the Fed gets the money to do this: right from our pockets! The Fed will simply print several billion more dollars and hand it over to Freddie & Fannie. Those dollars devalue the dollars in your bank account. The money was stolen right out from under your nose!

Option A (no bailout) leads to a complete and total economic meltdown in the U.S.
Option B (bailout) leads to more inflation and the possible final blow to the U.S. dollar

Which road do you think the government is going to take?

Did I mention this is a good time to buy gold?

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Another Way To Avoid the Recession/Depression: Start an Internet Business

Most of my living is now made from the internet, including my niche website, http://www.triswimcoach.com.

Since this blog is about freedom, including financial freedom, and avoiding the tough economic times, it’s important that I mention a way to jump off the sinking ship of the general economy and on to a safety raft. This raft can not only allow you to survive the next few years, but to build a nice business in a growing arena and achieve financial freedom in the process!

The internet is on a blistering pace in terms of new users logging in world wide. Between 2000-2008, there was a 290% increase in internet usage around the world (totally 1.4 billion people online!).

If over the next 8 years we keep up this pace and increase at this same rate, we’re looking at over 2.5 billion new users! And that’s not even taking into consideration population increases, and countries like India and China where the middle class is absolutely exploding.

No idea is too small online, and with this kind of growth, even in an all-out depression in our economy, you can still make money online as internet buying becomes more mainstream every year.

I’ll discuss later the various possibilities of niches, and how you can get started.

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