Pay Down Debt: Are you one in a million?
Pay down debt and you'll eventually increase your wealth, in addition to increasing your peace of mind. Too bad our government doesn't feel the same way.
John Maynard Keynes, a much respected and admired economist in the 20th Century, understood what governments are tempted to do to reduce their debts. Rather than cut back on their expenditures, they inflate. And he understood the consequences too. In fact, he understood why governments typically get away with this approach to paying down their debt.
John Maynard Keynes, a much respected and admired economist in the 20th Century, understood what governments are tempted to do to reduce their debts. Rather than cut back on their expenditures, they inflate. And he understood the consequences too. In fact, he understood why governments typically get away with this approach to paying down their debt.
“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.... The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner
which not one man in a million is able to diagnose.”
This description may be what our government ultimately resorts to in the near future. Our Federal deficit (as pointed out by Warren Buffet in an August 18th NY Times editorial) hit a previously unheard of 13% of our GDP for 2009. Our Federal debt is astronomical by any standard. No one even talks about paying it down anymore, much less paying it off.
So while you may pay down your personal debt, our government will take another route. And their actions will ultimately reduce your wealth.
You've got a decision to make. First, do you want to be that one in a million who's aware of what's going on? If you decide "yes," you'll have to get over any anger and frustration you may feel. The chances of you changing the government's policy are slim. Government's have been doing this sort of thing pretty much forever.
So you'll be left with deciding to either accept your fate or do something about it.
If you decide to do something about it, I wouldn't waste any time. You won't have forever to protect yourself from this confiscation.
The question is what to do. There are all sorts of solutions proposed by various parties. I'll tell you my least favorite.
My least favorite is this idea that investing in stocks for the long run will keep you one step ahead of inflation. You can certainly read studies that show that over "X" period of time, someone of "X" age investing in stocks for "X" number of years managed to come out by year "X" somewhat ahead of inflation.
If you're Mr. or Ms. "X" I guess you're okay.
As for the rest of us - all the non-X's out there - I'm not so sure this works. The stock market runs hot and cold. And, depending on when you put your money into stocks and when you need the money, you may or may not keep ahead of inflation.
Besides, this approach means you've got to take all the risk on yourself to counter something the government shouldn't be doing in the first place. Doesn't sound fair or just to me. How about you?
Nah, I'd rather look into maybe owning some gold along with some other precious metals.
The problem with this is that if you understand the value of owning gold, you'll agree with what I just said. If you don't, you'll think I'm weird or something.
Well, I guess it's a start, though, if you're at least that one in a million. If you are that one in a million, you'll see the problem. That's good.
Hey, maybe you'll even pay down debt too. That'd be another idea to consider, if I were you.
So while you may pay down your personal debt, our government will take another route. And their actions will ultimately reduce your wealth.
You've got a decision to make. First, do you want to be that one in a million who's aware of what's going on? If you decide "yes," you'll have to get over any anger and frustration you may feel. The chances of you changing the government's policy are slim. Government's have been doing this sort of thing pretty much forever.
So you'll be left with deciding to either accept your fate or do something about it.
If you decide to do something about it, I wouldn't waste any time. You won't have forever to protect yourself from this confiscation.
The question is what to do. There are all sorts of solutions proposed by various parties. I'll tell you my least favorite.
My least favorite is this idea that investing in stocks for the long run will keep you one step ahead of inflation. You can certainly read studies that show that over "X" period of time, someone of "X" age investing in stocks for "X" number of years managed to come out by year "X" somewhat ahead of inflation.
If you're Mr. or Ms. "X" I guess you're okay.
As for the rest of us - all the non-X's out there - I'm not so sure this works. The stock market runs hot and cold. And, depending on when you put your money into stocks and when you need the money, you may or may not keep ahead of inflation.
Besides, this approach means you've got to take all the risk on yourself to counter something the government shouldn't be doing in the first place. Doesn't sound fair or just to me. How about you?
Nah, I'd rather look into maybe owning some gold along with some other precious metals.
The problem with this is that if you understand the value of owning gold, you'll agree with what I just said. If you don't, you'll think I'm weird or something.
Well, I guess it's a start, though, if you're at least that one in a million. If you are that one in a million, you'll see the problem. That's good.
Hey, maybe you'll even pay down debt too. That'd be another idea to consider, if I were you.
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