Gas prices and the middle class

I have noticed lately it seems gas is most expensive in Ritzville and in the Hood. Life seems to be the same way – the rich and the poor stimulate the economy. Rather ..the rich and the poor are the economy, or so it seems. And the middle class always seems to find a way to separate themselves from it just a simple observation today..

Okay I’m not saying the middle class are not actuall part of the economy honestly that would be foolish. I’m just saying it seems that the rich buy the asset that the poor spend money on which are liabilities to the poor. The middle-class, the real middle-class, which is greatly shrinking and for the reasons I am talking about here(that and they are at or approaching retirement), stash their cash and avoid paying interest. In an economy that is entirely built on debt, very little is contributed financially outside of the fractional reserve dollars that they create by holding their money in savings. However, the real value created by these people is usually very high when you look at the quality of workmanship they produce in the small business sector. The rich and the government however beat the hell out of them. We have been seeing this especially in recent years with this bloodbath of the middle class.

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What GDP really tells us

(What is really scary is that the chart above stops in 2005..)

Written by: Joshua Gayman

Gross Domestic Product(GDP) is the sum of all final goods and services produced within a nation’s borders for a given period(year). GDP is made up of only 4 different factors:

1. Personal Consumption Expenditure: The amount spent by individuals on goods and services.

2. Private Investment: Private investing into things such as factories, equipment, and residential/non-residential buildings.

3. Net Trade: The amount the US exports minus the amount it imports.(This is currently a negative number, hence the term: “Trade Deficit.”)

4. Government Spending: Doesn’t matter if it is buying Barbies, war tanks or investing in medical research. It has the same effect on GDP.

In 2011, the United States’ GDP was $15,000 billion.(NOTE: 1,000 Billion = 1 Trillion. This really puts the $16 Trillion national debt into perspective doesn’t it..) Of that $15,000 Billion, Personal Consumption accounted for 71% of GDP. Private Investment accounted for 13% of GDP. Net Exports is a negative number because we import more than we export. You could say it accounted for -4% of GDP. Finally, Government Spending(federal and state levels) accounted for 20% of GDP.

Let’s take a closer look at these four factors of GDP:

1. Personal Consumption: At 71% of GDP, this factor is by far the most important. The amount that individuals spend is determined by two factors: how much money they earn and how much money they can borrow. These two factors are also the most important factors for 2.Private Investment, because business investment and residential construction both are driven by consumer demand, which is driven by the ability for the consumer to take on more debt.

The expansion of debt owed by the individuals in the United States was the strongest factor driving the economy from the early 1990s up until the economic crisis of 2008. In 1993, the total debt of the household sector first topped $4 Trillion. This number peaked near $14 Trillion in the 3rd quarter of 2008. At that point, the donkey collapsed from too much debt on it’s back when individuals could no longer afford the interest payments on their loans and began to default. (From 2002-2007, the household sector increased its borrowing by an average of $1 Trillion per year.) It was all of this debt that funded personal consumption and therefore GDP.

When loans began to default in 2008, the banks refused to lend the household sector any more money. With credit cards and Home Equity Lines of Credit(HELOCS) getting cut, people were forced to spend less money. With personal consumption contracting, private investment began to contract even more. The result of this was a STEEP decline in US GDP in the 4th quarter of 2008. During the same quarter, unemployment shot up to 10%. At this point, the US Government began to spend much, much more. Had it not done so, the economy would have collapsed into a Greater Depression. It’s just math:

Personal Consumption + Private Investment – Net Trade + Government Spending = GDP

3. Net Exports: This number really comes down to the competitiveness of the country’s goods and services in the global economy. Since this number is negative in the US, it is obvious that we consume more than we produce. We offset this number by holding Reserve Currency status and printing money. Luckily for us, the system will collapse when the world no longer buys American debt, therefore the financial system is doing whatever they have to do to keep the dollar alive. This of course is not a good thing if you are a saver.

4. Government Spending: In the United States, government spending is supposed to be determined by elected officials in response to the demands of the voting public, but the voting public is gaining an increased awareness that government spending is actually determined by the demands of corporate donors.

All of these numbers and stats for me to point out one simple thing: Debt is more important to the United States than production. If it weren’t, we would stop taking on debt, stop paying for unfunded liabilities, and start competing to produce and sell in the global economy(export). it is much easier for us to simply take on more debt, as long as the world will buy our bonds and allow us to print dollars.

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Don’t Drink the Unemployment Kool Aid

No Jobs Just More Student Loans (Debt)

Written by: Joshua Gayman

Yesterday I posted a status on my Facebook fan page stating, “For those between the ages of 18 and 24, the unemployment rate is at a staggering 46 percent according to a recent report by the Pew Center. That equals the highest unemployment rate for this demographic since reporting began in 1948.” A friend commented saying that she feels many people between the ages of 18 and 24 are lazy. Too some extent I can’t help but agree with this young lady(who is an educated young professional and works very hard). However, I have to agknowledge that there always has been, and always will be, lazy people. The difference is that right now there are too many people unemployed in this younger demographic to simply chalk it up to laziness.

The numbers can be deceiving, as the latest unemployment numbers have the rate down to 8.3%(Down from 9% one year ago). But things may not be as good as they seem, especially for those under 30.

If you are to account for people who have given up on looking for a job, unemployment soars from 8% up to 17%!(Source: Boston Globe) This number equals 5.4 Million lost-workers over the past 3 years and a huge loss in productivity for our nation.  Losing this kind of productivity means that we will see a slower recovery, and have fewer people contributing to our nation’s output, less people buying goods and services, and less people paying taxes. These people are then much more likely to become poor, rely on government assistance, and develop mental health issues(too much stress). This means simply that 5 million people are now consuming and not producing, and are more likely to require money from a government that already spends nearly $1 Trillion more than it takes in every year.

For the future generation, unemployment is at an all time high(since they began reporting in 1948).

*Ages 18-24: 46% unemployment rate(source: Pew Center)

*Ages 18-34: more than 33% have gone back to school and taken on more debt because they can’t get a job.

*34% of those between the ages of 25-29 have moved back in with their parents, and almost 25% of those between 18-34 have!

*One in 5 have put off marriage or having kids because they don’t have the money 😦

TRANSLATION: Kids are not growing up, not producing, and not ready to take over for their aging parents or care for them when they retire.

Add college loans and entitlement programs like Social Security that transfer wealth from young to old, and you can see why kids are fleeing back to their parents’ houses and their childhood bedrooms.

Robert Kiyosaki(author of Rich Dad Poor Dad), puts it this way: “Rather than preparing the next generation to support our country, we’re taking their wealth, their jobs, and instead still taking care of them.”

2012 is an election year, so you can be sure the media and politicians will be serving the Kool Aid. Don’t drink it! Invest the time into yourself and increase your financial education! Invest to acquire assets that put money in your pocket before you buy liabilities that take money out!

Fed to Buy Back Bad Debt and Push Government for Looser Lending Restrictions

The Federal Reserve is looking to buy back bad debt and pushing for the government to write loosen lending standards on loans that they invest in and write down the balance on mortgages where the home is underwater.

 

 

Fed Looks Foolish

             Fed Looks Foolish

Posted on: Tuesday, January 17, 2012|Written by: Robert Kiyosaki

Last week, I wrote about the Fed’s recent criticism of the U.S. government’s handling of the housing crisis, a crisis that still persists and may only be getting worse (“Fed Cries Foul?“).

According to a number of news sources, the Fed is considering taking unprecedented action in the housing markets by buying back more housing bad debt. And they are pressuring the government to step up efforts to loosen lending restrictions for borrowers and doing loan write-downs for owners who owe more than their house is worth through Freddie and Fannie.

This week, some new revelations about the Fed’s outlook during the run up to the housing crisis in 2006 were released in the form of that year’s meeting transcripts—and the Fed looks foolish.

According to The New York Times, “Meeting every six weeks to discuss the health of the nation’s economy, [Fed officials] gave little credence to the possibility that the faltering housing market would weigh on the broader economy, according to transcripts that the Fed released Thursday. Instead they continued to tell one another throughout 2006 that the greatest danger was inflation — the possibility that the economy would grow too fast.”

Additionally, the Fed poked fun at the growing concern by builders to move housing inventory, “The officials laughed about the cars that builders were offering as signing bonuses, and about efforts to make empty homes look occupied. They joked about one builder who said that inventory was ‘rising through the roof.'”

The implication of the transcripts are clear: the Fed had no clue that the floor was about to fall out from underneath them and the U.S. economy.

So, this begs the question, why do they think they’re now qualified to speak in the housing market?

In 2006, there were plenty of people with enough common sense to know that the housing crisis was going to be bad for the economy, but these were generally considered fringe economists or conspiracy theorists because they challenged the status quo.

Rather than listen, the Fed drank its own Kool-Aid on the fundamentals of the economic system, and the safety net that was supposed to be collateralized debt.

Today, many people, such as my friend and now Rich Dad blogger, Richard Duncan, author of The Dollar Crisis and The Corruption of Capitalism, are sounding the alarm about the coming collapse of the dollar that may result from the Fed’s continued call for printing more money and inflating the economy through debt.

Yet, today, the Fed continues to drink their Kool-Aid and move forward with blind faith — much like they did in 2006, when one Fed member stated upon Chairman Greenspan’s departure, “It’s fitting for Chairman Greenspan to leave office with the economy in such solid shape. The situation you’re handing off to your successor [Chairman Bernanke] is a lot like a tennis racquet with a gigantic sweet spot.”

Those must have been some pretty cheap strings.

The point of all this? I simply want you to understand that the so-called experts can not only be wrong, but they can be dangerously wrong. My hope is that you don’t drink Kool-Aid, whether it’s served by the Fed, or even myself, but that you increase your own financial literacy.

The mission of the Rich Dad Company is to equip you to think for yourself. We provide financial education that helps you do your research, gather all the information, analyze that information, and make your own informed decision.

Think for yourself and get a financial education.

This is why I rarely tell people what to do, but instead simply explain what I’m doing. I never want you to follow my advice blindly. I want you to think for yourself. What works for me may not work for you.

This is also why we redesigned our website to be more useful to you by providing free financial news and resources to help you make informed decisions.

At the end of the day, only you can save yourself and your family financially. Make the decision today to think for yourself and to take charge of your financial future.

We’ll be here to help with our financial education resources.

What happened to our money, to our country?!

By: Joshua Gayman

The reason Occupy Wall Street is happening right now is because there is a huge movement of young people who want to reclaim this country from corporate interests. These protesters feel that our political system has been hijacked by Wall Street and their corporations. Not only that, but they feel that our elected officials now serve the interests of the wealthy upper 1%, instead of “the 99 percent.”

I’m gonna write..Dang it!!! I’m gonna write…

It’s not that I can’t do, but that I can reach more people online than I can on the street. Also, I can capture attention. Why protest when I can speak more clearly through my mac sitting in my bedroom. I don’t oppose the Wall Street crashers. They are frustrated. They feel that the system has hijacked the way of life their parents had and that they planed to continue, and they are right.

The solution is that we need to reclaim our own money. If America acts now, we still have the financial and political power globally to reclaim our position. China will fight us hard, but we really need not compete directly. We don’t have to buy Chinese. If we open back up the factories we can put millions back to work and produce value back into our society. My God, can you imagine what stuff we would have cooking right now if everyone was working hard to better society? We are geniuses. I don’t really know why, but for some reason us Americans kick ass. In all actuality, I don’t think we have anything that any people don’t have. It’s just the timing and in my honest to God opinion, it’s God’s plan for this time.

So how did we really get where we are now? The world has turned upside down in the past 3 years!!

Well..Life happens. The only thing constant in this world aside from God’s love is change. Because of this thing called time, everything constantly evolves.

So what happened?

1700’s – USA is founded. We say F U to Britain because we do not want to use their currency and pay their taxes anymore. We draft a constitution that we will never let another entity print our currency and we will never have an income tax. We kick their butt and start our own country on free market using gold to back our currency. As an interesting sidenote..The South made their own currency during the Civil War, but with no gold backing it inflated to zero value..

We go from Wild West to Industrial Revolution. Life is changing rapidly with new mechanics. Lots of production is created, in fact, it is exponentially created because of leverage and tools.

Let’s face it..The media is about as honest with us as a politician. So when you think about it, how do you really know what you learned in school was even truth? I know I hear you already, “Oh here we go, another conspiracy article..” NO – Listen to this: John D. Rockefeller founded the US Board of Education in 1903. What did  that guy want with the school system? And since he did buy it..Why didn’t he add education on money into the school system? Why do we still have a school system that is hundreds of years old and was created to manufacture military? Now here is my point, we have no idea if the things we read in our history books are true. History is not math, gramar, or science. History is one of the biggest tools used for manipulation and deception.

Moving on…

10 years later, John D Rockefeller, along with other ultra rich men such as JP Morgan, and Paul Warburg, founded a company and called it the Federal Reserve. This company would issue currency to countries. The trade off that they could offer to the Congress was that if they printed the money, they could give it to the government. Scandals in the Congress are nothing new, and the Federal Reserve Act passed.

Time for an income tax!!

The income tax was supposed to be to fund WWI, but we still pay it today, 100 years later…

20’s…HUGE recession, but it was removed from Rockefeller’s history curriculum in our education system that he hijacked.

GREAT DEPRESSION: Debt from WWI is too much to pay. we need more currency. The government confiscates gold and then raises the dollar-associated value to it by over 50%, hijacking over 50% of the real money in circulation and jeopardizing our whole system.

WWII – America wins. Bretton Woods Act is passed, making the United States’ currency known as the Dollar, the Reserve Currency of the World. Oil is now traded in dollars, making it so that other countries must exchange their currency for dollars and then purchase oil. This causes the value of the dollar to increase drastically and therefore makes it easier for the United States to get credit from foreign investors who are eager to invest in the luxurious American economy. After all, their debt is backed by the good faith of their tax payers.. Remember too, the Congress can now go the Federal Reserve whenever they want, increase their “debt ceiling,” and borrow more money.

America rocks like rock stars for 27 years, get involved in some turmoil overseas, increased the debt more. Then Nixon said let’s have a REALLY big money supply, since everyone in the world treats our dollar like gold! He totally cuts the link between the Dollar and gold. Expanding the money supply to infinity.

A few years later, the “Employee Retirement Income Security Act” is passed, making it so that the tax payers are responsibly for their own retirement, and the burden is lifted from corporations. Birth is given to the IRA and 401K. This makes it so that retirement money flows to Wall Street and they can operate the money as a ponzi scheme, with money from new investors paying out the old people as they retire. *Another sidenote:  Social Security(Which was enacted during the great depression), also operates as a ponzi scheme, with the money flowing into the system from young workers’ paychecks and out to the retired older folks. The money retirees paid into the system has been spent.

For nearly 40 years, we lived out of our minds!!! There were recessions and expansions, but the reality is that no matter what, we could always get more money because we had a credit card with no credit limit. The credit card company was the rest of the world buying our debt, and the Federal Reserve company selling it.

Our economy boomed and we just kept continuing to kick ass. We got fat, lazy, and greedy, but we stayed smart. We powered through at the front of the line with our advances in technology, especially with computers and the internet. We created several huge bubbles with the stock market, precious metals, dot com, and real estate, but we never thought about the larger bubble that was emerging around all of the other bubbles. The credit balance that we had…The biggest bubble of all, debt!

In all reality each bubble helped us. Because off of each bubble, we could sell more debt, increasing our limit. The last one we benefited from was real estate. When we all could buy a house or re-finance one and get a rediculous amount of money for, with nothing down but a signature. How bitchin is that!? You could make $30,000 a year, live in a $300,000 house, drive a $30,000 car and have mad toys. All you had to do was refinance your house when you needed more money to cover your bills.

Then it popped. It popped because people could not afford the minimum debt payments on their mortgage payments anymore. Even with interest only loans and low interest short term adjustable loans, the mimimum monthly debt was just too much. The world quickly realized that the actual real estate was never truly worth what we sold the debt for. Values plummeted, but so did families losing their homes.

The government tried to keep the bubble going(and still is) by lowering interest rates, again and again and again. The Federal Reserve is happy to do so because it preserves the system of debt. If we stop selling our debt, they cannot continue to gain power over us for our indebtedness. Also, with all of the other countries attached to our debt system, known as the dollar, it keeps it easier for them to have a leash on the entire planet.

With mortgage payments stopping, lending stopped. Now, even with super low interest rates, the people are simply not allowed to take on anymore debt, unless they still have some collateral left that they are willing to put up, and most don’t..

With a country that’s whole currency system operating on debt, not getting any more loans, the economy dried up.

2007 – The banks failed because nobody could afford their loans. They sold a product that was risky, and they lost. The collateral from the loans was not sufficient to cover the exposure they had. Congress decided that if the banks failed, lending would stop, people could run to the banks to withdraw their money, and the economy would die, so they took on more debt from the federal reserve, pinning the tax on the US taxpayers back still(but now getting exponentially larger) and marched on with the debt system, even tho it was by all means bankrupt. They gave it to the banks, “to lend to the people.”

The banks didn’t loan shit to the people. The rest of the world gets mad(particularly China), because we are now exponentially increasing our money supply, and thus devaluing our debt to them.

With no buyers left outside of our country to buy our debt, and no assets to pledge them, the company knows as the Federal Reserve decides that they will just buy our debt themselves. This keeps the cash flowing into the United States, and stays off a collapse for the short term. The money supply keeps exponentially increasing, as prices rise on exports to combat the artificial expansion of our money supply.This is what is known as “quantitative easing.”

Meanwhile, people keeping losing their houses, their jobs, their businesses. Everyone keeps waiting for life to go back to normal. But it doesn’t happen…

The stock market goes up and down, but it doesn’t have any effect on anyone. The people that have money seem to keep getting bigger. But everyone you know is broke and jobless. People hear what the banks did with the money that they were given that was supposed to be for lending. They hear about the bonuses to all of the CEO’s that took their house.

Student loans never stop, but everyone is starting to figure out that the debt created by going to school is huge and they aren’t making nearly enough to make it manageable, if they are making anything at all.

Let’s face it…The debt system is broken. We still have some HUGE values that we contribute to the world. I like all of our professional sports, Google, Aaple, Nike, I could name many many more. But, we don’t have anything left to pledge as collateral to keep receiving debt to live on. We already pledged it up….

Present Day:

We go to Wall Street. We protest about the greed and corruption. We don’t go the the corporation the Federal Reserve who created the system, instead we go to the investors on Wall Street who’s job is to keep money flowing into the market to satisfy the system and pay our people’s retirement’s through pensions. Without Wall Street, many retirees would lose their retirement. Retirees like teachers, firemen, and police officers.

We need to take back over our systems. It’s sad to say, our currency is falling to zero like a slowly bleeding cow. And there is nothing anyone can do to stop the bleeding. We try to stop it with band aids such as expanding the money. But expanding the money without expanding the demand for the debt can’t create real value. So the dollar will die.

Value is coming back. Value is king. If you have a trade, great. If you don’t, learn one. What do you love? How can you do that so as to benefit society? If we can get back to creating real value, they’ll keep buying our debt. But we should not let Congress give away our value to the Federal Reserve. We can sell our debt directly if we are going to sell it at all.

What will happen next?

I don’t know.

I suspect that to preserve the system of debt, the central banks will create a globally currency. The world will buy into it because they won’t have a choice. The debt bubble in Europe popped too. Asia is next. The Chinese have been devaluing their currency to try and combat the inflation of the Dollar. The global currency will be digital, as in all actuality the Dollar is now digital itself. I don’t know which part of the world will receive the biggest inflow of the global currency, but I suspect that it will be the gographic location which produces the most value. Competition is inevitable.

No matter what, we aren’t here for a long time, we’re here for a good time…

Peace and love,

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QE3 Explained