Sunday, March 28, 2010

Liberty

"The fact is that liberty, in any true sense, is a concept that lies quite beyond the reach of the inferior man's mind. He can imagine and even esteem, in his way, certain false forms of liberty - for example, the right to choose between two political mountebanks, and to yell for the more obviously dishonest - but the reality is incomprehensible to him. And no wonder, for genuine liberty demands of its votaries a quality he lacks completely, and that is courage. The man who loves it must be willing to fight for it; blood, said Jefferson, is its natural manure. More, he must be able to endure it - an even more arduous business. Liberty means self-reliance, it means resolution, it means the capacity for doing without."

- H.L. Mencken

Wednesday, March 24, 2010

Economics: Fiat Currency

In Ayn Rand's Egalitarianism and Inflation she demonstrates the consequences of the introduction of paper money into a thriving agrarian gold-based economy. And she shows how the resulting inflation actually destroys the real-world capital that had previously been accumulated by shifting society's focus from production to consumption.

"Now project what would happen to your community of a hundred hard-working, prosperous, forward-moving people, if one man were allowed to trade on your market, not by means of gold, but by means of paper—i.e., if he paid you, not with a material commodity, not with goods he had actually produced, but merely with a promissory note on his future production. This man takes your goods, but does not use them to support his own production; he does not produce at all—he merely consumes the goods. Then, he pays you higher prices for more goods—again in promissory notes—assuring you that he is your best customer, who expands your market.

"Then, one day, a struggling young farmer, who suffered from a bad flood, wants to buy some grain from you, but your price has risen and you haven’t much grain to spare, so he goes bankrupt. Then, the dairy farmer, to whom he owed money, raises the price of milk to make up for the loss—and the truck farmer, who needs the milk, gives up buying the eggs he had always bought—and the poultry farmer kills some of his chickens, which he can’t afford to feed—and the dairy farmer can’t afford the higher price of alfalfa, so he cancels his order to the blacksmith—and you want to buy the new plow you have been saving for, but the blacksmith has gone bankrupt. Then all of you present the promissory notes to your “best customer,” and you discover that they were promissory notes not on his future production, but on yours—only you have nothing left to produce with. Your land is there, your structures are there, but there is no food to sustain you through the coming winter, and no stock seed to plant.

"Would it make any difference if that community consisted of a thousand farmers? A hundred thousand? A million? The entire globe? No matter how widely you spread the blight, no matter what a variety of products and what an incalculable complexity of deals become involved, this, dear readers, is the cause, the pattern, and the outcome of inflation."

From FOFOA:
Indeed, this is a big problem. Wouldn't you agree? Perhaps she is right, we must return to gold money if we hope to save the Western world from its ultimate destruction. Maybe this is the only way. But what if returning to an economy based only on gold and silver coins in your pocket is a complete pipe dream? What if this will never happen? Is there no hope for our future?

Sunday, March 14, 2010

The Making Work Pay Credit

Part of the government's 2009 American Recovery and Reinvestment Act, this credit was designed to put more money in taxpayers' pockets by taking less money out of their paychecks throughout the year. With less money being withheld, fewer people are getting large refunds. Remember, getting a tax refund means you've given the government too much and now you're getting your money back. Since the government took less, you have less to get back.


I believe there are going to be a lot of pissed off people when they realize this when they pay taxes this year. You do not want to owe the government and do not want the government owing you. If you are a saver than you would rather owe than be receiving tax return. This is why you set up a fund and withhold taxes(you want to be around $0.00). So when it is time to pay uncle sam you have that money sitting somewhere making a little interest rather, than letting the government borrow it from you and they make interest off it.

Thursday, March 11, 2010

Jim Rogers on Bailouts

Daily Bell: Do you believe in the bailouts taking place in America?

Jim Rogers: Of course not. This is what the Japanese tried to do in the 1990s and it led to zombie banks, zombie companies, lots of problems generally. And the same thing is going to happen this time too. America already has its zombie companies. We are going deeper and deeper into debt. With Fannie Mae and Freddy Mac, the debt is just staggering. And of course all those derivatives and off balance sheet items are obligations of the US taxpayer. This will continue to get worse and is a horrible disaster.

The way things are supposed to work is, when somebody goes bankrupt or somebody fails, he goes bankrupt. Then competent people come in, take over the assets, reorganize and start over from a sounder base. Just as what happened in Scandinavia, Korea or Mexico or Russia, or many other countries in the past twenty years. Yes it is horrible for two or three years but then things get much better. The Japanese did it the other way round, and they still have not recovered. What America is doing is taking the assets away from the competent people and giving them to the incompetent people - and then saying, "OK now you can compete with the competent people with THEIR ASSETS." I mean it is absurd economics, it's outrageous morally and the politicians don't care about morality of course, and it's a disaster that is being imposed on America and the rest of the world.

See rest of interview at The Daily Bell

Tuesday, March 2, 2010

February 2010 Net Worth: More Growth

Another month in the books and another positive growth- 4.68% Not quite as good as last month but still growing. Last February my net worth was $35,410.64 that is a growth of around 65% or so. That is real encouraging to me! This is why I add these number every month, to see how my wealth is growing.

I started my taxes and it looks like I will be owing uncle sam this year with the new Making Work Pay Tax Credit. I will not go their because we are happy, but it will effect a lot of people not expecting to owe the government this year. So, the next couple of months might not be as good to us as these last few. I am also hoping that we do not see another downturn in the economy which could start to kick in later this year.
Lets break it down:

Cash & Savings: This category jumped this month and I actually thought I would have saved a little more than I did. I did have one of our vehicles worked on for around $400.00 which would have been nice to add. For the most part, this money grows from money directly transferred from paycheck to my money market. I do not see this money unless I have a big emergency. It is the money that we are saving for a downpayment on a house.

This bracket holds the funds for my down payment on house(which is pushed back until after the wedding), insurance, auto maintenance, Roth IRA(before I max it out), and vacation. This is why it can be a little deceiving, it also holds my monthly budget in it. It has about 13-15k sitting around as savings the rest are funds that are going to be used at some point over the year. The rest is used on a daily bases for covering expenses, rent, food, auto, etc...

Stocks/Brokerage: Stocks have been slowly growing over the past few months. I have bought some stocks I've been watching along with with some hedging. I bought some Exxon(XOM) and Chevron(CVX) stocks as a hedge for crude oil prices, which I see going up (I expect 100 a barrel in 2010). I drive around 40 miles to work everyday so gas is a big expense. I bought the stock while crude oil was around 76 a barrel. If crude oil goes down the stock goes down, but if it raises, my stocks hopefully will raise with it. I also have gold/silver and mining stocks and couple other random ones - (GLD)(SLV)(EGO)(AUY)(FAZ)(ZQK) I have also added on to my watch list (AVARF - Avalon Rare Metals Inc.)

As you can see I am heavy in commodities in my brokerage account. This is all based on my thought that over the next decade the best investments are going to actually be in hard assets. My Roth/IRA/401k are in pretty common index funds and mutual funds so I figure I can go more risky with brokerage. I believe these will out perform equities in the next decade and if nothing else I feel more comfortable with my portfolio diverse. I am bearish on the US Dollar and US Economy, I believe that trillion dollar deficits are not going bode well for us, citizens of the USA.


Retirement 401k: This braket is just me adding money to my 401k every month. Saw a nice little jump this month with the stock market. I'm not really checking on this bracket(daily/weekly) as it really long term and I just keep pumping money into it every paycheck.

Retirement IRA's: Not much growth here this month - I still have a big chunk of cash sitting on the sidelines which will hopefully be maxed out before April 15th. If I still think the market is going to correct itself I will keep it on the sidelines and just try and max out my fianc├ęs and my Roth's next year. I am currently still waiting with cash on the sidelines - In this bracket I have all Vanguard Funds (VTSMX, VGSTX, VEIEX)

Debts and Liabilities - Vehicle under 10K!! Credit Cards done...

Credit Cards: This is just a car maintenance that I put on credit, it will be paid off before I am charged - I pay off any Credit Card debt monthly.

Car Loan: I am paying 4% APR on it so I am paying a little, but not a ton. Still looking to pay it off early-will probably be a goal this or next ear. I ended paying near $458.00 dollars in interest last year, but still just contemplating paying off early. We are still saving up for a house so not sure its in our best interest to get rid of our cash sitting to be debt free on my vehicle.

February was another great month considering how bearish I am on the economy, sovereign debt, and our government. Next few months are going to be a little crazy with all the wedding stuff with time and money so we will see how everything goes, would love to keep having months like this one.