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Personal Finance Meltdown Makeover – Take the Long View
Americans on Main Street were urgently urged to work with Treasury Secretary Paulson and Ben Bernanke to bail out Wall Street’s bad debt of $700 billion and counting. We were told that this had to happen to not only stabilize Wall Street, but the economic system itself. Different! As of this writing on 9/29/08, Parliament has just voted to deny aid.
If the bailout bill is ultimately passed, it will not be a magic bullet and we will continue to navigate uncharted economic waters as a nation. But perhaps more importantly, millions struggle to keep a balance when it comes to household finances.
Personal finance gurus took to the fore and weighed in on news and talk shows. They hit on “whatever you do, don’t liquidate” and please keep calm. Keep calm?
I worry about what the personal finance gurus are like no to tell Americans. Their advice to John and Joan Q. Public about the best decision-making approach given the current financial meltdown is wrong. Why? Their solutions do not reflect the elephant-in-the-living-room root cause. Instead, we were told that the financial crisis was the result of a subprime mortgage meltdown, mortgage defaults, and the resulting decline in home prices across the country. Yawn.
The Emperor’s New Clothes
The mainstream media served up this convenient cover. As in Hans Christian Anderson’s tale of The Emperor’s New Clothes, although the king may be naked as he parades down the street, virtually all the spectators of the royal parade see the king as he himself wishes to be seen; dressed in beautiful clothes. Only when a child in the crowd announces the king’s nudity does the mass delusion of the townspeople dissipate.
Thanks to the Internet, there are more and more “kids” with eyes that see and ears that hear the truth about money. As a result, there are many cracks in the official story about why we are in the financial mess we are in and what we need to do to get out of it. There is much more to know.
The real root cause dates back to a time when there was a general understanding of how interest-based money lending, also known as usury, had corrupted the fabric of relationships and society. In modern times, usury through the global network of central banks has been treated as normal. Almost nobody thinks about it today.
The central banking system is global and has been carefully designed to be debt-based in nature: money is brought into existence when it is lent at interest. Interest compounded over time becomes both income for the system’s shareholders and cost-of-living inflation for you and me as debt service is added to the cost of goods and services.
To most people’s surprise, the Federal Reserve, America’s central bank, is actually not even part of the government, but a private for-profit corporation with shareholders. However, as with The Emperor’s New Clothes, don’t expect TIME magazine to cover it anytime soon.
The money system
My association with R. Buckminster (Bucky) Fuller in the 1980s led me to understand the wisdom of the saying “the whole is greater than the sum of its parts”. Money is only part of the monetary (central banking) system, just as the earth is only one aspect of the solar system. It is impossible to fully understand Earth as a planet without understanding the system that contains it.
A more complete picture of money emerges with the broader picture of the monetary system. Because we were forever changed when we first saw the entire Earth from space, getting a bigger picture of the monetary system changes the way we think about money.
A holistic view would change Paulson’s mega-bailout plan quite differently. A comprehensive review would tell us that investing $700+ billion in national debt in a debt-based system will only delay the inevitable bottoming out of an already heavily indebted system. Such an injection of capital would be akin to giving a heroin addict a bigger injection so he can continue to experience his high.
It’s really no different. The monetary system, by its very design, needs ever-increasing sums of credit (digital money) to repay debt and access working capital. It’s an insatiable beast that needs more and more new credits to keep the wheel turning. Therefore, I humbly submit that we have a completely unsustainable monetary system.
For international, national and personal financial solutions to be more than band-aids, as the mega-bailout will surely be, the entire system needs to be reformed with a complete systemic transformation. As Bucky taught, systems ultimately shape and define the possibilities of their moving parts.
You are left to your own devices
Until national leaders make monetary reform a top policy priority, everyday Americans will find the best ways to solve their personal financial problems on their own. Each of us is affected by the mechanics of a debt-based monetary system, through the loss of purchasing power. What’s more, government purchases of Wall Street’s “toxic assets” will only accelerate this ongoing process.
However, almost no financial advisor will tell you. Actually, this is not a real surprise, as the professional training of most CFAs never covers central banking 101 and its personal implications. Advice without understanding the personal impact of the monetary system is short sighted at best.
A long look
Like nuclear waste for landfills, hundreds of billions of dollars in additional debt from purchasing “toxic assets” will have to go somewhere. That somewhere, after the high liquidity injection goes off again, will go directly out of our pockets due to the loss of purchasing power and the increase in taxes.
Outsourcing, bankruptcies, foreclosures and debt have meant that millions of Americans have traded peace of mind for chronic stress. Enough is enough! Individuals, families and communities will benefit from (hopefully) eventual monetary reform, but they need the right answers now.
Over 25 years of independent research, study, and working one-on-one with individuals and families have led me to the following conclusions regarding a long-term approach to personal financial well-being, especially while living with the risks of debt. designed system.
The traditional approach to personal finance tends to destabilize lives by using its main strategy; recurring leverage of credit and debt. The following recommendations empower people to stabilize their financial lives in the long term.
However, time is of the essence. The erosion of purchasing power accelerates over time and dramatically as billions and trillions are injected into the system all at once. So the sooner individuals and families can take corrective action, the more likely they are to create a sustainable financial position.
Here is the formula I recommend:
- First and foremost: learn the whole story about money. There are many resources, for example, see (Google) the short and entertaining animated documentary Money as Debt by the Canadian Paul Grignon. If you are fully informed, you are more likely to feel empowered to take the necessary action.
- Get out of debt. The mortgage debt is still owed.
- Track your monthly intake and payout.
- do it whatever it takes that more money comes into your household than goes out. You must be willing to change your lifestyle if necessary. It is the goal that creates the process.
- When you have more money coming in than you spend, aim to live below your means.
- Create a cash flow engine to drive your finances to stay ahead of rising living costs in the future so you don’t have to go back to using credit. It is important to keep in mind what goods and services people are willing to pay for in good times and bad. This also applies to people on fixed incomes, who will probably need more money (than they thought) to keep them going.
- Become a member of an alternative currency exchange system like Fourth Corner Exchange for access to the second-tier economy. If there isn’t a system in your community, create one.
Once you change the way you think about money, are debt free, and practice the above, you will be out of the matrix once and for all. This is an opportunity to rebuild a quality life on your terms, long term!
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