^{THE GOLD COIN – INFLATION}

Fiat money, by definition, is money that has no backing such as gold or silver to give it value.  The Tenth Amendment of the U.S. Constitution disallows the government from printing fiat money.  In the old days, the government had to have silver or gold to back the value of the money they printed.  The Federal Reserve was formed to solve this problem.  You must understand that the Federal Reserve is not part of the Federal Government.  The Federal Reserve oversees all of the banks in the United States.  In the early 1900s, the government needed to find a way to print and control the flow of money without having the gold or silver on hand to back that money.  The banks formed the Federal Reserve and said they could print the money for the government.  The Federal Reserve would then lend the money to the Federal Government, but a serious problem arose.  The government needed to find a way (INCOME) to pay the banks (Federal Reserve) back for supplying the printed money that by law the government couldn’t print.  The government introduced the Sixteenth Amendment of the Constitution that burdened the public with an income tax to solve the problem of repaying the Federal Reserve.  Ironically, the income-tax law still states this action is a temporary measure to be used by the government.

I’m sure just about everyone is aware of how inflation has and will continue to impact their lives.  Some of you may be old enough to remember purchasing gas at 20 cents a gallon or bread for 25 cents a loaf.  Those days are gone.  The reason that we have inflation in our lives is because we live under a fiat-money monetary system.  The money we use daily has no real value since it is not backed by gold or silver.  If the money we use had real value, then there would be NO inflation.

As an example, let’s say you and I could go back 2,000 years.  There we are standing in the middle of Rome.  It’s Friday afternoon according to the sundial, and you say to me, “Hey, there is a toga party tonight and we should go.”  I agree and then you say, “Hey, I have one gold coin and I should buy a new toga for the party.”  So, we walk down to the toga shop, Toga Depot, and for your one gold coin, you get a new toga, a leather sash and new leather sandals.  Now, flash-forward 2,000 years and here we are today.  It’s a Friday afternoon and you say, “Hey, there’s a party tonight and we should go.”  I say, “OK,” and you say, “You know, I have one gold coin here and I would like to buy a new suit for the party.”  So we walk down to Suits Are Us and for the value of one gold coin you purchase a new suit, a leather belt and new leather shoes.  After 2,000 years, the gold coin has the same value as it had previously because IT HAS VALUE.

Today, inflation is a two-edged sword.  We are not only losing the buying power of our money, but also some services we used to receive.  I remember pulling up to a gas station and an attendant would come out and pump the gas, clean my windows, and ask if he should check my oil.  After all of that, I would give him two dollars for the gas, and he would say thank you.  I’m not making this up.

Inflation is nothing more than a hidden tax on our earnings and purchases.  Inflation also impacts our ability to save money.  Saving rates in the United States are extremely low.   According to the Government Accountability Office (GAO), today’s savings rates are as low as they were in the 1930s during the Great Depression.  The other average person is finding it difficult to save.  Unfortunately, inflation raises the cost of goods, eats away at any attempt to save, and, of course, you will be taxed on any gains you have on that savings.  Inflation will continue to create financial problems for you in the future.

You may be starting to discover that there are some unintended consequences that could impact your financial future.  Rates of return, risk of return, time the value of the dollar and inflation will all play havoc in your life.  And then there are taxes, the largest transfer of your wealth.  With all of these obstacles and challenges, attempting to prepare for your future may look like an impossible chore, but it doesn’t have to be.  The real problem is traditional thinking and how it solves the problem.  Traditional thinking is the evolution of transferring away most of your wealth to those who create the situations, control the outcome and profit from doing that.  In many ways, traditional thinking continues to FEED THE PROBLEMS that you will be facing in the future and ignores the economic trends and shifts of the times.

“We are heading for a future where we will have to double federal taxes or cut federal spending by 60%.”

-David Walker,  Former Comptroller General of the United States.

The rapidly changing demographics of our country are going to impact everyone’s future.  It can no longer be expected that the United States can dictate, from the pulpit, the direction and course of the world as a whole. Simply believing we are a great nation will not continue to make us one.  To compete and survive, we will have to change, and that change may not come easy.  We may have to rid ourselves of some of our contempt, political self-righteousness, and the need to blame someone for our lack of competition in a global economy.  Although the United States will remain a powerful nation, our ability to change will be our measuring stick in the future.

“As a nation we have already made promises to coming generations of retirees that we will be unable to fulfill.” – Alan Greenspan.

As you are reading these words, the U.S. Federal Government is continuing to spend $1.85 for every dollar it takes in from tax revenues.  The debt in our nation is growing at 52 million dollars an hour, $866,000 a minute, and that is just on the interest on that debt.  According to the Government Accountability Office (GAO), the Federal Government fiscal burden in the year 2000 was 20.4 trillion dollars.  Today, that burden has expanded to over 60 trillion dollars.  What does that mean to every person in the United States?  Well, in order to pay for this government burden, every person in the country would have to pay more than $156,000.  For every full-time worker, that comes to around $375,000, or for every household $700,676.  The purpose of telling you this is not to scare you, but rather to make you aware of the economic trends and shifts that are in place that may cause everyone’s taxes to increase.  Traditional-thinking professionals may avoid discussing this problem until it becomes a crisis for you.  Then, it is simply too late for you to react to the problem.

“We face large and growing structural deficits largely due to known demographic trends.  Our current fiscal policy is unsustainable.”

-David Walker former Comptroller General of the United States

The demographic shifts in our country will impact all of us personally.  Not only will the cost of living continue to increase, but also the cost of our Federal Government.  It is projected that an average 45-year-old couple will receive benefits from the government totaling $884,000, 45% more than they would receive today.  The government has created a social dependency problem that has a need and addiction equal to that of a drug addict, being homeless.  The government’s ability to pay for this addiction depends on us, the taxpayers.

“Addressing the nation’s transformation challenges may take a generation or more to resolve.  Given the size of the projected deficits, the U.S. Government will not be able to grow its way out of this problem – tough choices are required.”

-David Walker, former Comptroller General of the United States

Understanding the economic trends and shifts you will be facing will give you an opportunity to compare the decisions you have made in the past and the ones you need to make for the future.  Understanding that this may be the lowest tax bracket you will ever be in for the rest of your life is important.  The government, because of its own actions, is now conceding that taxes must go up in the future.  Knowing that taxes will go up in your personal life is not a concession of financial defeat, only a concession that taxes will be a problem, and you  need to pay attention to that problem now.

SHAPING THE FUTURE

THE CHALLENGES

If you understand the challenges that will be confronting you in the future, you will be able to prepare yourself for these events.  There are external forces that are going to impact your financial future.  Your ability to survive these challenges will be determined by the information and knowledge you have today.  Discovering your starting point, where you’re at and what is going to happen in the next 3,000 days demographically will become the foundation of your thought process for making better life decisions.  Everything in your financial life is connected.  Learning how everything is connected is a learned process, not a product.  Many of the challenges you face in the future cannot be solved simply by purchasing a product.  Overcoming these challenges will take information and knowledge.

WASHINGTON IS BROKEN

The future taxes that you pay will be one of the largest transfers of money that you will ever make.  The size and amount of future taxes has not yet been determined, but we know that government debt will be a large determining factor.  Another issue in the future tax equation is that the labor force in the United States will continue to decline.  We already know that, from a percentage standpoint, there will be fewer taxpaying workers than there are retirees who are and will be on government programs (Social Security, Medicare, Medicaid, etc) and these retirees will be living longer.

So, let’s do the math.  We have a declining workforce in the United States.  We have an aging population living longer on government programs.  We have a government that spends $1.85 for every dollar of revenue they take in.  We have over 60 trillion dollars in future government fiscal burdens.  Unfortunately, the only source of revenue for the Federal Government comes from collecting taxes.  From the government’s standpoint, do you think they are going to lower taxes or raise taxes and/or decrease government benefits?

“Closing the long-term fiscal gap would require real average annual economic growth in the double-digit range every year for the next 75 years.  The U.S. economy grew an average 3.2% in the 1990s.”

-David Walker, former Comptroller General of the United States

Imagine now, if you can, your future savings and retirement money being taxed at two times today’s levels.  Once again, this is an estimate from the government’s GAO.  Traditional thinkers and the so-called experts from the government are new telling us that in order to survive financially in the future, where we will all be living longer, we must save more money now.  I imagine if you could spend $1.85 for every dollar you get, as the government does, you would be okay.  But you can’t.  From the government’s own study, it reveals that the personal savings rate in the U.S. has declined.  In fact, this is the lowest amount of personal savings recorded since 1934, during the Great Depression.  The idea of someone saving more now, so he can pay higher taxes in the future, is a game she shouldn’t want to play.

You may experience a defining moment in your thinking by answering this question: If given a choice, would I want to receive money now, when taxes are the lowest, or later when taxes may be much higher?  If you are successful and are saving money and deferring the taxes to a later date, you may want to rethink the dilemma awaiting you.  The adage: “You will probably retire to two-thirds of your income, thus be in a lower tax bracket” may be floating around in your mind.  Think!  That thought is saying: I want less money, so I don’t have to pay as much in taxes.  That is not a great solution, but that comment has become so commonplace in traditional thinking, it somehow magically became acceptable.  Do you want to retire with the least amount of money, or the most?

Past and present government decisions and a lack of leadership and planning over the last 40 years have assured us that the mistakes of the past and present are about to collide with reality.  America, and its people, has never lost is greatness, but we have been sold down the river by leadership filled with greed, corruption, lies, and a lack of courage and respect.  The social fabric of our country is unwinding.  The moral and ethical decay thrust upon us by our elected officials is a sign of dramatic changes.  Ideology and social engineering have put our country on the verge of collapse.  Fiscal irresponsibility and poor decision making by our leaders have led us to the brink of financial failure.

With the fall of the investment banks, the Fannie and Freddie collapses, and credit and solvency crunches, the next 3,000 days in America will be critical.  In the next several years, America is facing several threats that could destroy its social foundation.

THE LOSS OF THE FAMILY

The family was once the center point for American life.  The family supplied the morals, ethics and values that made us a great nation.  The decline of family values will ultimately reduce the use of common sense and personal responsibility.

THE SIZE OF GOVERNMENT

In the last 50 years, the size of government has grown three and a half times faster than the economy.  The size of the government alone robs its citizens of their ability to save for their future.  The government has been ruling with only a 10% to 20% approval rating by its people.  Government arrogance is suffocating.

MEDIA MANIPULATION

We no longer receive the news; it is editorialized and “opinionized” to meet the agendas of the news organizations.  The news media is more excited about creating headlines than reporting the news.  The media is big business and needs to make money for its advertisers, no matter what.  It can be very dangerous when the media’s agenda can destroy people, their lives and our country.

EDUCATIONAL PRODUCTIVITY

We are falling behind in the world of education.  The level of our decline goes unnoticed and unreported.  The government approach in trying to solve the problem is to simply throw more taxpayer dollars at a broken system.  In the last 20 years, it seems that the educational institutions have also formed an agenda.  In some cases, opinions are being taught, bad teachers cannot by fired, and a philosophy that “America is the problem: must be dealt with since the involvement of the Federal Government (Department of Education) and Unionization.  Education has become very expensive, and the price has not produced favorable results.  We need to teach our kids to compete and inspire them to succeed.

ENERGY DEPENDENCY

America has the ability and resources to become the energy leaders of the world, but ignorance keeps getting in our way.   The agenda of leadership and their do-nothing attitude leaves us enslaved to pathetic social causes.  Ironically, we feed the hatred of America, and we have become dependent on countries who despise us the most.  We continue to feed the problem by purchasing our energy from people who would like to destroy us.  We are held hostage by our own stupidity.  Energy impacts our economy, our standard of living, our national security and our freedom. 

AMERICA’S DEBT DEPENDENCY

During the Cold War, we spent Russia out of existence.  Our government’s current spending levels and our politicians are now during doing the same to us.  Over 14 trillion dollars of government debt and increasing size and cost of government programs are turning us into a socialized society hat over a period will consume itself financially. 

INTERNATIONAL DEBT

Piece by piece, bit by bit, we are selling our nation to other countries.  Foreign nations will have the power to determine our future and influence our course of action.  This is very dangerous to the survival of our country.

Individually, each of these elements could cause havoc in a society, but the thought of dealing with all or most of these concerns at one time is overwhelming.  Each one of these problems has something in common: government involvement.  There is a lot of distrust whenever the government gets involved in any social economic solution.  All too often, their solution to the problem is to have us, the taxpayers, pay for their mistakes, and they have a long history of making mistakes.

WHAT IS AND IS ABOUT TO BE

There are many views and opinions about the direction and path that our country is on.  There are many citizens who believe that the government is the solution to all their personal problems.  Personal responsibility is a funny phrase.  Personal responsibility is your ability to respond to certain situations.  If you have the ability to know and understand the challenges, shifts and trends that may occur in the near future, it is truly a gift.  With that information, you can respond in a way that can help you.  There is a lot of talk about the “rights” of every American, but very little talk about with these “rights” come “responsibilities.”

IT’S NOT WHAT YOU KNOW, IT’S WHEN YOU KNOW IT

Prior to the 9/11 terrorist attacks, if someone would have predicted that you would wake up every day to terror alerts, that the Twin Towers in New York would be attacked and destroyed, that thousands of Americans would die on American soil, that we would be involved in a war, that the stock market would suffer tremendous losses, that the airline industry would be near collapse, that major scandals would rock Enron, WorldCom, Arthur Andersen, Kmart and many others….would you have believed them?  Would it be fair to say that if you had this information before these events occurred that you would have had the opportunity to prepare for them in advance?