Tuesday, June 22, 2010

Are You to Blame for Our Runaway Government?

The Government Relies on Your Participation


Scenario #1 - You just turned 24 and graduated from college.  You secured a job with a 50 year old firm as an entry level manager.  You move to the city.  You pay your first and last month's rent, plus deposit.  You have a moving company move your meager college level  furniture into your new apartment.  After meeting several girls and inviting them over, you decide to trash all of your furniture and just furnish out the entire place in rent-a-couch furniture.  You eat out every single day and night.  You finally meet a girl you like.  She doesn't like the city and you get a promotion to super peon manager step 2.  You end the furniture renting contract.  And, you go put a down whopping 2% down-payment on a house and put an entire house's worth of furniture on your credit card.  You take out a car loan, since you need a car to commute to work now.  Two kids later, you're enrolling your first-born into soccer and have to get a second job to pay for all the extra expenses.

Conclusion: the economy crashes and you lose your job, both jobs.  You lose your house you've been paying on for 2 years, because you now have negative equity in it.  Your car gets repossessed although you were a few months shy of paying it off.  You look up to the heavens and wonder where you went wrong.

Scenario #2 - You graduate from high-school with a C average.  You go get a job down at the steel mill working opposite shifts as your dad.  Your parents are alright to live with, but you dream of moving out one day.  One day your dad turns to you and asks you have you thought about where you want to live for the rest of your life.  That night at the kitchen table all of you, mom, dad, brothers and sisters, all discuss what would be the best place to live.  Your dad says there is absolutely nothing wrong with the little town you're in right now, but if you want to go see more that's fine too.  Your mom would like for you to go see other places a bit before settling down.  Your kid brother, the genius, brings a print-out of all the places and cities around the country of where the best jobs are and how long it has been that way.  He also brings a print-out of home prices and commute times to the city.  Your sister makes remarks about schools and kids.  Finally your dad says you should get a house with land on it, so you can always grow much of your own food on it, like you have right now.  So even if things go bad, you will always have food.  After much thought you do exactly that, after saving up for buying a house and buying a car full price.  You move to the city, the entire family helps you move and even helps you plant your garden / mini-farm.  You buy a small house, and furnish it with heirloom items and some other items you buy second-hand.  You get a job working construction just outside the city about 2 miles from your house.  You meet a lady and get married.  Two kids later, instead of soccer, they are tending the farm, and learn about plants and animals.  You never eat out, and your wife doesn't have a job.  She tends to the farm when you're not home and sells any extra produce on the front lawn when it's in season.

Conclusion: the economy crashes. But, you're an independent worker to begin with so you don't lose your job.  You don't lose your house since you bought it outright. Your don't lose your car since you bought it outright. You look up to the heavens and wonder when is it going to rain next, so the tomatoes can bloom.

In each scenario the jobs are of course different, but also the person's approach is different. While people are very hesitant to living, what they feel is, a backwards lifestyle, when the system crashes, they go down with it.  Way down!  While the person who is still tied to the earth might not live the jet-set lifestyle of a penthouse playboy, they also have a much more worry free life.

The government now is in bed with business.  The two are so intertwined that the business of government is now the government of business.  50% of all policy and government laws is geared to assist business, not govern people nor do the job that they were created to do, protect people.  But, the government only gets away with any of this, if you participate in the scam.

Scam #1 - CREDIT: credit is the biggest and largest systemic scam out there.  You are barraged daily, not just with the message of borrowing and spending, but that having good credit, to begin with, should be your goal for a happy lifestyle.  The message goes beyond just having credit, to the point that you should be so ingrained in the credit system as to assist yourself in it, by upping your "credit worthiness".  Financial planners now advise you how to get better credit.

-- STOP --

It's all a lie.  You don't want credit at all.  Your participation in the scheme is what they want.  Noone presents you with an alternative.  Now the average adult would say, oh everyone should know that, but in practical speech, 70% of adults are never confronted with even the possibility that you don't have to participate in the credit charade.

Credit cards launched a massive marketing campaign to not only get people involved in credit, but banks even started issuing  credit cards down to a local level, so that the entire system, top to bottom was saturated with the credit doctrine.  Stores launched their own credit cards.

But, it is all a lie.  You do not need credit.  Hell, even a debit card is not something a savvy person should use.  The person, adult, that knows anything about money, knows that you will never personally leverage yourself enough to have a winning side in the equation of banking and credit.  That means, that the message of use credit so you can have a better lifestyle now based on a fraction of the cost, is a losing position to have.

Use of borrowed money to increase production volume, and thus sales and earnings. It is measured as the ratio of total debt to total assets; greater the amount of debt, greater the financial leverage. Since interest is a fixed cost (which can be written off against the firm's revenue) a loan allows a firm to generate more earnings without a corresponding increase in the equity capital requiring increased dividend payments (which cannot be written off against the earnings). However, while high leverage may be beneficial in boom periods, it may cause serious cash flow problems in recessionary periods because there might not be enough sales revenue to cover the interest payments.

Here's the part that gets you, as a person, tripped up. Your leveraging, credit, does not generate you any income.  Even borrowing for a house or car, never generates money for you.

Scam #2 LOANS - taking out loans is a new thing.  There is still a very large percentage of the population that saves up money and buys a car in cash, or a house in cash, or all of their home furnishings and appliances in cash.  Noone is telling you this, because they are on the take and in on the scam of loaning you, your own money.

Here's the promise.  You take out a loan and you can buy far more house than you ever could, if you saved up.  It is completely and utterly untrue.  If you ever set aside the amount of money, in total, that you pay for the amount of time that you spend in a house, you would always come out ahead in savings, to loans.

Let me help you with the calculation: [ warning this might be forgetting some things ]
  • loan
  • down payment
  • impound and taxes
  • home insurance
  • 3% to seller agent and 3% to buyer agent
  • title insurance
  • mortgage insurance [FHA]
  • lender points for doing loan
  • loan origination fees
  • escrow fees
Now add in the devaluation of the dollar over that time period too.

If you saved that same amount of money for that time period, let's say 15 years, you could buy a house twice as expensive as the one you took out a mortgage for.  THAT is what everyone is trying to make sure you don't realize.

Americans used to save up and buy a house.  Or, better yet, live in the same house and the father and mother pass it on to the kids, while they are alive or when they die.  Americans also did not kick their kids out at 18.  This is more of the inner city phenomenon.  I have no idea when it started, but it has no logical thought behind it, nor no financial logical thought behind it.

The best possible thing to do as a parent would be to have a savings account for each and every child you have and put funds into it very single month.  Your child would even be better served by you taking that money and buying them a house with some land, at 18, than paying for their college.  If you did it right, you could have enough money for both school and a home.

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