I doubt I could fine much fault with anything that has been said – I will offer my perspective as a student of History.
Capitalism and our government was never formed to allow the masses to prosper or run the country that is what a representative democracy is all about. It has always given the advantage to those that already have an advantage. This leads to a natural separation of the classes. However in the past the system was unstable enough to cause major catastrophic events which have redistributed wealth and re-shuffled the deck creating new opportunities. Wars, Economic collapses, or major changes in the technology landscape. Unfortunately most if not all of these “holes” in the system have been plugged. Case in point, we will never have another major military engagement, the wars of the last 25 years have done nothing but maintain the status quo. Catastrophic economic events have been stymied by “To big to fail”. The Microsoft Millionaire phenomena has been reworked by the new age of venture capitalists. If you weren’t on the advantaged side of the line 25 years ago, there are few opportunities to get there now.
On the national debt, Alexander Hamilton figured out that being in debt to other nations was a good way to get them to leave us alone. If you owe your neighbor a lot of money you want to give him every opportunity to work hard to pay you back. You don’t want to blow up his house and put him on the street. On energy prices, I sat in a wonderful lecture a few years back on the economic strategy of OPEC. To simplify it, their goal is to maximize profits and they don’t do that by raising prices, they do that by keeping prices at a level that will keep the dependent countries’ economies just healthy enough that they stay addicted. At that time the target was $90/barrel. China is trying to do the same thing, not to overproduce, keep the prices low enough to control the markets yet keep our economy healthy enough so we continue to pay. If they refuse to buy our paper anymore it is likely because they feel they control our currency well enough and they want us to get a little healthier so we keep paying them and buying their goods. Hamilton’s policy is still at work today.
So how does one “protect” oneself and assure that you have a comfortable retirement. I am not sure you can. In 2000 I thought I was sitting pretty, sold a company bought a nice 40’ Pilot House Ketch and lived a Margarettaville life, then came 911- wammy one, came out OK but sold the boat. Then came 2008 and I had to rethink everything, I was in great shape but realized that I couldn't be cavalier, too many unknowns. I changed my strategy and realized with modern medicine I could live for another 40 years and also watched the "assisted living" eat up my parents assets, so I scaled way back and started consulting for fun and profit, how much do you need to retire – better rethink that one based on all the broken promises. Remember when there were retirement plans – gone. You use to have medical insurance – gone. You use to be able to save money but now inflation far outstrips passbook savings or bonds -gone. It used to be that land was a good investment, but you don’t own land, you own the right to rent it from the local government – people are beginning to figure that one out. Buy gold? Precious metals are only precious to those who can use them for industrial purposes. Just look at what gold has done – down 30% since 2012. So I don’t have the answer to this question, I just know that you need a lot of legs in the retirement chair. One of those legs better be being able to live simply and be happy doing it no matter how much money you have. The best thing you can do is die with a lot left over to give so your kids and other deserving folks can have more opportunities.
Some sobering thoughts: The government CPI is less than 2% but if you use the 1990 metrics its closer to 6% and real consumer felt inflation is running close to 10%. The system is now set up to separate you from your assets, at a rate where it is just slow enough where you don’t feel it happening. It is set up to make indentured servants out of your kids if you don’t have enough money to send them to school (if you are advantaged you will advantage your children with a paid education in the finest schools). They can’t even go into the armed services to get an education, the Army college fund was suspended in 2011 and GIs are finding that they get maybe 1 year of tuition for 6 years of service (another opportunity – gone).
So how can interest rates be so low? This is not new, it is the same thing that happened after WWII, after Vietnam (But not Korea – Eisenhower had the guts to pay for that with the tax code) and is happening now on a regular basis, the Fed is manipulating interest rates to be low so they can “inflate” the debt away and hiding it with a bogus CPI metric. So take advantage of it, why sit on assets and cash, if you are not getting at least 10% on your investments then borrow now and stock up on durable goods (refurbish the house, new appliances, new car, but not new technology as it depreciates fast). So the trick today – borrow what you can at 2% and either spend it or invest it in something that yields 10% or more. Sitting on cash is like pissing 10% of it away each year and not even getting to enjoy it. But you do need some cash, it should not be the only leg in the chair because it is getting shorter every year.
The fallacy in our system is the saying that anyone who works hard enough can make it to the top. The truth is that there are only so many spots, you have to be lucky and working hard improves the odds but is no guarantee. It’s always been that way, but today there are fewer opportunities per person than ever before and the pie is getting awfully small with the world economy. Your kids are going to need all the opportunities they can get and the more you can help with that the better.
Don't ski the trees, ski the spaces between the trees.
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