Archive for October, 2007
In America, today, we import more goods and products than we export. This has been going on since the 1970’s, but the magnitude of the imbalance has reached historic proportions.
In fact, the U.S. trade deficit rose 10% for the month of March 2007 to nearly $64 billion — $64,000,000,000. In other words, Americans spent $2 billion more per day than they made on a global basis.
The difference was made up with debt: corporate debt, government debt, and private debt.
It does not take a genius to understand that when you spend more than you make you eventually go broke.
But with rapid globalization a curious affair has developed in world markets led by a curious word — “liquidity”. In short, foreign central banks take the $2 billion per day that we send them, convert it to their local currency, and then purchase U.S. Treasury Bonds.
This suppresses interest rates and props up the value of the dollar, perpetuating an ever expanding bubble of debt. All this activity produces more and more “liquidity” as massive amounts of credit based money changes hands.
Historically, “liquidity” referred to the ability to liquidate assets, or how quickly one could sell an asset to raise cash. To be clear, “liquidity”, in today’s sense, is not real wealth; it’s largely based on debt.
And it has shown up in inflated asset prices including real estate, stocks, bonds, and in the dollar itself.
Why is this so dangerous?
Inflation, Credit, Speculation, and More Debt
Inflated asset prices support the extension of more credit, speculation, and the accumulation of more debt — and production of more “liquidity”.
This has brought another curious term to existence — the “wealth effect” — where people refinance their home loans, cash out part of the inflated asset price, and go on a gluttonous spending spree.
Yet the money cashed out is not free money, as many perceive, it is added to the loan balance as debt. Oddly, the “wealth effect” does not produce real wealth; it increases debt.
When credit is expanding, and asset prices are going up, those participating feel much richer. And much smarter too.
Throughout history central banking has brought with it rapidly increasing money supplies, encouraged swelling levels of debt, and a devaluing currency. However, when a currency is backed by gold a limit is ultimately reached where citizens become privy to the money supply expansion and begin redeeming their paper money for gold.
At that point credit no longer expands; it contracts. Asset prices no longer inflate; they deflate. The financial economy no longer flows with “liquidity”; it stagnates. The “wealth effect” becomes supplanted by bankruptcy. And people feel less rich — and less smart.
In such instances, a recession or depression occurs. And while these scenarios would be financially painful, and would result in a lower standard of living for many, after some time economic growth would return.
But this time the Depression will be preceded by an all out financial crisis that turns currencies — especially the dollar — upside down.
The ensuing calamity will be much worse…much more painful…and will result in much more social upheaval and chaos.
The above article is an excerpt from the Online Course the Great Depression Online. Find out about the Free 7-Day Course and Get Two Gifts When You Sign-up Today at http://www.greatdepressiononline.com The Great Depression Online is published by Direct Expressions LLC. To learn about the many exciting publications we offer, please visit http://www.directexpressions.com
October 29th, 2007
It is a common misconception that credit counseling services and debt management companies are the same. They are not. Both help people with their financial difficulties; however a debt management company will request that its clients pay a set amount of money to them every month in exchange for paying off their creditors.
Considerations in Selecting the Right One
Nonprofit - some states require debt management companies to work on a nonprofit basis. If you check with the Better Business Bureau you will be able to see if there have been complaints concerning any companies and their services under a nonprofit status.
Complimentary consultations - all companies should offer this to you. That way you can make a no obligation decision on the value of their services before you begin working with them.
Operating for longer than twelve months - the longer a company has been in existence, the better. This more strongly implies that it is operating legitimately and is experienced in dealing with many urgent personal financial issues.
Correct processes - make sure your chosen company asks you all the right questions. They need to gain a very good idea of your finances and financial commitments before asking you to begin paying them. If a company asks for money without any further discussion, politely say goodbye.
Affiliations - make sure that the company you choose is not in any way connected with any of your creditors. If they are, you could find yourself dealing with a company that has a conflict of interest; this could impact you adversely.
They take time to understand your circumstances - if your company doesn’t do this, they are not working in your best interest.
Recommendations - pay little attention to the inevitable glowing compliments previous customers have said on the company’s web site. Often they are contrived. Talk to real people who have actually used their services.
And the Wrong One?
Have you already engaged a debt management company and wondered after-the-fact if you signed up with the wrong one? If you’re not sure, consider the following tips.
Regular statements - your company should send you a summary statement regularly. If not, why not? They are dealing with your finances, after all, and you have the right to see what they have been doing. If in doubt ask them to provide one.
Action without your consent - if you find your company has done something that can impact your credit without your agreement, this should raise a red flag. Why have they done something like that?
Finally, listen to your instincts. If you believe your company doesn’t have your best interests at heart, don’t take the road of passive compliance; do something. You have entrusted the company with your finances, so you have the right to make sure they are working with you, not against you.
For practical debt consolidation information, please visit http://www.debt-consolidation-assistance.com, a popular site providing great insights concerning how to address your issues and concerns related to debt management.
October 29th, 2007
Financial freedom is a bit of a misnomer. Having financial freedom is defined as being in a place in your life where you no longer have to work to pay for your living expenses. To me, having financial freedom is more about time than money. What could be better than having the time to do what you want without having to work?
That said, many people seem to confuse being financially free with being debt free. Debt has very little to do with financial freedom. If your income is enough to cover it without you having to work, you are financially free. Even if you have $5,000 a month in credit card payments, if you have the money to pay them and you don’t have to work for it, you have financial freedom.
Of course, being debt free can be an integral step in achieving financial freedom since the less debt you have, the less your living expenses are from month to month and the less you income you will to achieve financial freedom. It is definitely recommended that you attempt to pay off all your debts. But paying it off is just one of the first steps in a journey towards financial freedom.
Saving money is also a big part of financial freedom. I recommend having a savings account that is for emergencies only and is easy accessible in case you need to withdraw money. Start with a small amount, maybe $500 or $1000, just in case your car breaks down or, like me, your stove decides to catch fire and explode one day. Don’t worry too much about the interest rate on this account since its purpose is not to make you money.
Next you should have a savings account that is hard to withdraw from, like an automatic deposit savings account that gets a predetermined amount from your paycheck every payday and is invested in a mutual fund or other low-risk investment. The annual gain can be pretty good with this type of investment and it is more difficult to withdraw money from them than your local bank savings account.
Once your savings accounts are set up, and you are focusing on paying as much debt off each month as possible, you need to begin thinking about increasing your income. This is the step that most people overlook in their quest for debt and financial freedom, but it is the most important.
In order to stop working and still earn enough money to pay your living expenses, you need to find a way to get income without working. The two main ways of doing this is through investments and through passive income. There’s also inheritance and winning the lottery, but I wouldn’t stake my financial future on either of those.
Investing is tricky when talking about getting enough of a return to live on. Real estate can be a good investment, especially with rental income, for producing cash flow but as with all forms of investments it is at the whim of the market. Plus, despite what all those ‘no money down real estate deals’ books tell you, you need good credit or a lot of money (or both) to seriously invest in real estate.
Creating a passive income is a more likely way to become financially free than investing, at least for the short term. Internet niche marketing is currently the easiest and most profitable way online to make a passive income without having to invest a whole lot of money. In fact, it is possible to make money through niche marketing without spending any money at all through sites like Squidoo and Hubpages but it is easier and more profitable to build individual niche sites with a targeted domain name.
Don’t be fooled though, although it is easy enough to learn, Internet marketing takes hard work and a lot of time invested into it. Building a website that will bring in targeted readers who are willing to spend their money is quite a task and building trust takes time. You will not get rich overnight but, if you put in the time and effort, you will be able to achieve financial freedom from niche marketing in the future.
For more information on achieving financial freedom, visit http://livingmybigdream.blogspot.com
Jennifer Carpenter is a work at home mother of three, two teens and a preschooler. She is a writer and Internet marketer who is currently working towards financial freedom through working online. Read more about her incredible journey at http://www.livingmybigdream.com
October 28th, 2007
Next Posts
Previous Posts
