“None are more hopelessly enslaved than those who falsely believe they are free”

Tuesday, January 19, 2010

Thinking Like The Man

By now you’ve no doubt realized that you’re already at a huge disadvantage. Our financial system is structured, much like Madoff’s 50 billion dollar “Ponzi” or pyramid scheme, so that it benefits the people at the very top.

In a Ponzi scheme, potential investors are wooed with promises of huge returns, usually because of the investment manager’s savvy and skill or some other secret.
The returns do come, at least for a short while, out of new investors’ principal, NOT from profits. This can continue as long as new investors line up with cash and old investors don’t try to withdraw too much of their money at once.
This is also known as a pyramid scheme because, as one might naturally surmise from its shape -- ever-growing layers of new recruits are needed (from the bottom) to provide gains to the smaller, earlier cronies (those that bubble to the top).
In the same way, the American uppercrust is fed continually by the labor of the masses with the transference of wealth continuously bubbling to the top. Except that in this scheme, the people at the top of the pyramid stay on top, and the people that are at the bottom feel like they’re climbing a few rungs in their lifetime but this is principally because they have younger generations behind them feeding the machine (remember, those new “investors”). And The Man’s plan is definitely to keep this scheme going. So, what can we do to stop Him?
The answer lies in Practical Banking, which simply means thinking like a bank. And it’s sort of a tricky thing to achieve because there is an abundance of information out there – from magazines like Kiplingers and Fortune to personal finance “gurus” like Suzy Orman and places like MSN Money – all feeding us their straight, predictable and unusually conformist wisdom. Interesting, right? This sort of lame duck advice goes something like this:
* Keep your job; times are tough!
* Save as much of your salary as you can by maxing out your 401k’s, then your IRA’s
* Put money away in an emergency fund (at least 3-6 months to cover your expenses should you lose your income)
* Pay down all debt, according to whichever debt holds the highest interest rate
* Invest ‘spare change’ (after all debts are paid off and your ‘emergency fund’ is built up) into some low cost Index Fund
* And, keep going to work until your government-directed or employer-forced retirement.

In the meantime, Orman is taking lavish vacations and smiling on her way to the bank, the editors and writers for these magazines are similarly cashing in, and the Man’s happy too because nothing changes. Under this construct you and I are still in the struggle, surviving. Get this straight: under such conditions we’re simply perpetuating the status quo – its business as usual. Keep your job?! Are you kidding? Obviously you’re going to keep your job but this advice implies that you stay there, permanently. And you’re not doing anyone, except those at the top any favors by “keeping your job” (and maxing out your 401k or building up that emergency fund, for that matter). To really get ahead, we’re going to have to work hard, no doubt, but we have to start by thinking differently, by rethinking the conventional wisdom being spewed by the media – the Man’s Army! It’s not impossible. To truly get ahead, we’ll have to debunk this conventional wisdom, exposing it for that it really is, bunk.

To really get ahead, we should start by at least trying to level the playing field and abolish the scheme The Man’s got going with The Fed. No one is saying that banks shouldn’t charge interest on the money they loan. The practice of The Fed, however, is to charge interest on the money they create (out of thin air) and that scam has to end. Just by exposing this to our “leaders” in Congress, most of whom are well aware of the hustle, we can try to shut this down. The reason this is still happening is because a) not enough people are aware and b) those that know are not sufficiently pissed off. We have to start by writing our Congressperson and by exposing this scam in our communities until everyone knows, adopting an Each One, Teach One attitude/approach.

Additionally, no one is going to get ahead by building emergency funds and maxing out 401ks. That’s a lame-ass passive approach and it’s what everyone wants to sell you on. We have to learn the rules of investing (real estate, stocks, and options), starting businesses, and learning the nuances of how this game is really played. But we can’t stop there; bolder practices are required to really get ahead. Read on.

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