November 18, 2009

As the economy turns...What's your 20? 2 quick thoughts of mine

---------------1st Thought-----------------------

If you take a step back in history, you will find that the US Economy has been through bad times and good times.  Our economy has gone through various depressions and recessions, as well as prosperity  and increase within a century.  It reminds me of the popular game show "Wheel of Fortune", where contestants spin a wheel hoping to win money while simultaneously avoiding bankruptcy and from losing a turn in the game.  What baffles me is how similar this game is to reality for most of us in how we govern our  money and finances.  People consider that because they have a job in good times - they expect to have that same job in bad times.  But as the current economic crisis has taught us, (with a 10% unemployment rate that continues to climb) that many of us may not have a job.  So now some unemployed people are rushing to pay off debts by taking out more loans, or they decide to live off of savings and file for unemployment benefits to continue living their lifestyle as if nothing has happened. 

But what if you didnt have any debts?  And what if your income did not depend solely on your job?  But rather your income was diversified with dividends and rental income from your investments?  So that even if you lost your job - you would have money still coming in?  It's not impossible at all....some people live this type of lifestyle and not all of them are retirees.  These individuals I speak of live a good life whether the economy is bad or good.  Aim towards this lifestyle and you won't have to worry about saving a 401k for retirement.

--------------2nd Thought--------------------------

Speaking of 401k's - how many of us really expect to retire off of a 401k and savings?  I think it is so funny that the media acts as if this is all we need to do to reach a happy retirement, or the "golden years".  Has anyone taken notice about how the government has raised the retirement age to 67?  Now why would they do this?  Answer:  There isn't enough money in social security to pay everyone when they retire at 65.  So the government needs you to wait a while...even if you dnt have a job.  If the government keeps printing money and expanding its deficits then what do you think will happen when the bill becomes due?  Answer: Higher taxes and inflation.  So if you're one of the people who loves to save cash - see how good you will feel when your $100,000+ in savings is really worth only $70,000 in savings due to inflation. 

Is Obama a supporter of Keynesian economics?  Is Obama similar to President Nixon when Nixon wanted to continue paying for the Vietnam war, expand social programs, and create cheap money to promote growth in the economy during the 70's?  This era was coined as the "Great Inflation", where the US saw inflation as high as 14% !  An advisor to the Obama administration, Paul Volcker, a retired Federal Reserve Chairman with a monetarist approach to fiscal and monetary policy, will hopefully prevent "Nixonomics" from happening again.

I'm not sure if the Obama administration is leading us down the same or similar path as Nixon - but it makes you wonder when the US taxpayer is paying for wars in middle east, expanding social programs and extending unemployment benefits, and keeping interest rates low.  This strategy might give us the jobs and recovery we Americans want, and make some Americans comfortable....but at what cost?