Money is mightier than the Sword
Money has always been a power center. When Rome dominated
politics, it was also the wealthiest city. Kings and emperors were always the richest
people in their countries, and the US now leads the world in many categories including the
financial leader.
The easiest way to make money for 1000’s of years was to own
the strongest military. A strong military could invade an area and steal their wealth.
An army would also protect the riches it had already siezed. Since the best way to
make money was to steal and protect, societies were organized around the military.
Governments and religions supported the army by making the image of God authoritarian and making the military leader the head of
politics.
In the 1700’s a new way to earn wealth began to emerge in
earnest. Companies created products which added more value to
society more quickly than armies could steal from neighbors. At the same time, the
cost of fighting a war became more and more expensive. Currently war is extremely costly,
while starting a company with funding has never been easier nor less expensive.
As a result, the power of armies, governments, and ancient
religions are in decline, while banks, companies, business
people, and markets are taking over. Arrogant politicians are regularly humbled by market
corrections while non-political non-violent business people are becoming the wealthiest
most powerful people in the world.
People complain about money ruling the world, but the best way to
make money is to honestly and legally develop a popular product at a low cost and
distribute it efficiently to the masses. Compared to the ancient method of supporting a
dictator to invade a foreign land, free markets with thriving businesses are a much nicer
world order.
Best bets for getting rich
- Pay off your credit cards immediately. Credit cards are great, but pay off the
entire bill each month. Paying off credit card debt (or any debt) guarantees a
saving of the interest you are paying. So paying of a credit card that bills 12%
interest would be like buying a stock that gains 12%. The only difference between
paying off a debt and buying stocks, is that the gain is guaranteed!
- Own your home so that you pay rent to yourself rather than to someone else.
- Put money in stocks every month regardless of market conditions.. (The government
may shrink drastically over the next 20 years, but companies like Motorola, Boeing, and
Coke will probably increase their value to the world)
- Invest your maximum amount in tax free retirement programs. Stocks are great long
term investments, but tax free over many years really adds up.
- Run your own business rather than working for the fat man
- Related Essays:
US Stocks may be one of the safest places to put your money, but
don't expect much gains if any over the next 10 years
- US companies are the most efficient organizations in the world, but the P/E's (price to
earning ratios) are way to high. So the stocks will not disappear and may not even
fall in price, but since they are so expensive, we should not expect big price increases
- Slower less eurphoric ecomonic activities are spreading from Asia, to Latin America to
Europe and will eventually reach the USA. American companies will survive any
slowdown, but their stock prices may get hurt.
- Much of the stock market high valuations has been caused by liquidity. (Liquidity
means everyone has lots of money to invest and there is lots of trading going on).
But if interest rates rise, confidence falls, or the economy slows, that liquidity could
dry up and put more pressure on stock prices regardless of how the companies perform.
- Related Essays:
US government bonds and US dollar are over valued
- The US dollar never had to worry to much about devaluation because there was no other
real place for people to put their money. But now that the Euro currency is
available, if investors lose confidence in the dollar, there is a place for investors to
go. Also, it is likely that someday there will be a quick rise in digital
currencies.
- As many countries ran into bad Short term debt problems, scared investors ran to the
only safe haven, the US dollar. Now that most of those short term debt problems in
developing countries have subsided, some money should start to leave the US.
- US government has enormous amount of short term debt that will balloon very rapidily if
record low interest rates rise.
- The US government is poorly run and badly in need of massive restructuring.
- Related essays:
Deflation is the concern, not inflation
- Most people think that prices only rise. Therefore, we should expect them to fall
because whenever everyone thinks something is true, the opposite invariably happens.
- The computer industry leads our economy and the computer industry has been living with
rapidly declining prices for years.
- It is already happening: In Japan and China prices are declining across the board.
Commodity prices have been falling for a couple years, and manufacturer prices in
the US are starting to decline.
- Related essay:
International Outlook
- Latin America will do surprisingly well because they have been ravaged by markets for 20
years and are probably used to it
- Asia still have huge problems, but not much worse than anywhere else in the world.
We can expect Asia to grow at comfortable rates.
- Watch out for terrorist, former-communist, and dictator countries. Those countries
are often run by of crooks. If you invest, you run a higher risk of being robbed.
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