August 4, 2011
The Ultimate Ponzi Scheme
The roller coaster that the United States of America has just ridden through the debt ceiling crisis has revealed something that was devastating and unnerving. Many of us did not realize it, but the government has raised the debt ceiling 75 times since 1962. Few increases got any mainstream media attention but this circus brought an enormous amount of attention to a real problem that many of us, including business and global leaders, did not properly understand. We have all known that the government lives outside of its means, but until now most of us probably didn't focus on how much out of its means the government lives.
Taking the next generation's money to pay this generation’s bills is the ultimate Ponzi scheme. It dwarfs by a factor of a million, the damage that was done by the criminals that we've heard of over the last few years, including Bernie Madoff, Allen Stanford and others.
Why are the markets not responding favorably to the delightful debt decrease that our legislators and president have agreed upon? The answer is that now everybody better understands what is really going on under the sheets in Washington. We are living way beyond our means, borrowing from the future to pay for today.
Under this week’s plan, debt is not decreasing at all. Expenses over 10 years will be cut so that we can borrow that amount in the next 2 years.
In the last three years, haven't most consumers learned that they have to get off of the credit card diet? Everybody has learned it, except for the federal government, who has accelerated its spending.
So the reaction by the markets is clear. The stock markets are not happy with the amount of spending reduction, and they are worried about the country’s economic future as a result of it. How many people in our society have their pension plan, IRA funds and other monies tied up in the stock market? Consumers have very little idea about what is going on with their stock market investments. Even though the rules are designed to promote transparency, the complexity makes that transparency, for most consumers, completely elusive.
It sounds like a dangerous place to put your money. But what choice do you have?
You have plenty of choices – but you have to ask for them. You can “self-direct” your retirement funds, which means that you have to take your assets away from people who are consumed with serving themselves and put your money into the hands of people who either are paid to look out for your interest (such as Registered Investment Advisors), or into the hands of people who are on the same side of the table and share profits – making money when you do. More on that next time.
In the mean time, keep an eye on the markets because they are unstable. If you don’t understand the markets, then reevaluate whether or not you should gamble you life savings there. In the meantime, think about Charles Ponzi. Is the government doing what it condemns?
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Often dubbed a "Growth Architect" by his clients, Joel Block advises companies on explosive growth strategies by driving revenues and sales. Well known in the capital markets, Joel is a successful entrepreneur, speaker, advisor and is an astute investor. Joel is CEO of Bullseye Capital , a full-service real estate company supporting owners and buyers of real estate assets with brokerage, leasing, property management, and mortgage services. Joel is also the founder of the Bullseye Capital Real Property Opportunity Fund, LLC , which is an investment company that acquires distressed real estate by working with accredited investors.
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