How to Make US Government Spending Habits Work Toward Your Investing Process
We are better than most world economies only because we are sinking slower. We are however still going under. I see the direction of the U.S. government as something we, as its citizens better off not fighting but joining.
Here are some musings/observations about our economy that we as investors can use to our benefit.
1. There is no reward for savers anymore. We punish people who do everything right. Savers earn nothing on their bank deposits, and the purchasing power of their savings falls further every day. When the interest rates are lower than the rate of inflation, simply saving or investing in low risk instruments such as treasury or municipal bonds doesn’t work.
2. The Government DOES however reward indebtedness. My financial plan now includes going into as much debt as I can. The Government rewards people who take on more debt than they can manage. I watch people who haven’t made a mortgage payment in years and still live in their house, which never gets foreclosed.
3. The Government devalues our money by printing more whenever it’s convenient to cover its ever increasing debt. Therefore what seems like a large amount of money today will amount to nothing in the future with the inflation of the dollar.
4. Many Americans believe they are entitled to something. The lower income populations feel entitled to Government handouts and the rich are entitled to lower taxes than the rest of us. Middle income people pay the fare and don’t expect rewards.
5. Government insurance of banks assures them they can’t fail, no matter how many bad loans they make. We created a penalty-free environment for stupidity. Use this to your advantage.
You’ll lose when you play against the Government. Don’t play against the Government, play with them. Don’t work hard to pay off debt. If you really want to go all the way, skip a few house payments every year, and invest that money.
Before you start skipping house payments however, be sure to refinance your house and get as much equity out of it as you can. Remember, the Government doesn’t reward you for having equity in your house. You don’t get to deduct anything on your taxes for home equity, but you can deduct a second mortgage interest.
Once you’ve borrowed to the limit at long term and low interest, pay back the loan with as little of the principle as you can manage. If you can get an interest-only loan, all the better. If you can get a thirty year loan at under 3% interest, you’ve got the best of all worlds.
The plan is to pay back as little principle as possible. Emulate your role model, the U.S. Government. After 30 more years of inflation, the annual income of the average household will be $500,000 a year.
If you managed to borrow a half million dollars during that time for example, go ahead and pay it back. It will be like having a $50,000 loan today. It’ll be chump change. Retire the loan and thank the Government for the continued devaluation of the dollar.
You could invest the principle for 30 years and get rich using their policies, while paying practically nothing for the money. This is my retirement plan. Imitation is the sincerest form of flattery.