Cash is nothing more than an IOU printed by the GOV. It has no inherent value except that which it buys today. It retains no value save what it can continue to buy. However, things inevitably go up in price, and prices rise primarily because...land will forever increase in price. As land prices drive higher, all prices rise. That's the big appeal of R/E, it's inflation protection benefit. It's the primary reasons why prices rise to begin with. It will forever the poor people poor. Not because they don't want to be richer (though motivation can be considered a piece of it), but because rents always rise. They may stagnate, but they rise. Even commerical businesses face the same situation, which they pass on through to the consumer.
The primary inflators of price are:
1. Land
2. Health care
3. Energy
And they all roll together. The true inflation rate (CPI) is made up of components that are outdated, and don't have a dramatic effect on the purchasing power of consumers. Even a small increase in energy, land, or health bills can sap consumers of 100's and 1,000's of dollars in disposable income. Will there ever be an end in sight for a decrease in prices with the above components? No, never.
And with Cash only being an IOU, effectively a debt instrument as you examine the IRS and treasury websites, you begin to realize, what kind of asset is it? Cash itself, sitting in your wallet is nothing. Gold, sitting in your bedroom, does have value. Stock certificates in your office have value. A piece of property sitting in a decent location, has value. Old coins, have value. Even old baseball cards will have value. But cash, save what it buys today to keep one alive, has no value. If converted to a savings account, a cd, etc, has value, because depositing it creates value for the bank, to be lent out. For the bank, your money is a liability, a note to be repaid to you. On the flipside, your home loan is an asset to the bank. It allows the monetization of your loan. Most banks will sell the loan for a discount to funds and get cash they can then lend out. That's the money cycle, and it's created through debt.
This isn't an absolute, but cash was created to faciliate the transfer and barter of goods, not for accumulation. It's transmission allows the fluidity to different investment mediums...from stocks to bonds to R/E to businesses to hard assets, and on and on. Anyone without it, needs it and wants it, but if you have Gold, the same gold 50,100 years ago would buy a suit then, the same as it would buy a nice suit now. The same can't be said of cash. It can only buy what it can THEN. It has no future value.
Moreover, what decreases its ability to be a real asset is the fact that the supply is manipulated based on policy. It's not tied to anything economic, as gold is tied to mining and production, or homes are tied to construction and sales. The value of cash is completely arbitrary and diminishes over time. Within the system of our economy, the effect isn't widely felt, except when gas blows the roof off our SUV, or property taxes rise, or health insurance goes up. Over a 10 or 20 year span though, you feel it. For the 20 somethings, you know movie theatre tickets for the same technology IN movie theatres is now double. That clothing has doubled, despect no changes except style. Quality is very suspect with clothing, as most retailers are providing LESS material per unit (case in point, the Metro craze sweeping men's clothing, most shirts are skimpy, near sleaveless and thin.).
Hence why, the rich get richer. They're buying assets, things that are in little supply even now, letting them compound, then buying things. If you bought gold, for instance 30 years ago with what money you had, you could buy the same standard of living today. While it won't make you rich, it will keep you whole. If you want to be rich, that's possible, too, just invest more money, learn more financial tips, accumulate more assets in a given year or years than you do THINGS, and you'll be rich. Making mega millions or billions requires founding something, being a star, or earning a high income. You can still be rich by investing wisely and positioning yourself correctly.
Indebting makes sense if...
*If you can earn MORE money through indebting yourself, than you can otherwise. Someone who's savy with money and won't blow it, and can earn MORE than the rate of interest a bank charges on the loan SHOULD borrow, because their CAREER income or INVESTMENT income will rise faster than their LOAN indebtment will. For instance, if you're a professional with a bright future, buying a house today that might be very tight for you is SMART if it's a good deal on the home AND you're going to see many raises in the future.
However, if you're not a GO Getter, and you don't aspire to save or invest, then indebting yourself just created a nice little ring of slavery. The same people trudging away for a 4% pay increase will see that increase sapped by ENERGY, HEALTH care, and HOME costs. So they might as well pay the home and car off AS fast as possible. They're not "financially intelligent" enough to leverage the life they have, and that's ok. But having debt running forever, CAN double the price of a car or home, or college tuition, so if you're not planning to earn a better ROI, then why stay indebted?
Kids who go to college, borrow at extremely low rates ANTICIPATING many wage increases in the future, that will more than make up for the debt service costs on the loans. Yet, if you're not of that type, why throw the added cost into the equation? The DEBT service factor on homes and cars stays the same, but costs rise in both categories, and often faster than incomes of Average Americans. Only, it's not really seen. A minor raise is really slap in the face, since most people know that Prescriptions, Gas, Oil, Home, Land, and Taxes rise all the time and are suspect to change. A minor raise doesn't even keep pace with inflation truly, because the biggest alligator of one's budget isn't food or clothing, which the CPI measures, but HOME, ENERGY, and HEALTH care. From the average persons perspective, the mortage is 28% of one's net income, and then add in both OIL, GAS, and ELECTRIC, you'll easily hit 50% or more of NET INCOME.
Cash converted today is purchased at an asset level today, on assets that will go up. People who are 'conservatively' estimating retirement or future costs are doing a grave disservice because the numbers show otherwise. Cash is what works in this society where bartering would be impossible, and where gold has been taken out of the equation, but playing the game requires different tactics. Cash value is built on the faith and credit of the US that it can be exchanged for something else, that's it. And amidst the transaction, the US gov will pull out or put in MORE of the cash, throwing the equation off balance anyways.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Our parents can tell us about how cheap gas was, or movie tickets, or home prices. What do you think we'll tell our kids? "Gee, home prices were cheap, or movie tickets, or coca cola, or gasoline...was cheap." People ask, where do I invest? Look around you. Look at all the opportunities. Peter Lynch should be renowned in history because he used to just pick stocks for his Magellan fund that he'd see while walking or driving through society. Opportunity exists to seize one's wealth, it's there. And you needn't have to be wealthy, even just "comfortable" enough to put the fruits of your labors to work will suffice. Because like the story of the Ants and the Grasshopper, reckoning day comes. The grasshopper only consumed and considered the present, and when the snow began to fly, he had nothing, not even a morsel to eat to stay alive - that was until the ants helped him out and kept him alive by offering some of their stash. And as the story proves, there's time to reap the rewards of one's labor -- in this case it was winter. So those who abhor saving or even giving this a "go", needn't worry, the day will come when you can rest and enjoy the fruits of your labors.
But what if instead of buying a Coke product, you bought the Coke stock?
What if instead of buying XBOX 360, you bought shares in MSFT?
What if for every liability you bought, you instead bought the corresponding asset? How much better off would you be? People ask..."where do I invest..." yet, the investments are all around them, theyre just on the LIABILITY/EXPENSE side of the equation. Sure, Coke stock, or MSFT could go down, in the short-run. But if it's around longer than your XBOX, or the COKE you drink, won't it likely go up? Or at least be around the same value, which is more to be said than for your consumption of their products?
What if instead of throwing money away on going OUT, you worked on learning how to make the kind of place you'd never want to leave? The kind of place with game rooms, and bars, or pooltables, a pool, a jacuzzi?
A-Unit
The primary inflators of price are:
1. Land
2. Health care
3. Energy
And they all roll together. The true inflation rate (CPI) is made up of components that are outdated, and don't have a dramatic effect on the purchasing power of consumers. Even a small increase in energy, land, or health bills can sap consumers of 100's and 1,000's of dollars in disposable income. Will there ever be an end in sight for a decrease in prices with the above components? No, never.
And with Cash only being an IOU, effectively a debt instrument as you examine the IRS and treasury websites, you begin to realize, what kind of asset is it? Cash itself, sitting in your wallet is nothing. Gold, sitting in your bedroom, does have value. Stock certificates in your office have value. A piece of property sitting in a decent location, has value. Old coins, have value. Even old baseball cards will have value. But cash, save what it buys today to keep one alive, has no value. If converted to a savings account, a cd, etc, has value, because depositing it creates value for the bank, to be lent out. For the bank, your money is a liability, a note to be repaid to you. On the flipside, your home loan is an asset to the bank. It allows the monetization of your loan. Most banks will sell the loan for a discount to funds and get cash they can then lend out. That's the money cycle, and it's created through debt.
This isn't an absolute, but cash was created to faciliate the transfer and barter of goods, not for accumulation. It's transmission allows the fluidity to different investment mediums...from stocks to bonds to R/E to businesses to hard assets, and on and on. Anyone without it, needs it and wants it, but if you have Gold, the same gold 50,100 years ago would buy a suit then, the same as it would buy a nice suit now. The same can't be said of cash. It can only buy what it can THEN. It has no future value.
Moreover, what decreases its ability to be a real asset is the fact that the supply is manipulated based on policy. It's not tied to anything economic, as gold is tied to mining and production, or homes are tied to construction and sales. The value of cash is completely arbitrary and diminishes over time. Within the system of our economy, the effect isn't widely felt, except when gas blows the roof off our SUV, or property taxes rise, or health insurance goes up. Over a 10 or 20 year span though, you feel it. For the 20 somethings, you know movie theatre tickets for the same technology IN movie theatres is now double. That clothing has doubled, despect no changes except style. Quality is very suspect with clothing, as most retailers are providing LESS material per unit (case in point, the Metro craze sweeping men's clothing, most shirts are skimpy, near sleaveless and thin.).
Hence why, the rich get richer. They're buying assets, things that are in little supply even now, letting them compound, then buying things. If you bought gold, for instance 30 years ago with what money you had, you could buy the same standard of living today. While it won't make you rich, it will keep you whole. If you want to be rich, that's possible, too, just invest more money, learn more financial tips, accumulate more assets in a given year or years than you do THINGS, and you'll be rich. Making mega millions or billions requires founding something, being a star, or earning a high income. You can still be rich by investing wisely and positioning yourself correctly.
Indebting makes sense if...
*If you can earn MORE money through indebting yourself, than you can otherwise. Someone who's savy with money and won't blow it, and can earn MORE than the rate of interest a bank charges on the loan SHOULD borrow, because their CAREER income or INVESTMENT income will rise faster than their LOAN indebtment will. For instance, if you're a professional with a bright future, buying a house today that might be very tight for you is SMART if it's a good deal on the home AND you're going to see many raises in the future.
However, if you're not a GO Getter, and you don't aspire to save or invest, then indebting yourself just created a nice little ring of slavery. The same people trudging away for a 4% pay increase will see that increase sapped by ENERGY, HEALTH care, and HOME costs. So they might as well pay the home and car off AS fast as possible. They're not "financially intelligent" enough to leverage the life they have, and that's ok. But having debt running forever, CAN double the price of a car or home, or college tuition, so if you're not planning to earn a better ROI, then why stay indebted?
Kids who go to college, borrow at extremely low rates ANTICIPATING many wage increases in the future, that will more than make up for the debt service costs on the loans. Yet, if you're not of that type, why throw the added cost into the equation? The DEBT service factor on homes and cars stays the same, but costs rise in both categories, and often faster than incomes of Average Americans. Only, it's not really seen. A minor raise is really slap in the face, since most people know that Prescriptions, Gas, Oil, Home, Land, and Taxes rise all the time and are suspect to change. A minor raise doesn't even keep pace with inflation truly, because the biggest alligator of one's budget isn't food or clothing, which the CPI measures, but HOME, ENERGY, and HEALTH care. From the average persons perspective, the mortage is 28% of one's net income, and then add in both OIL, GAS, and ELECTRIC, you'll easily hit 50% or more of NET INCOME.
Cash converted today is purchased at an asset level today, on assets that will go up. People who are 'conservatively' estimating retirement or future costs are doing a grave disservice because the numbers show otherwise. Cash is what works in this society where bartering would be impossible, and where gold has been taken out of the equation, but playing the game requires different tactics. Cash value is built on the faith and credit of the US that it can be exchanged for something else, that's it. And amidst the transaction, the US gov will pull out or put in MORE of the cash, throwing the equation off balance anyways.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Our parents can tell us about how cheap gas was, or movie tickets, or home prices. What do you think we'll tell our kids? "Gee, home prices were cheap, or movie tickets, or coca cola, or gasoline...was cheap." People ask, where do I invest? Look around you. Look at all the opportunities. Peter Lynch should be renowned in history because he used to just pick stocks for his Magellan fund that he'd see while walking or driving through society. Opportunity exists to seize one's wealth, it's there. And you needn't have to be wealthy, even just "comfortable" enough to put the fruits of your labors to work will suffice. Because like the story of the Ants and the Grasshopper, reckoning day comes. The grasshopper only consumed and considered the present, and when the snow began to fly, he had nothing, not even a morsel to eat to stay alive - that was until the ants helped him out and kept him alive by offering some of their stash. And as the story proves, there's time to reap the rewards of one's labor -- in this case it was winter. So those who abhor saving or even giving this a "go", needn't worry, the day will come when you can rest and enjoy the fruits of your labors.
But what if instead of buying a Coke product, you bought the Coke stock?
What if instead of buying XBOX 360, you bought shares in MSFT?
What if for every liability you bought, you instead bought the corresponding asset? How much better off would you be? People ask..."where do I invest..." yet, the investments are all around them, theyre just on the LIABILITY/EXPENSE side of the equation. Sure, Coke stock, or MSFT could go down, in the short-run. But if it's around longer than your XBOX, or the COKE you drink, won't it likely go up? Or at least be around the same value, which is more to be said than for your consumption of their products?
What if instead of throwing money away on going OUT, you worked on learning how to make the kind of place you'd never want to leave? The kind of place with game rooms, and bars, or pooltables, a pool, a jacuzzi?
A-Unit
