Since arriving in Pennsylvania I’ve been staying at my friend Tom’s house. His house is absolutely gorgeous, a showcase of good taste and money well spent. Tom is only a few months younger than me, and each staged room of his home reflects back to me my own monetary stupidity and foolhardiness.

Tom's living room with custom-built bookshelves

Breakfast in the making

My kitchen

What makes the difference between people like Tom and me? I asked Tom how he got here. He has a very good paying job and makes a lot of money now. But we all know that earning a lot of money doesn’t guarantee financial success. According to The Millionaire Next Door (and Ben Franklin), the main key to wealth is spending less than you make.

If you know how to spend less than you get, you have the philosopher’s stone. –Benjamin Franklin

Tom tries to pay cash for everything. If he really needs something he can’t afford, he buys it on credit, but only if he can pay the debt off by the end of the tax year. When he started working he was making roughly $5.50 an hour. When he got a raise to $10, he lived on $7.50 (because California was expensive) and saved the difference. He continued this habit his working life.

And here’s the amazing part that people living on credit don’t appreciate: When you spend less than you earn and save the difference, you will have money to pay cash for things you need. Imagine that!

Society comprises two classes: those who have more food than appetite, and those who have more appetite than food. –Sébastien-Roch Nicholas de Chamfort, Maximes

Tom has also invested in appreciating assets. In the book Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money–That the Poor and Middle Class Do Not!, the key lesson imparted by the rich dad is that money should be spent on appreciating assets, like homes, real estate, stocks, and bonds, and not on depreciating assets, like cars, motor homes, boats, and trailers.

What did I do? I saw something I liked, and if I couldn’t afford it, I bought it on credit. I carried the credit a long time giving away my earnings as interest, because I was so busy “consuming” that I couldn’t pay off my debt.

The credit industry worked on my ego by giving me a score that reflected my trustworthiness and success. And when it came to credit cards, no gold or silver for me. My card was platinum. I had a $15,000 credit limit. On just one card.

So the bottom line is to spend less than you earn. Period. Just start there.

Earlier this week at Robbie’s coffee shop I got into an argument with a state trooper named Will about wealth and retirement. That’s what we do at the coffee shop: argue. Politics, religion, health care, gun control, you name it. Many intelligent, educated, opinionated people hang out at Robbie’s. It’s a great place for stimulating the mind.

Will and I were discussing capitalism, which morphed into an argument about the financial health of American citizens and their retirement outlook. Will expressed a love for our capitalistic system and believed capitalism made America the great country it is.

I asked Will, “How’s it working so far? People are broke and in perpetual debt on a treadmill of consumerism.” I wasn’t actually arguing against capitalism, but against the statement that our country was great. I said that most people would be unable to retire with the same level of comfort they have while employed. He disagreed and stated that most people would be able to retire comfortably. He thought that most people were financially secure.

Will said repeatedly to me, “I deal with facts. I don’t know where you get your information, but I’m talking facts.” When I told him only 3 percent of the population would be able to retire comfortably, Will laughed at me, exclaiming, “Where’d you get that from?” I got it from John Cummuta, a financial educator I trust.

After being told for the fourth time that he dealt in facts (as opposed to my emotional, fictional argument), I asked where he got his facts. He said, “Well, define wealth.” I told him, “You’re the one that said people are wealthy. So you define wealth.” He couldn’t so I offered that wealth was the ability to retire and enjoy the same level of comfort as that had while employed. This included being debt-free and able to pay for gas, taxes, food, travel and goods. He agreed to this definition.

But when pressed for his sources, he said he couldn’t pull them out of his butt at the moment. He couldn’t offer me the title of any book, any publication, study, anything that would substantiate his claim. Eventually he admitted that he “talked to people.”

“Talked to people? You mean you have determined that we’re all wealthy by talking to people in Lane county?” No, he talks to people all over the US. Sorry, but that’s hardly statistical, representative evidence that most people are wealthy and retiring comfortably. But that was all this facts-based man was able to come up with.

The funniest thing about the conversation was that Will determined that my view was based on emotion, because most people he argues with come from a position of emotion and faith (what they want to believe), not on facts like he had. Okay, I have found that also to be true. But only a closed mind would assume that my argument is based on emotion before even listening to it.

Will himself couldn’t produce any facts. When he couldn’t back up his claim, he tried to denigrate me by calling me a pessimist, meaning that my views were nothing more than projection of a disappointed life.

When you find yourself in a debate, argument, whatever you want to call it, ask for sources. Some people take in information by reading reports and studies. Some base their opinion on a book or two they’ve read. Some people can be very passionate about a subject and devote considerable time to it. Some merely absorb hearsay. Hearsay is:

• unverified, unofficial information gained or acquired from another and not part of one’s direct knowledge
• an item of idle or unverified information or gossip

People are very opinionated, and they’re very passionate about their beliefs. But few, in my experience, take the time to educate themselves on topics of interest. People tend to repeat what they’ve heard their whole lives (societal paradigm) or the latest TV sound bite (media manipulation) without exercising critical thinking.

Faced with the choice between changing one’s mind and proving there is no need to do so, almost everyone gets busy on the proof. –John Kenneth Galbraith

Here’s an example of believing something without testing it. A colleague posted a piece that was attributed to George Carlin. I read through it quickly and posted that it was brilliant. Then someone else proved that it was not Carlin’s work and that Carlin thought it was sappy. I had turned off my critical thinking and accepted at face value that Carlin wrote it. Then, because I thought Carlin was brilliant, I chose to believe this piece was brilliant. It really wasn’t. It was rather dull and sappy, as Carlin said.

I catch myself all the time wanting to read things that agree with my worldview and pass over things that do not. But I’ve been proven wrong so many times, I’ve seen that there are numerous angles to just about everything, that it’s hard to be certain about anything. We’re all just guessing. But the best guesses can be made with the most information.

I went home and looked up income and savings on the Internet, and the picture is pretty dismal and agrees with my “pessimistic” view. But I’ll save that for another post.

This post is in response to a question I received from Sarah in a comment. She asked:

I dont understand why you let yourself slide into this position. Why? bankruptcy.losing your house,credit,credibility,and business and reduced to the kindness of strangers and all that. kinda like all those harvard grads in the banking industry whom have just pushed the US into a depression. they have taxpayers to bail them out, but you don’t.

I’ve blogged a lot about how I got into my current financial situation. You can read about it if you click on the topic of Business and Finance > Finance. It was a combination of business mistakes I made and a failing economy. Books aren’t in high demand when people can’t afford fuel or food.

The economy has been tanking for over two years. Our government is bankrupt. Financial institutions are failing. People all over are losing their jobs and homes. But I didn’t lose my house. I gave it back to the bank. Just like I’m giving back my car. I’m giving it all back and starting over, which is my legal right.

A bank is a place where they lend you an umbrella in fair weather and ask for it back when it rains.—Robert Frost

Don’t think it was the Harvard grads that pushed us into a depression. They were just doing what they were taught to do and what people wanted them to do. Everything they did was perfectly legal. Just like my bankruptcy is legal.

Our problems started when we allowed fractional reserve banking and were compounded by the creation of the IRS and the Federal Reserve.

This cycle repeats. People get into debt, can’t pay it, and the banks take possession of houses and property, property on which they have often already received huge sums of money through finance charges. If they risk too much and lose, the government bails them out by printing money, and our currency is further devalued. Businesses are bought for a fraction of their value. Stocks are devalued and snatched up by the wealthy who sell them when they recover.

If you owe the bank $100 that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.—J. Paul Getty

It’s like this: I am a banker. I have the ability to create fake money but my customer base is tapped out. So I dream up a new scheme that allows a new customer base–poor people with no credit–to own homes. So I teach Harvard grads how they can get rich with this new system, and they go out and sell it to the public. I’m so very clever.

I know I can get the poor people to pay me 30% interest for a while before they default, if they default. But when they default, my government covers my loss. Meanwhile, I’ve pocketed the interest and lived high on the hog. I risked nothing.

You see, I paid to put the politicians in place who would establish laws that allowed me to get away with usury and that cover me in case of default. I own all the media, which is constantly drumming into your head that you need silly things that cost a lot of money. I own stock in all the major corporations that produce garbage for you to buy. And I own stock in the pharmaceutical companies that make the antidepressants and drugs that treat the diseases that your stress produces, stress further compounded by the nightly terror known as “TV news.” And when I really want to speed things up, I start a war, finance both sides and then buy up the countries when they are bankrupt.

The rich become richer and the poor become poorer.

Then the cycle turns and our economy booms, we all bet on a happy future by buying houses and cars and TVs and boats (all financed, of course), we’re happy for a season and it starts all over again.

OUR MONEY IS BEING HARVESTED.

And we’re offered a million entertainments, drugs, and pharmaceuticals to dumb us down and keep us from revolting. Well, I’m not on drugs, pharmaceuticals or benumbed by entertainments. On the contrary. This situation has compelled me to learn about how I got here, how the banking system works, how money was created. I have educated myself into clarity. And I’m checking out of the system.

I haven’t been reduced to the kindness of strangers (not sure where you got that from), nor have I lost credibility. I have lost my high credit score, which simply means that I will no longer be able to borrow imaginary money from banks (strangers) and pay exhorbitant finance charges that not long ago were illegal in this country.

I made a choice that was in my best interest. I decided I was not going to work for the banks for the next twenty years. I choose freedom.

If you really want to help the economy, get out of the credit game, no matter the cost. Pay off the debt or get out via bankruptcy. It’s only when we stop relying on the banks and begin working together as a community that we’ll be able to avoid the ups and downs manipulated by bankers.

The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight-of-hand that was ever invented. Banking was conceived in inequity and born in sin… But if you want to continue to be slaves of the bankers and pay the cost of your own slavery, then let the bankers continue to create money and control credit. –Josiah Charles Stamp

I leave you with this humorous tale.

An American INVESTMENT BANKER was at the pier of a small coastal Greek village when a small boat with just one fisherman docked. Inside the small boat were several large yellow fin tuna.

The American complimented the Greek on the quality of his fish and asked, “How long does it take to catch them?” The Greek replied: “Only a little while”.

The American then asked why didn’t he stay out longer and catch more fish? The Greek said he had enough to support his family’s immediate needs. The American then asked, “But what do you do with the rest of your time?”

The Greek fisherman said, “I sleep late, fish a little, play with my children, take siesta with my wife, Maria, stroll into the village each evening where I sip wine and play cards with my friends, I have a full and busy life.”

The American scoffed, “I am a Harvard MBA and could help you. You should spend more time fishing and with the proceeds, buy a bigger boat with the proceeds from the bigger boat you could buy several boats, eventually you would have a fleet of fishing boats. Instead of selling your catch to a middleman you would sell directly to the processor, eventually opening your own cannery. You would control the product, processing and distribution. You would need to leave this small coastal fishing village and move to Athens, then London and eventually New York where you will run your expanding enterprise.”

The Greek fisherman asked, “But, how long will this all take?” To which the American replied, “15-25 years.” “But what then?” The American laughed and said that’s the best part. “When the time is right you would announce an IPO and sell your company stock to the public and become very rich, you would make millions.”

“Millions … Then what?” The American said, “Then you would retire. Move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take siesta with your wife, stroll to the village in the evenings where you could sip wine and play cards with your friends.”

Chase was calling me two to four times a week asking for money they know I didn’t have. I would feel my body tighten up whenever the phone rang. As much as I tried to make a game of it, I was still getting stressed by the frequency of calls.

Chase calls yet again

Each time I spoke with them I explained my situation, and they went through their script: “When can you make a payment? Is there anyone you can borrow the money from to make a payment? Can we schedule a payment today for later in the week?” Sometimes I would simply say, “Nothing has changed. I have no money. Talk to you in a few days.”

I never felt comfortable hanging up on them, because it was just a person doing a crummy job. But some of those people seemed to like their job too much. And for the others, I can’t imagine the stress they are under making these oppressive calls day after day.

FYI: Chase business calls come from America. Chase consumer comes from India.

Finally, for a mere $9, I changed my number to an unlisted number. I already know I’m going to be filing for bankruptcy, so why keep taking the calls and risking my health? I have no job. There’s no money.

I’m guessing it was Chase who sold my email address, as it’s in keeping with their behavior. I received 35 spam emails a couple days ago referring to debt. Somehow, I’ve also gotten on the email list for improving sexual dysfunction. What a world we live in!

So peace reigns in my home now. I gave the number to a few close friends. I’ve decided now’s a good time to break with the family as well. They won’t notice my number is no longer listed anyway.

But now I’m getting computerized calls to extend my car warranty, hook up cable television, help lower my mortgage interest rate and get me low interest credit cards. Our nation should have a DO NOT BOTHER OR BE LASHED registry.

Jamie has called and left several messages for me to call back, so I returned his call on Thursday. He’s with Chase Bank that holds my second mortgage. He’s concerned that I’m behind on my house payments, and he wants to see what he can do to help me get caught up.

I explained to Jamie about my business, the past due payroll taxes and that the IRS won’t let me stay in the house. He wanted to know if I was going to do a short sale, and I said no. He expressed concern over my situation and asked if he could put me on hold for a moment. What he did was pass me off to an aggressive female whose job it was to intimidate me. The conversation went something like this:

She said “I was just talking with Jamie about your situation. We need to take care of this so we can get you caught up on your payments.”

“I’m not going to get caught up. In a week I won’t have a job.”

“What do you intend to do about the house? Are you trying to sell it.”

“No, I’m not going to sell it. I’m just giving it back.”

“What do you mean you’re giving it back?”

“I’m going to let the bank foreclose on it. Indymac Bank is going to have to foreclose.”

“It doesn’t work that way. You can’t just give the house back.”

“Sure I can.”

“You have a contractual obligation. Here’s what you need to do. You need to put a For Sale sign up on the house.”

“No, I don’t.”

“If you don’t do that there will be consequences.”

“What consequences?”

“I know Jamie discussed them with you. There will be severe repercussions.”

“Such as?”

“If you’re going to be nonchalant about it, I guess you’re going to have to find out the hard way.”

That’s when I hung up on her. Chase Bank is the most aggressive bank and has the rudest people in collections. Last week another woman was yelling at me on the phone. They call every week with the same set of questions.

I’ve got nothing more to lose. I’ve lost my 740 credit rating. I’m closing my business on Tuesday. I’m losing my home. The past two months I’ve tried to sell as much inventory as possible to pay the IRS. Next week I need to take a full inventory of my books and sell or auction it off, wrap up my affairs, pack my belongings, and move. I have neither the time nor the inclination to try to sell an overpriced house in a market that’s not buying. For the first time in my life, I’m taking care of ME and damn contractual obligations.

Yeah, I was Stupid

I remember when I was very young asking my mother if I could have something. She said, “We don’t have any money.” So I said, “Then write a check.” I had no idea what a check was. The next week bookshelves were delivered to the house. Mom never taught me about money or finance or saving. She just taught me about spending.

I was stupid. I admit it. I paid too much for my house. Wasn’t the first time I made a poor money decision. I seem to have made a great deal of them in my lifetime. Much of the money I’ve earned has been given to the banks in the form of interest. I’ve consistently bought depreciating assets, haven’t saved, haven’t invested. But from what I understand, I’m pretty typical of my my my generation.

And why is that? Are Americans stupid about money? Or is it because we’ve grown up in a paradigm we don’t question, a paradigm of success and happiness through credit? How many people can save money to pay for a car with cash? And being bombarded all day in billboards, radio, print ads, and television that X car is sleek and sexy, Y car is reliable and safe, Z car is fast and youthful, is it any wonder we try to buy the car that promises to enhance our marketability or driving “experience”? Who wants to drive a clunker?

My car has a cracked windshield, and I’m embarrassed by it. I know it’s irrational. What does a cracked windshield have to do with my self-worth? Nothing. But isn’t it true that we judge people by the cars they drive. I’ve always been able to afford to replace a windshield. Now the cracked windshield is testament to my poor financial status.

Before you think you’re above such things, would you date a guy in an old rusty and dented Pinto? Would you trust a real estate agent if she drove up in a beat-up Ford truck? Let’s get real. A whole class of “professionals” (doctors, lawyers, Indian chiefs) is expected to demonstrate their success in what they drive, where they live, what clothes they wear.

My purse is starting to fall apart. It’s fraying and rubbed. It still works, still carries my stuff. But I’m embarrassed by it. I don’t like shopping, so the idea of having to find another purse I like and pay money for it is a pain. I like my purse. But I don’t like others seeing it.

As an exercise in materialism, what do you have that’s embarrassing to you because of what others might think or how they might judge you? And how have you judged others by what they drive, what they wear?

And now, for your entertainment, here’s a humorous skit on investing and subprime lending.

In a previous post (Inflation: Why Your Dollar Just Doesn’t Buy As Much) I posted two videos from YouTube about money and inflation. I was so intrigued by those videos that I bought a couple books to learn more.

In this post I would like to discuss the claims made in the first video that I believe are incorrect. The narrator’s basic claim is that we have inflation because the dollar has been taken off the gold standard, meaning the dollar is no longer backed by gold. The current dollar, our Federal Reserve Note, has a value subject to manipulation whereas gold has maintained value over time.

The Constitution says that Congress has the right:

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures

But our governing leaders could never determine exactly what “money” should be or who should make it. Gold and silver were used for the payment of debts, but gold was leaving the country to pay for imports and taxes. Not enough gold was being mined to replace the gold shipped overseas or to expand with the population and economy.

In the late 17th century Massachusetts began printing its own paper money–government IOUs to be repaid at a later date–to pay militiamen and their widows for a military campaign against Canada. Then other colonies printed their own money, either backed by hard currency or legal tender itself. In the early 18th century Benjamin Franklin printed money as currency secured against future tax revenues.

The colonies prospered. Money was no longer being drained off by England. Colonial assemblies began issuing paper money as loans at low interest rates that were backed by real property or other assets. The interest paid on these loans was put back into circulation, not siphoned off by private parties. Some of the loans were never paid off and helped increase the money supply to keep pace with a growing economy. Money also came into the country via import duties.

But some of the colonies printed too much money and did not require it to be recycled back to the government in the form of excise taxes or interest on loans, so their money began to depreciate. The American colonies were expected to provide raw materials to England at reasonable rates, and British merchants and bankers weren’t too happy about the depreciation of their investments. They successfully petitioned King George II to ban the issuance of new paper money in the colonies in 1751.

In 1764, Benjamin Franklin visited London to try to get the ban lifted. But the Bank of England influenced Parliament to pass the Currency Act making it illegal for the colonies to print their own paper money. This caused the money supply to be reduced by half and colonists had to pay taxes to Britain in silver and gold. If they didn’t have it, they had to borrow it at high interest. Within a year poverty and unemployment abounded. The colonists revolted and began printing their own money again, which was a crime considered intolerable by the crown. And so began the Revolution.

But the Revolutionary war cost a lot of money to wage, and the new government had to pay for it. So the new continental congress issued its own paper currency called the Continental with which they funded the war. Most of this paper was issued as IOUs to be redeemed after the war. But British bankers counterfeited the Continental and flooded the colonies with it, reducing its value. Its value was finally ruined by speculators who convinced the population that it would be worthless when America lost the war and then bought it up for a fraction of its value.

The war over money continued with the chartering of private banks, dissolution of same, money printed as IOUs, money printed as legal tender, wars, depressions, etc., until the Federal Reserve Bank, a private bank without reserves, was legalized by the government. And it’s been downhill ever since.

Our government, which has the constitutional right to print its own money interest-free, has been tricked by private bankers into borrowing the money at interest and has been falling into greater and greater debt thereby. And who pays the interest on the debt?

The Real Reason for Inflation

Our banks use fractional reserve banking. They are required to keep a reserve of money in their vaults to service the customer withdrawals on any given day. They are allowed to loan out ten times what they take in deposits.

For example, I deposit $100 in my checking account. The bank reserves $10 and loans $90 to you. You spend your $90, which is then deposited in another checking account. The bank reserves $9 and loans out $81. And on and on. Thus $100 physical dollars are used to create $900 ledger dollars, all of which are earning interest. But where will the interest come from to pay the debt? It hasn’t been created by the bank. If you create $10 and expect $11 back, where does the extra $1 come from? You have to fight your neighbor for it from an increasingly reduced supply.

So the $100 ends up becoming $10 because $900 was lent but $990 was repaid. Get it? And who got the $90? Yes, some of it came back into the economy, but those rich bankers are sitting on most of it and controlling the world by funding some corporations and witholding funds from others, buying politicians and lobbies, buying the media that feeds you information they want you to believe, and then contracting the money supply and pulling in the defaulting banks and properties like a great net pulls in schools of fish. Meanwhile, the $100 in my checking account that allowed them to earn $90 is earning ZERO. In fact, I’m paying $10 a month to maintain that account. How whacked is that?

Reserve requirements apply only to transaction accounts, which are components of M1, a narrowly defined measure of money. Deposits that are components of M2 and M3 (but not M1), such as savings accounts and time deposits such as CDs, have no reserve requirements and therefore can expand without regard to reserve levels. Furthermore, the Federal Reserve operates in a way that permits banks to acquire the reserves they need to meet their requirements from the money market, so long as they are willing to pay the prevailing price (the federal funds rate) for borrowed reserves. Consequently, reserve requirements currently play a relatively limited role in money creation in the United States.–Wikipedia

Does that make sense? The 10 percent reserve requirement only applies to accounts like your checking account where you can remove the money at any time by withdrawal, writing a check, or using a debit card. And even then the reserve may not be required. But no reserve is required on savings accounts, time deposits, etc.

This means the bank can make as much money as their shareholders think they can get away with. They just have to make sure they have enough in reserve to handle the withdrawal demands at the window. This is why banks get in trouble financially and have to be bailed out by the government (um, that’s you and me again). They loan more money than they should and often imprudently. And if too many people demand withdrawal of their money on a given day, called a “run on the bank,” the bank can become insolvent if they’re not able to borrow the shortfall.

It’s not the Federal Reserve printing money that causes inflation. That’s just an end effect of the true cause: the banks creating debt money on which interest is due. Increased credit creates more interest debt and subsequent inflation. The screwy thing is that if we paid all the debt back we wouldn’t have any money! At least that’s my understanding. If you have another take on it, please comment. I’d love to hear it.

The real issue…was not what money consisted of but who created it. Whether the medium of exchange was gold or paper or numbers in a ledger, when it was lent into existence by private lenders and was owed back to them with interest, more money would always be owed back than was created in the first place, spiraling the economy into perpetual debt. A dollar borrowed at 6 percent interest, compounded annually, grows in 100 years to be a debt of $13,781. That is true whether the money takes the form of gold or paper or accounting entries. The banks lend the dollar into existence but not the additional $13,780 needed to pay the loan off, forcing the public to go further and further into debt in search of the ephemeral interest due on their money-built-on-debt. Merchants continually have to raise their prices to try to cover this interest tab, producing perpetual price inflation.” –Ellen Hodgson Brown, J.D. The Web of Debt

(The information in this post was derived mostly from Ellen Hodgson Brown’s book referenced above.)

I’m came across an article today about a couple that killed themselves and their four golden retrievers:

“It is believed that the Donacas committed suicide after attempts to save their home following a foreclosure notice left them believing they had few options,” the Crook County Sheriff’s Office said in a report.

Before I decided to file for bankruptcy, I spent many nights unable to fall asleep because my mind kept obsessing over my bills. I needed to sell my motor home. But to do that, I needed to get it detailed and have the couch reupholstered. But it had also developed a hydraulic leak. I needed to get a hydraulic hose replaced, the fluid refilled, and the batteries charged. I couldn’t drive it, so I’d have to hire a mobile mechanic.

But I couldn’t afford that because I was driving on bald tires on my car. I needed $650 for new tires. Then there was the 50-year-old apple tree that fell over in my front yard across the front walkway. Then the apple tree in the backyard fell over. These are old trees, and I’m in a flood plain. I hadn’t cut them back (didn’t know I should), and they grew so top heavy that they just fell over. Their roots had been dying from water rot.

I bought a chainsaw to try and cut them down. I figured it cost less to buy the chainsaw and cut them myself than to hire someone to come out and do it. But it was just too big of a job. I couldn’t do it alone. I needed a ladder, but I couldn’t afford to buy one. I’d blown everything on the chainsaw. I also sliced the back of my hand open with an ax, so I was a little nervous about the chainsaw.

My electric bill over the winter was between $250 and $300 a month. And I was paying a mover to move my book inventory from my warehouse to my house. Each trip cost between $500 and $600 (books are very heavy), and he made maybe eight trips. But my income was reduced because I couldn’t list and sell books that were boxed and being moved.

So here I am, in bed. I’ve been thinking about money and debt more than a 16-year-old boy thinks about sex. I’m fading, fading, fading into that sweet point between wakefulness and the dream state and BAM! I’m awake. My body is now vibrating from the jolt. I’ve GOT to sell my motor home. But I need tires. How am I going to get tires? It’s not safe driving this car in the rain. The mover is bringing another load tomorrow. I have to pay him. Awake, awake. My mind racing. My body tense. I cry from frustration and helplessness.

Life has never been more secure, really, for many people in the world. Our power over nature has never been greater, in every way–and yet we’ve never been so uneasy. The Bushmen in the Kalahari–who had none of the things we have, where life was the ancient life of the hunter, unpredictable and dangerous–felt more secure than we feel in the midst of our plenty, alone at night in our beds. –Sir Laurens van der Post

Finally, I would drift off to sleep, but when I woke in the morning the first thing I thought about was my bills. Who had to be paid next? How much did I now have? How could I get more money? Oh, God, the car payment is due in three days. Shit, I need to pay my packaging supplier. I have to fix my motor home. I haven’t even gotten out of bed yet!

I was Making Myself Sick

We’re not supposed to live like this! I was making myself sick. I can’t even count the number of gray hairs I have now, but two years ago it was just a few here and there. I kept picking piles of my hair up off the floor. I was poisoning my body with worry and fear. I could have the best diet, a healthy exercise program, the cleanest air and water imaginable, a pile of good, close friends, and the stress alone could kill me.

Whenever I would feel myself tense up, I would hear my friend Tom say, “Breathe.” Just breathe, I told myself. That’s what I did. Whenever I would feel tense, worried or fearful, when I would feel panic threaten to overwhelm, I would take a deep breath and tell myself, “It’s only money. What’s the worst they can do?”

And I practiced what Eckhart Tolle wrote about in The Power of Now, an excellent spiritual book on living in the present moment. I would sit in my chair, and ask myself if I lacked anything, if anything was wrong. No, nothing was wrong. I had eaten so I wasn’t hungry. I was warm. I was comfortable in my chair. The present moment was free from concern. There was nothing RIGHT NOW that was wrong. And I would release the fear.

It was only when I remembered the past or imagined a fictional future that I became fearful and tense. Live in the present moment. Breathe. Forget the past. Leave the future to itself. This moment I am content and at peace. But if you worry enough to make yourself sick or if you carry pain, then that will intrude into the present moment.

It is idle to dread what you cannot avoid. –Publius Syrus (whoever the hell that was)

Really, aren’t all our worries a result of imagining a future that has not yet arrived? Why borrow trouble? Why leap ahead and live in a moment that doesn’t exist anywhere but in your own mind?

Remembering when I was Happy

I remember when I was in the Army in Colorado at my first post. I moved eleven times in thirteen months. The last place I lived was a small mother-in-law cottage in Colorado Springs. I had it all to myself. It had a small living room with a Murphy in-a-door bed, a small kitchen and a tiny bathroom. I owned one of those cheap stereos you get as a kid that had a turntable, radio and cassette player all in one box. I bought it when I was about 14 years old for $40. I had few possessions. I would write a check for $5 at 7-11 to buy a pack of smokes and get laundry money, and I would be tapped out. I was always borrowing $5 or $20 from my boss until payday. I was only making around $440 a month.

But I was HAPPY. I was free! I loved living alone in my own little house with my own little porch and walkway. I had my Toyota Corona Mark II that I bought for $650 (through a signature loan at the credit union), and I had bought a Honda 350 SL motorcycle. They were paid for. My friend John and I would ride around Colorado Springs and up into the mountains on warm, sunny days, every smell and patch of warm or cold air available to my senses. All I needed was a couple gallons of gas to have hours of good fun.

Now I am fettered by belongings. The greatest burden I bare are my cats, and I don’t regret them. But I am willing to lose everything else if need be. It’s all just stuff. What of your stuff is so important that your life will be diminished over its loss?

Do you remember buying your first piece of furniture? Your first lamp? The first rug? Your pots and pans? Your coffee pot? All that stuff you could get at Good Will for next to nothing. Wouldn’t you rather live in a shack with a cheap lamp and your mind free to imagine beautiful things and time to spend with friends and family–now that you’re not working so many hours–than in a fine house with expensive furniture and a mind full of worry and fear and always in a hurry because there’s just never enough time?

Figure Out Your Priorities

Anyway, get your priorities straight. Figure out what you really want. Then get it. Do it. Decide it. You really can do anything you want. If you can’t pay off your debt in a reasonable amount of time, file bankruptcy. If you can make your house payment, you can keep the house. The only people you hurt in filing bankruptcy are rich bankers who don’t give a shit about you. You’re not hurting the economy. The economy is the way it is because our monetary system is corrupt. (If you didn’t watch the videos in my previous post, you’re not going to understand what I’m saying, so please go watch them.)

And who cares what other people think? Do you want to keep slaving away, getting sick with worry, destroying vital relationships because someone might not approve? Because the Pamela’s of the world think you should be ashamed? Forget them. You’ve only got the one lifetime this time around. Time is running out. The time to live is now.

I know a woman who has credit card debt that makes her worry. She lives with her boyfriend. He bought her a pair of $90 earrings. She spends her money on crap too. But she sends in the minimum monthly payment–forever.

Imagine if you didn’t have to think about money all day long. Imagine if there were no bills coming in the mail other than utilities. Remember how happy you were when you were a teenager and didn’t have anything but time to spend with friends? Sell off your possessions if you have to to get out from under the debt. Go without that blended mocha drink and put that toward your debt. Sell your car and buy a cheaper model. Do whatever you have to to unhook from the system.

Once you’re out of debt, buy that beautiful lamp you want with C*A*S*H. The pleasure’s usually in the finding and buying, not the having. Isn’t it?

I decided to do some more research on the money issue that I’ve been writing about. I’d like to better understand inflation and how our nation got so grossly into debt. So I ordered and have started reading The Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free. What an eye-opener! I have lived my entire life in complete ignorance of our monetary system. I recommend this book to anyone who wants to understand money and banking and get a healthy dose of American history as well.

This morning I found the following comment from Pamela awaiting approval on my Bank Offers No Help post (I quote in part):

Thank you for contributing to the downfall of our economy through your reckless and irresponsible use of debt. Your lenders have no obligation to help you but YOU have an obligation to pay the debts that you willingly and foolishly acquired.

How dare you think that they have to help you with your irresponsibility? How dare you abandon your debt for others to pay off? You are symbolic of the reason things are such a mess right now.

I always get a chuckle when someone says, “How dare you!” Such righteous indignation! Such superiority! This woman thinks I’m the cause of this country’s economic problem? I’m just a symptom, folks. If I asked Pamela to explain how I am symbolic of the “reason things are such a mess right now,” she would be incapable of doing so. Pamela would not be able to explain why our current monetary system guarantees that people will default on their loans.

Shit happens, Pamela. People who file for bankruptcy often do so because they’ve lost their job or become ill and incurred massive debt from medical bills. A very small portion are irresponsible or cheaters, though the bank wants you to believe we’re all crooks. It takes the spotlight off them, the real crooks. Why do you think we have laws in place to protect people filing bankruptcy? Because bankruptcy of a minority is a natural conclusion to a monetary system based on debt. The rest of you “responsible” people just trudge along in servitude to the banks.

Lurking behind the curtain of the new national bank [instituted in 1791], a privileged class of financial middlemen were now legally entitled to siphon off a perpetual tribute in the form of interest; and because they controlled the money spigots, they could fund their own affiliated businesses with easy credit, squeezing out competitors and perpetuating the same class divisions that the “American System” was supposed to have circumvented. The money power had been delivered into private hands; and they were largely foreign hands, the same interests that had sought to keep America in a colonial state, subservient to an elite class of oligarchical financiers. –Ellen Hodgson Brown, J.D., in The Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free

Pamela thinks I should be ashamed. Sorry, Pamela, I’m not. And if you realized how ignorant you are about the money system, you’d be ashamed of judging me so harshly. Because it’s your ignorance, and the ignorance of your fellow Americans–I count myself as one of them–that has gotten us into this mess. But no hard feelings. I thought the same way not long ago.

This puts me in mind of a famous preacher and healer named Smith Wigglesworth. He healed a great many people but learned to stop judging others when his failing eyesight demanded he wear glasses. Up until then he had considered people with glasses as lacking faith for the healing power of God. It’s the same as saying when you point one finger at someone you’ve got three pointing back at you.

If the American people ever allow the banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property, until their children will wake up homeless on the continent their fathers occupied. –Thomas Jefferson, 3rd President

We are obsessed with the acquisition of money. People lie and steal to get it. Most work at jobs they hate to get it. But most of what we earn ends up in the bankers’ pockets, first in the form of taxes and then in the form of interest on loans. How stupid is it, really, to pay $200,000 in interest to own a $100,000 home? Is that home worth $300,000? Then why are we agreeing to pay that? Because we are that stupid. But to get the $300,000 for the home, you have to earn $500,000 to pay taxes, taxes that service the national debt and again end up in the bankers’ pockets.

We buy our first car on credit. We get a credit card and charge “responsibly” to “build up credit” so we can get more credit. So we can make the bankers richer! And ourselves poorer. After a lifetime of work most people will be lucky if they have a house paid for.

If I only knew 30 years ago what I know now. I cannot believe what I’ve learned this past week. Do you understand what’s going on, how our money is created, why we pay income tax, who the Federal Reserve is, or what fiat money or fractional reserve banking are?

If the American people only understood the rank injustice of our money and banking system, there would be a revolution before morning. –Andrew Jackson, 7th President, to Congress in 1829

I’m staging my own revolution by giving it all back. Take it all. Take the house, the car, the credit cards. And let me have a black mark on my credit report so I can’t borrow from you thieves again. You have siphoned off the last of my wealth!

Folks, don’t be stupid any longer. Watch this excellent series of videos, and you will know more about money than most of the people on the planet. And you’ll probably be the only one who knows this in your circle of acquaintances. Hopefully, it’ll help you make better decisions about your finances and start you on your road to financial freedom. Then spread the word. With perseverance and conviction, we can change our monetary system. Then please, share your comments on these videos.

Money as Debt (part 1 of 5)

Money as Debt (part 2 of 5)

Money as Debt (part 3 of 5)

Money as Debt (part 4 of 5)

Money as Debt (part 5 of 5)

When I first considered filing bankruptcy, I felt guilty about the idea of not honoring my debt. But when I added up how much I was paying in interest and how much I was getting to keep to eat, entertain myself, save for the future (that would be ZERO), and pay down my mortgage, I realized I was working most of the week for the banks. I was giving the banks thousands of dollars a month and then getting excited over being able to buy a salad spinner.

How can anyone get out from under 29.94 percent interest? And that interest hike was because I was late paying a bill. How can a credit card company justify doubling someone’s interest because their payment arrived a few days late? They don’t need to justify anything. They just do what they want. And then other cards raised their rates. I was being squeezed by everybody. I would be forever working for the banks. If the rates were lower I might have had a chance. But their greed was my emancipation.

Don’t even look at your mortgage. The banks advertise six percent, seven percent. Doesn’t seem like much. But in the first seven years or so you’re actually paying about 95 to 98 percent. And the average American moves every seven years, so you’re always in the 95 plus percent bracket. And if you do manage to pay off enough of the mortgage to get down where you’re only paying, say, 50 percent a year, the bank encourages you to refinance or take out an equity loan. Anything to get you back up to 95 percent. Buy a hot tub. You deserve it! How about a European vacation? Or that sleek, new, sexy automobile that’ll make you look and feel SUCCESSFUL?

We’ve been trained to think of credit as money available to spend. You know, you have a credit card with a $5,000 limit. You owe $3,200 on it. Don’t you think of the $1,800 as available to spend. Don’t you WANT to spend it? I know I did. We all know the saying, “Money is burning a hole in my pocket.”

I knew a woman who fell for the lure of refinancing. Her house payment in Florida was about $250 a month, and she had a lot of equity in the house. Well, she refinanced her home and bought new carpeting and a hot tub. I would live on a dirt floor at this point to have a $250 mortgage. This woman signed away future earnings and paid way more for those items than had she just saved up every month to buy them.

I Won’t Be Retiring Any Time Soon

At a time in my life when I should be looking forward to retirement in a decade or two, I have nothing of worth. I have no savings. And I’m pretty typical of the average American. I did my bit for God and country, which was work jobs that did not fufill me or that I hated to pay taxes and consume goods produced by other people who hated their jobs and paid their taxes. Our entire economy is based on and sustained by consumerism.

I’ve read that about 96 percent of the American population will be unable to retire and enjoy their current life style. They will have to continue to work and rely on the government to support them with health care (what I call disease management) and retirement income. I’m one of those 96 percent. Are you? I doubt social security is going to be around when it’s time for me to enjoy my retirement years.

The game we play is to cleverly move debts around until we have what we want and hopefully don’t find ourselves insolvent at some point. Even if you are technically debt free, all mortgages paid off and car loans too, you are responsible, in the eyes of the government, for your share of the national debt. Your debt freedom is relative, not absolute. –Jason Kirby, June 2006

The Banks Are Calling the Shots

We now pay about 50 percent of our income in taxes. Does that seem right to you? Who came up with the idea that the government should get something of everything we earn? And how easy does the government make it for us to save money for retirement? I love how they put limits on how much you can set aside each year for retirement, and whatever you do save, if you invest it you pay interest on your gains.

Make no mistake. The government isn’t calling the shots. The bankers are calling the shots in this country. I’ve been learning quite a few things lately that I’d like to bring to your attention. But you’re going to have to have an open mind. And I’m going to have to find time to write it.

Inflation Explained

For now, the following video will explain to you why your dollar just doesn’t buy as much today as it did a few years ago. This is going to be information that the average American simply doesn’t know. There are a lot of things we don’t know about, mostly because we’ve been programmed to entertain ourselves with consumer goods. And we’ve grown up giving our trust to a government that hasn’t earned it.

Here’s the next video in that series:

No Longer Guilty

When I consider how much interest I have paid over my 35 or so years of employment, I don’t feel guilty anymore about not paying back the banks. The things I have learned in the past week make me very angry, and I hope they make you angry too. Angry enough to pay off or discharge your debt and free yourself. This should be the land of the free, not the land of debtors.

Additional reading:
The Real Reason for Inflation and Deflation
How Dare I Ruin the Economy!
Get Out of Debt Now by Any Means

When I went to my shopping cart to complete my Amazon book purchase a year and a half ago, the order screen said I could save $30 off my purchase by applying for the Amazon Visa card through Chase Bank. They advertised an introductory 0 percent interest rate for six months, after which it would go to 14.99 percent.

I, like most, thought I would make my initial purchases and pay the card off within six months. But as I procrastinated and cash flow dwindled, I was unable to pay. And that is exactly what the banks and lenders want and expect. They entice potential customers with low or no interest teaser rates for purchases or balance transfers and count on our inability to use credit wisely. They land us right where they want us: in the “sweet spot.”

Ed Yingling, incoming president of the American Bankers Association, tells FRONTLINE that revolvers are “the sweet spot” of the banking industry. This “sweet spot” continues to grow as the average credit card debt among American households has more than doubled over the past decade. Today, the average family owes roughly $8,000 on their credit cards. This debt has helped generate record profits for the credit card industry — last year [2003], more than $30 billion before taxes.–Frontline

The Sweet Spot

If you use your card and pay the balance off every month, then the lender gets only the fees charged the merchant who pays for their service. In bank parlance, such a responsible customer is called a “deadbeat.”

But if you charge up the balance, pay it down somewhat, charge some more, pay it down, the bank gets the interest and fees from the merchant plus the interest you pay. The sweet spot is where you use the card every month but always maintain a balance. Such customers are called “revolvers.”

And the best of all worlds is if you pay late and go over your limit. Then the bank typically raises your rate to 24.99, 29.99 even into the thirties, making it all but impossible to ever pay off the debt with your current income.

The Federal Reserve reported Wednesday that Americans’ credit card debt jumped 6.7% in the first quarter of this year to $957.2 billion. This spike comes despite the fact that nearly one in three banks is tightening guidelines for credit cards.

In Atlanta, debtors calling the agency in the first quarter of this year had an average of $29,300 in unsecured debt, primarily on credit cards, up from $25,700 in 2007. They spent $335 on groceries and $242 on gas, on average, in April. A year earlier, those outlays averaged only $291 and $181, respectively. –Tami Luhby, CNNMoney.com senior writer, May 2008

An Example of My Own Mismanagement

When I was much younger I used a new credit card to buy ski equipment and clothing. I got skies, boots, poles, a couple jumpsuits, hat, goggles, scarf, gloves. I believe at that time the minimum payment was 2 percent of the balance. With a balance of $2,000 at 14.99, I’m paying $24.98 per month in interest. But if my interest is 29.99, that’s $49.98 per month in interest.

For years I had dreamed of owning an RV. I finally bought one, a used Fleetwood Flair. I went on a weekend trip with a fellow photographer and told her how I loved RVs because I had everything with me and I didn’t ever have to pay for hotels. She asked, “How much was the RV?” I said, “Twenty-seven thousand.” She replied, “You can rent a lot of hotel rooms with $27,000.” What was I thinking? I felt so stupid.

I took the best vacation in my life in that Flair, so it wasn’t a complete wash. What I was really after was freedom, not shelter. And in exchange for this illusory sense of freedom I was now working a few hours a week for the bank. I had promised my future earnings to them. Want to know what I used for a downpayment? A $5,000 surround sound system I bought on credit with a “low monthly payment.”

• How many of you have exercise equipment or expensive kitchenware or boats you bought on credit for a “low monthly payment”?
• How many of those items sit unused while you continue to make payments?
• Have you ever calculated the true cost of those items after adding interest to the purchase price?

Credit Card Minimum Payment Interest Calculator

I’m going to use this calculator to figure out how long it would take to pay off $2,000 at 14.99 annual interest rate with a 2 percent minimum payment, or $40. It would take me 6.58 years and I would pay $1,157 interest. But if I were to make a late payment and the bank raised the rate to 29.99 percent, I would never pay off the debt if I made only minimum payments. I would instead be a victim of negative amortization.

But this savings calculator shows me that if I were to invest $40 a month at 6.5 percent interest compounded monthly, at the end of 6.58 years I would have $4,241.

Go get your credit card statement and take a ride with the calculator to find out how long it will take you to get out of debt. It’s sobering. Please, just get your statement right now and do this.

Fortunately, the Office of the Comptroller of the Currency raised minimum payments to 4% and banks reluctantly complied.

Making only minimum payments indicates to lenders that you have reached the limit of repayment capacity. Long-term minimum payments is a factor in your credit scoring…demonstrating increasing risk to the lender. –Harvey Z Warren, author of Forever in Your Debt: Escaping Credit Card Hell

I ended up paying that credit card off, but I didn’t learn my lesson. I got into debt again, because I wanted things and I wanted them now, and credit let me get them. The irony is that I could never afford to pay cash for these things because I had committed a portion of my future earnings to the bank, my “disposable” income. That word alone should clue you into how we are being played by consumerism. Hey, that word too. Disposable. Consume. Why don’t they just use the word “slavery”?

History of the Credit Card

Please take a moment and watch Frontline’s Secret History of the Credit Card aired in 2004 and learn why:

• There’s no limit on the interest rates banks can charge.
• There’s no limit on fees (late, over limit, bounced check) they can charge.
• They can raise your interest rate for any reason or no reason: e.g., they can raise your rate if you are late paying on another loan or if your balance is too high.
• The credit card companies have strengthened bankruptcy laws to make it harder for you to discharge your debt but they have successfully lobbied to block efforts to regulate their own industry.
• Paying the minimum payment on a high-interest credit card will ensure a lifetime of servitude.

By the way, while I still have all my ski equipment, I’ve used it only twice, but I’ve been lugging it with me because it was so gosh darn expensive. So much for freedom!