The word on the street is that we may be nearing the bottom of this recession, or even be on our way out. I’m a little skeptical of those claims, but even if they’re true, there are three nasty problems that will get in the way of any recovery:
1. High fuel prices
How much you pay at the pump is largely determined by supply and demand, along with a large dose of federal gas tax. The weak demand of the recession has brought about much needed relief in fuel prices. But while nobody is paying attention, the new administration has canceled many gas leases in the western United States, which potentially lowers the supply of fuel. My prediction is that by the time the Dow recovers to its pre-recession glory, the price at the pump will be setting new records as well.
2. Higher Taxes
The federal government keeps spending us deeper and deeper in debt, and sooner or later will have to raise taxes in attempt to balance the budget. Regardless of whether they tax the rich or the middle class, the effect on the economy is still negative. High taxes = poor economic performance. Period. It doesn’t matter who pays the taxes.
4. Inflation
The spending of the federal government has been getting plenty of media attention, but I don’t hear much about the trillions being spent by Federal Reserve. While this spending doesn’t drive up the federal deficit, we pay for it just the same – with inflation. LOTS of inflation.
It seems many financial advisers today have a strong opinion about which type of IRA is the better way to invest for retirement. I’m not a financial expert, but I cringe when I hear somebody emphatically state that one type or the other is clearly superior, when it really is not that simple. The correct answer depends on several factors, and I think so-called “experts” are doing a disservice when they try to steer a financial novice like me in one direction or the other without a proper explanation. Please note that I don’t have any fancy initials after my name, so I’m not to be relied on for sound financial advice. This post reflects my limited (and possibly out-of-date) understanding of the subject. continue reading »
If I continue writing non-technical posts as I have in the past month or two, I’ll have to rename my blog “Bernardo’s Anything But Tech Blog”. Here’s another one on a subject that is on many peoples’ mind recently:
BusinessWeek.com has listed a number of financial Dos and Don’ts for the new year. Check it out at http://www.businessweek.com/investor/content/dec2008/pi20081217_317510.htm
I have known for a long time about the religious exemption to Social Security. However, I recently ran across an account of how it all came about. Here is the story of the struggle between the Amish and the IRS.
http://www.amishnews.com/amisharticles/amishss.htm
I’m a little envious of them, considering that an individual can receive far more retirement income from safe investments such as bonds than he or she can ever expect from social security. Here is an enlightening article on just how bad of an investment social security really is.
http://www.heritage.org/research/socialsecurity/cda98-01.cfm
If you are a middle-class American and are having trouble achieving the financial freedom you dream of, chances are it is your fault.
I recently ran across a good article on Yahoo! Finance that explains the reasons many people never get rich.
Click here to take a look
