"When you run into debt..."

Americans marvel at the wisdom of our nation's founding fathers, who crafted a Declaration of Independence and Constitution that so eloquently express the aspirations of humankind through the ages. Thomas Jefferson and Benjamin Franklin, in particular, get a lot of praise for their genius.

Too bad we ignore their financial advice.

Both men spoke about the dangers of debt. Jefferson warned against public debt, perhaps generalizing from the demoralizing weight of his extensive personal debt. Franklin, one of the richest Americans in history and a lifelong proponent of liberty, made his position clear: "Think what you do when you run into debt; you give to another power over your liberty."

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Categories: Education | Finance | Economics

10 comments - Posted by Paul Orfalea at 10:16 AM

Bubble to Bubble

By Lance Helfert

Satirical newspaper The Onion ran this headline in July 2008: "Recession-Plagued Nation Demands New Bubble to Invest In." The joke works because it's true, and because investment bubbles of the last fifty years were so frequent, so frenzied, and so well documented. The history of economics - and progress - has been a history of bubble and bust economic cycles.

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Categories: Finance | Economics | Investing | Optimism

0 comments - Posted by Dean Zatkowsky at 8:28 AM

There's More to the Housing Market Than Homes

Every discussion of "The American Dream" revolves around home ownership, although many would argue that the quest for universal home ownership contributed to our current financial crisis.

When politicians and the press talk about housing today, they invariably talk about homeowners at risk of foreclosure, and heaven knows that's an important topic, particularly for the people affected directly. But there's more to the housing market than primary residences.  Many Americans own a rental property in addition to their own home, and many investors devote a significant proportion of their portfolio to real estate holdings.  For better or worse, real estate prices depend on these people's actions too.

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Categories: Finance | Economics | Investing

0 comments - Posted by Paul Orfalea at 5:00 PM

NEW BOOK!

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Categories: Corporate Culture | Creativity | Customer Service | Education | Nutrition | Management Skills | Disabilities | Entrepreneurialism | Finance | Economics | Ethics | Competitive Advantage | Optimism

2 comments - Posted by Paul Orfalea at 9:13 AM

Reaching Around the World to Punch Ourselves in the Nose

Buckaroo Banzai said it during brain surgery: "No, no, no, don't tug on that. You never know what it might be attached to."

The global economy is no less complex and interconnected than the human brain - maybe more so. The funny thing about American protectionist jingoism is that we do know what we're connected to, but we're adding a "Buy American" provision to the economic stimulus bill anyway. Once again, politicians have chosen symbolism over good policy.

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Categories: Finance | Economics

0 comments - Posted by Paul Orfalea at 9:40 AM

Hyperinflation and the Loch Ness Monster

Inflation has been an all-purpose bogeyman since the 1970s, but a small amount of inflation comes with a healthy, growing economy.  The Federal Reserve focuses on managing inflation, not preventing it. We have written often that we feel the government measures inflation incorrectly, since the Consumer Price Index undervalues food, healthcare and energy costs. As a result, excessive inflation builds for a while before the government acknowledges it, and comes as a surprise, despite our constant measurement and analysis.

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Categories: Finance | Economics | Investing

0 comments - Posted by Dean Zatkowsky at 5:23 PM

Cut and Ruin

By Lance Helfert

Financial booms and busts result from many causes, but our short memories certainly play a key role. Experience and attention to history help investors remain calm during periods of increased market volatility, but also during extended periods of growth or decline. Brandes Investment Partners sent out a fascinating chart to shed light on "the cost of throwing in the towel," as they put it.

The table, which we have recreated below, shows peak-to-trough declines greater than 20% in the Dow Jones Industrial Average since 1960. It also shows the percentage change one and two years after the trough.

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Categories: Finance | Economics | Investing

1 comments - Posted by Dean Zatkowsky at 4:25 PM