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One of the problems with out of control government spending is the way it affects the behavior of government itself. Like any other junkie, the government convinces itself it needs "just one more" fix and will do anything to get it. Again like a junkie, the government will prostitute itself and steal from friends and family to keep the drug supply coming. We see a glaring example of the later when governments simply grab private property in order to pay off their own debts. We have already seen the precedent for pensions being seized by government. Just last week in Hungary the government grabbed $14 billion in private assets. Over the weekend, the Irish government decided to take 15 billion Euros from the future pensions of its citizens to give to the banks. Now France is taking 36 billion Euros from the pension fund to keep its bloated and unsustainable welfare state afloat for just a little while longer. People need to understand that the United States is not immu...

Today's topic is Shadow Inventory - the foreclosed or soon to be foreclosed properties that banks are stuck with and which are not listed for sale. As a result, they are not found in any formal listing of housing inventory when existing home sales are reported. This has been a problem for a long time, as we mentioned many months ago in Household De-formation . The media's silence on this issue has been almost total. Probably because any reasonable discussion of the topic would severely undermine the illusion of stability they are trying to project. This weekend, the Wall Street Journal took a stab at estimating the damage. Their conclusion is that it would take 107 MONTHS to clear the shadow inventory at current sales rates. Obviously not a number that the bankers and their apologists in government and media are anxious to publicize. Over the summer, banks appeared to be making some headway. The government’s mortgage-modification program helped some people get current on thei...

Call it editable estates, urban agriculture, reducing your carbon footprint, or a throwback to the American ‘Victory Garden’ of World War II -- Last year, we decided to plant at least one surprise edible in every garden plot in our back and front yard. Among the many fruits and vegetables, we had peppers beside are day lilies, strawberry plants as ground cover lining are front walk under the yews, and sweet potatoes climbing the fence as a back drop to the zinnias. Not only have we been rewarded with the playful fun of edibles interwoven across the landscape, we have relished (no pun intended) in the harvest. We have feasted on fresh vegetables and fruits all summer and have been canning and freezing to carry us well past Thanksgiving with home goodies. Who knew that three cucumber plants would give us enough to can dozens of quarts of dill pickle spears and bread and butter pickles? This fall, our pepper jelly has been a huge hit at gatherings. We found a very simple, step-b...

You have probably heard it said before, “the first million dollars is the hardest to save.” As I continued teaching from Jim Collin’s book 'Good to Great' , he speaks to how disciplined thought and disciplined action brings about disciplined results. It is like a  flywheel -- like starting a lawn mower, where it is hard to get started and then through continual little pushes (disciplined action) the flywheel begins spinning faster and faster until you reach breakthrough (the engine's running). As I am reading this, I keep thinking about how hard it is to make your first million dollars (I’m a long way from my first million) and how the flywheel provides a great analogy to saving your first million. It takes disciplined thought and disciplined action to start saving on a regular basis. If you start out saving $25 a month, you are starting your million dollar flywheel moving. Every time you get a raise, receive a bonus or a cash gift, you can add more to your monthly saving...

In my Senior Seminar class at Mount Mercy University we are reading "Good to Great" by Jim Collins. Chapter 2 is on Level 5 Leadership. As I read this chapter, I couldn’t help but to think how each one of us can be a leader in personal finance and how we can take some of the principles from Jim Collins and apply them to our daily lives. Collins describes a Level 5 Leader as someone who “builds enduring greatness through a paradoxical blend of personal humility and professional will.” We all want our families to be successful and I want my kids to be more successful than me (building enduring greatness). A central theme of this chapter is setting up the company for future success and not worrying about individual success. Our last blog entry was on how much money it will take to retire so I naturally put the two together. I want my kids to be able to retire and live successful lives, so I want to set them up for future success. The questions are how do I do that and am I doing...

In reading the Sunday, September 26th Cedar Rapids Gazette, there was an article “ From Boom to Bust ” by Susan Tompor that got me thinking what it would take for me to retire. Susan also wrote the article “How to Prepare for Retirement” to help you plan. One of the things she stated in her “ How to Prepare ” article is “that you want to spend 4 percent or less each year from your retirement saving.” So….how much is it going to take? Other experts say that you will need 80-100 percent of your pre-retirement income in retirement. If we put together all of this, and for ease of numbers, say you make $100,000 before you retire, you want 100 percent of your pre-retirement income, and you are only going to spend 4 percent of your retirement per year, you would need $2.5 million in retirement savings. Now this does not include your Social Security income. Right now, you can start collecting Social Security at ages 62, but if you want to receive your full Social Security benefit, you must wai...

The zero interest rate policy (ZIRP) will kill the banks. Falling interest rates help banks by increasing the value of their bond and loan portfolios. This is the well understood inverse relationship between discount rate and present value of a future sum. But you see keeping interest rates at zero does virtually nothing for the banks as rates cannot fall further. There is a short window where ZIRP is a positive but an "extended period" (in Fedspeak) is just slow death for the banks. During that short period, the banks are still collecting on portfolios constructed when rates were higher but as those higher-yielding assets mature, there is nothing comparable to replace them. We hear constantly how banks can just borrow at zero and invest in Treasuries - pocketing the difference. That would be fine if yields on Treasury debt were not low and falling along with everything else. The other problem is that this simplistic formula assumes that banks' operating expenses are negl...