by Cireal Americanus
“I am as mad as hell and I am not going to take it any more.” This is a famous line from the 1974 movie “The Network”, which chronicles the life of a washed up News Reporter who announces he will kill himself on live TV. Although the announcement is more than a bit extreme, for those who are diligent Savers, the sentiment of the statement is something we all can share.
For those who have been watching, you know the Consumer Price Index (CPI) has risen about 1.4% in the last 12 months. Given this figure you don’t have to be a mathematical genius to determine if inflation is approximately 2%, your savings are being slowly eaten away. This is counter to our Communities focus and “hand-me-down” financial advice of Save, Save, Save.
For the astute, there are three strategies you can use to subvert this tragic effect.
First, we should save as much as possible Tax-Free. This would mean maxing out IRA contributions, education funds, and any other investments that shield as much of your holdings from the taxman’s bite as possible. Caveat – be sure to get a clear understanding of the potential tax implications should you decide/need to draw on these accounts.
- Second, we can put our money outside Bernanke’s reach – in foreign markets. The European Central Bank (ECB) at least mildly cares about savers, and has pursued a more careful policy than the Fed. Within the EU, Germany is recovering nicely, partly because it had very little fiscal stimulus, and has almost no inflation. Outside the EU, Japan and Korea are both recovering nicely, and are worth a look.
- Finally, we savers can engage in the ultimate Bernanke protest, and buy gold, silver or shares of mining companies. Once the Fed reverses its policy, these will be rotten investments. But it’s pretty clear that the Fed is not going to give savers an even deal any time soon. In that case, if the Fed doesn’t reward us, gold and silver will. The dollar will decline, and gold and silver prices will continue to rise, until eventually the Fed is forced to act.
Knowledge, Diversification and Action are the key. As there is a change in times, so should there be a change in our mind-sets and strategies. I realize that these actions will not necessarily make one financially free but you will not be financially free unless we take an action. The simple trick is keep much more than you spend.