Consider three ideas that affect your financial future:
- Risk does not equal reward
- Stocks are actually less risky than bonds
- Predicting yourself is more important than predicting the stock market.
These ideas are just a few that are in the book Dollarlogic by Andy Martin. Available at Amazon.
You will find another idea that affects your financial future further along in this article.
Andy and I recently had a little twitter conversation about why government debt is growing so much more quickly than personal and corporate debt. He and I agree that governments either don’t know or don’t care about finances so long as they have money available. People seem not to understand that government debt can hurt us.
Whether you are an avowed monetarist, a rock ribbed Keynesian, or a follower of pop economics, you cannot doubt that getting value for the treasure you exchange is necessary. But, that’s you. Governments work on other premises.
To a politician and a bureaucrat, free means someone else pays.
After the exchange with Andy, I thought about that and recalled a Milton Friedman idea.
Every transaction involves an exchange of values. Friedman observed that purpose and source of money mattered. So, four conditions:
- I buy something for myself and pay for it with my money. I first decide need and then I seek both quality and price.
- If I buy for another and pay for it myself, then quality and need matter less, but price remains important.
- If I buy for myself with other people’s money, then quality matters, but need and price do not.
- If I buy for others with other people’s money, I do not care about any of need, quality and price.
We would be very naïve indeed to believe that 4) does not describe government.
Friedman’s analysis does not include the values politicians receive for their largess with our money. Power and adulation. It is little wonder that they spend their time dreaming up programs and finding ways to get the money to fund them.
The problem is that we do not withhold power from those who refuse to value the money they take from us. Silence is consent. They don’t need to care and borrowing is a better source of money. We don’t see the cost.
P.J. O’Rourke assessed the problem this way. “Giving money and power to government is like giving whiskey and car keys to teenagers.”
In business, in your family, and especially in government never put someone in a position where they need not care about needs and value.
There is a defense. Many years ago, we had a small gathering in our home before a community event and one of the attendees was a federal cabinet minister. Our then 10-year-old son asked him, “What is the government going to do about unemployment?” He explained the problem and some of the choices and finished with, because he was an honest man, “The only unemployment a politician really cares about is his own.”
Use that fear and make those people accountable.
Don Shaughnessy is a retired partner in an international public accounting firm and is now with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.
Contact: firstname.lastname@example.org 705-748-5181