Inflation Blindfold Conspiracy

Right now we have at least 14 million unemployed and growing. There is a high probability that unemployment could exceed its historic norm of 5 percent to 6 percent for several more years.

Our consumer price index (CPI) is way up. Our consumption of food, energy, clothing, recreation, education, transportation, toys, cosmetics, etc. makes up 58% of the Consumer Price Index with the housing market making up the other 42% and we know housing is down.  I don’t know if our leaders have gone to the grocery store lately or do a family budget and look at food as a line item but my family does  and what we are seeing is that prices are going up.

Everything is going up as we track our budget whether it’s education, health or life insurance, medical care, or our most precious groceries and water.  Yet the government keeps telling us there’s no inflation. Where are they shopping and are they doing it blindfolded?

The formula is quite simple and no wool pulled over your eyes should be able to keep you from the truth; even if media assists our government in this blindfolding experiment. First, our government borrows money from the Federal Reserve.Then the Federal Reserves says “sure we can help you out” and they loan the government some money. However, the Federal Reserve does not have any ‘real’ money but have control of the monetary system in this country and get the Treasury to fire up the printing presses and manufacture some money; or debt notes if you prefer.

The final stage is is where these dollars (debt notes) are created out of thin air and it gets its value by draining from existing money. Every time this new money or debt notes are manufactured and released, it takes away some of the value of the current money you’re holding; in essence it is stolen.

An example of how this effects you would be; you have $10,000 in a CD or the bank and most prognosticators agree the real effect of inflation is about 9.6%. Some even believe inflation it is running as high as 13%. However, we’ll stay with 9.6% to be conservative; perhaps even naive. So if you have this $10,000 in a CD or bank it would look like this

The Value of $10,000 with 9.6% inflation imposed on it for 5 years.

Ultimately the purchasing power of your savings; never mind the little interest it might acquire as it would have taxes to lessen it out. The purchasing power would be reduced by 36.8% in just five short years. By 2016 you will be left with just $6,323 out of your original $10,000 and have lost $3,677 just by doing nothing. This means things are not always about return which is nice and should be sought in tax-free environment going forward. But equally important is to consistently add to what you have and not lose anything. In other words, you need to protect principal, consistently and regularly add to your pot and try to eliminate as much tax imposed on it as legally possible. This 3 step process is a simple formula for wealth but many will not take advantage as it requires self-discipline and “know-how” on protecting principal and eliminating tax.

We teach seminars on smart money management and how to acquire corporate credit to fund your business aspirations and really succeed in what is now some of the toughest years in our country’s history. You have to ask this question – am I taking the right steps necessary to be able to retire? If you are not you will be working for the rest of your life and never taste true freedom which is to work on your own terms and time frame or choose to not work at all and know your family. Know  your family folks; how many of you can truly say you spend quality time with them and “know” them. I bet the number is resoundingly LOW.

We can help you as it is our life’s mission to reduce retirement poverty in this country and get those on track who will take the ” RED” pill rather than the “BLUE” pill (“ignorance is bliss”) and choose to not stay blindfolded in the dark but wake up.

James Burns

(866) 544-8825 Ext. 1 Office

Uncle Sam’s Snake Oil

Uncle Sam and his band of merry-men, better known as Congress, have been pushing snake oil on the unsuspecting public in the form of retirement plans. But wait, isn’t a pension plan one of the perks we look to when shopping for an employer? Well, not all pension planning is created equal and in most cases, quite disastrous.

Distributions from all qualified plans must begin no later than April 1st of the calendar year following the year that the participant attains age 70 1/2, or the calendar year in which the employee retires. Special rules apply if the distribution is made to a 5 percent owner of the business. The purpose of minimum distribution rules for retirement plans is to force the owner or participant of the pension plan to withdraw money from the plans, thus triggering an income tax on these monies. On April 16, 2002, the Internal Revenue Service issued final regulations as to these distributions.

Generally, the idea pursuant to the regulations is to have the owner or participant of the pension plan begin taking the money out of the pension plan beginning at the later of when he finishes working or age 70.5. One purpose of this is to insure that these monies will be subject to income tax prior to the death of the owner.[1]

Based on the current system the government has created with pension plans, the average retired couple will pay eight to twelve times more in taxes on their IRAs and 401(k)s during their retirement years than they saved during their contribution and accumulation years.[2] Generally, it is understood that you put money into your pension plan and tax is deferred and this is a great thing. Unfortunately, you may well be in a higher tax bracket if your pension accumulation is done right.

In addition to a higher tax bracket upon reaching retirement, many people find themselves with a free and clear home; they no longer have mortgage interest deductions to offset income tax. Many Americans find they are now paying back everything they saved in taxes during their accumulation and contributions years within the first two years of distributions. Therefore, there is an insidious income tax awaiting most people and if they didn’t plan their estates, double taxation in the form of both income and estate tax.

Many postpone the transfer of their qualified funds until age 59 ½ in order to avoid the 10% tax penalty. Sometimes by delaying the payment of taxes, retirees will find themselves in a higher tax bracket after age 59 ½ because Congress could raise tax rates because of a political change. Inevitably, one must pay the piper now or later.

What is the answer? Simple, savings grade life insurance. This type of life insurance is not the same as the one you get countless letters about in the mail. This is life insurance that is focused on building up a triple compound because it is tax deferred. The difference between the deferral that life insurance experiences and pension plans is that when it comes time for payout, life insurance is received as a loan. This is a powerful concept because the proceeds will not be taxed; loans are not a form of taxable income. However, as a loan you will have interest on the payments. Most people mistakenly think they are going to pay interest on their own money with life insurance. While in theory that is true, the best insurance carriers provide for zero wash loans where the interest basically is forgiven or taken out of the death benefit when a person passes on. We are talking about real life insurance not the typical death insurance that most people have because you use it while you’re alive.

The best candidates for creating amazing wealth with Savings grade life insurance are those in the age rages of thirty to fifty. Once committed and in the proper product it is foreseeable they will retire wealthy and without the annoying taxation that surrounds a pension plan. There are even strategies to start a contribution plan to your investment that only requires repositioning your current finances.

Social Security received a 2.7 percent boost in 2005, but Medicare will continue to eat up much of the increase and when the 79 million qualifying Americans sign-up – for Social Security look out below. This does not even account for the bail out with TARP funds that President Obama awarded bankers and the fact we are headed for Debtflation.

Long Term Nursing Care – are your prepared?

Many states have a high cost for long term care and nursing but California is very explosive in expenses.

State Median Annual Care Costs for 2010 are:

Nursing Home Care

1. Private Room                                                      $87,345
2. Semi-private Room                                          $73,000

Assisted Living Facility

1. Private, one bedroom                                     $42,000

Adult Day Health Care

1. Adult day health care                                    $20,020

Home Care

1. Home health aide                                           $46,904
2. Homemaker Services                                   $45,646

The statistics are that 7 in 10 people will require one of these types of long term care in their senior years. The question is what have you done to take care of this potential problem?

You need to look at a long term care policy or better yet, an insurance policy that provides for supplemental retirement income but also has living benefits if you need them like nursing care. To ignore the numbers is to ignore a fact like you’re going to get old and that everyone has to pay taxes. You need to be responsible to your loved ones and in order to preserve all that you are and have worked for from going out the window to pay for this.

James Burns, Esq.

www.jamesgburns.com

Domestic Financial Terrorism – How do we defend?

The level of destruction on our financial system is incredible compared to what even Timothy McVee did as a domestic terrorist. You have to ask yourself who do some of these bankers and investment firms work for when you look at what they’ve done to the once wealthiest nation in the world.

Right now we’ve got $2 trillion in short-term debt that has to be refinanced this year of 2010 and China, India and Russia are not buying. This is not counting the extra deficit spending which should top $1.35 trillion this year…more or less. The fact the countries we’ve relied on are not buying means we have to fire up the printing presses again. We would already acknowledge that we are at a 10% inflation but the money folks have been using tricky phrases like “core inflation” which ignores half the things we spend money on so that way they can keep the numbers looking low.

A great book called This Time Is Different: Eight Centuries of Financial Folly by Carmen Reinhard and Kenneth Rogoff shows that EVERY TIME a nation’s debt went above 90% of GDP or Growth Domestic Product…the nation failed. The book studies 25 countries over 800 years and there were NO exceptions to the 90% rule. Every nation that ran their deficits to this 90% ratio is now off the map or turned Third World.

Right now, the US is above 90% and there appears no way to bring it down for decades unless some obscure genius comes out of the woodwork as they are not in the White House, Treasury or Fed.

It is unclear what Americans will do, especially for their retirement as the very tool our bankers use against us (stock market) they expect us to hand over our life’s savings and just be ok with negative 30 or 40% loses. You know, its just the market reacting and it goes up and down. Why is that Ok? Why should we accept losses that take us forever to recover just to get back where we started be considered alright?

We need to redo some of the Healthcare Reform Act that President Obama so valiantly promoted before 2013 when our investments could be ravaged with a sur-tax just because we are in a certain income bracket and that bracket is not hard to be in if you live in a state with a high cost of living. Where is Sarah Palin and the Tea Party when we need them.

It is time to look at guaranteed opportunities that does not go down when the market goes down. When Wall Street was once honorable a man named Benjamin Graham (mentor to Warren Buffet) extolled what was an investment. It preserved principal and gave an adequate return. We need to get back to this simple idea and quit trying to find home runs since base hits get you to home plate just as well.

We also need tax-free strategies to weather the storm our own government and their brainy bankers have left before us. It was like turning on the gas to an already smoldering economy.

James Burns

“The Sensation with Inflation”

There is a lot of confusion as to where we are headed right now so I thought I would break down the different flations and maybe we can all decide which one is the fit right now.

Inflation is a where your currency buys less due to a rise in the price of goods and services; accordingly, inflation is the erosion in the purchasing power of money. Over time, as the cost of goods and services increase, the value of a dollar is going to fall because a person won’t be able to purchase as much with that dollar as he/she previously could.

What cost $29,900 in 2000 would cost $37031.75 in 2008. Also, if you were to buy exactly the same products in 2008 and 2000, they would cost you $29900 and $24235.11 respectively.

As a harbinger, gold recently rallied above $1,000 an ounce and many experts think that this is partly due to the Fed’s continued money-printing campaign over the past year will cause the dollar to weaken even further than it already has.

That’s putting upward pressure on other commodities. Oil is trading around $71.50 a barrel, an increase of about 20% over the past six months. The prices of sugar and copper have shot up.

Deflation: A decline in price levels caused by a decline in the supply of money or credit. Deflation often includes the side-effect of enlarged unemployment because of the lower demand for goods and services in the financial system.

Stagflation: High inflation and high unemployment occurring simultaneously.

Taxflation: aka bracket creep the gradual movement of income into a higher federal income-tax bracket as a result of wage and income increases intended to help offset inflation. It can also affect the liquidity of an estate by increasing the estate tax burden.

Example – single person with estate worth $5,000,000 and in 2009 that would cost the estate $1,200,000 or represent shrinkage of 24%.

If they pass away in 5 years or 2014- and was growing at 8% per year. The estate will have grown to approximately $7,346,640.38 the federal estate taxes would be $3,893,719 and represent shrinkage of about 53%.

It looks like we have a combination of them all but I would say Taxflation and stagflation are a good fit but it really is anyone’s guess.

Consumers Get Insult to Injury in a Worsening Economy

I was paying my T-mobile bill today when I noticed that if I didn’t sign up for electronic billing and kept the hard copies coming in the mail I am now going to be charged $1.50 per month for the luxury of getting a bill sent to me.

As if it wasn’t bad enough, now you have companies trying to stick it to you even for the bills they need to send to you. I’m not a fan of receiving the electronic bills because I receive so many e-mails and a lot of them are junk and might miss the bill or delete it by accident. I’m old school on my billing and want it in hard copy so I can organize it in a file with dates and make sure they get paid.

This is akin to the airline practice of hitting you up extra for a bag. It started out with no more meals. OK we said, we had enough of that cardboard food anyway but it was nice to get it offered or included in the outrageous price for flying. Now they are charging you not just for an additional bag, but every bag you check; even if it is one. We need to rebel Americans and show them we’re not going to take it. Forget sending a tea bag to your public representatives, start sending tea bags to these company CEOs who allow such caustic policies to be deployed that are not consumer friendly.

If we as consumers don’t work together to show them what is unacceptable they will continue to push us down and before you know it they be billing us for our carry on bag and to bring your own meal on the flight and there will be no stop to their adverse creative ideas to bilk you.

Sincerely,

James Burns, Esq.

Mortgage Meltdown – who’s to blame?

Many people have now looked to point a finger and fixed it on the Community Reinvestment Act, passed in 1977, which requires banks to extend loans where they accept deposits. It was created to combat redlining — the practice of denying loans to residents of minority neighborhoods. Conservatives have periodically criticized the fair-lending law, saying, for example, that it discourages banks from opening branches in poor districts. The latest controversy on these points began via a Sept. 15 editorial in Investors Business Daily, titled “The Real Culprits in This Meltdown.”

Contrariwise, Kenneth Thomas, author of two books about the law (“Community Reinvestment Performance” and “The CRA Handbook”). Thomas says you could just as easily blame the Sept. 11 terrorists (because the Fed slashed short-term interest rates afterward), or the Chinese (for buying so many bonds during the subprime boom). In other words, he thinks it’s a huge stretch to blame the CRA on lenders’ bad decisions.

Mr. Thomas espouses three reasons to exonerate the Community Reinvestment Act in the mortgage meltdown:

Why allegedly the CRA is not to blame

? The CRA applies to banks. Most subprime mortgages came from lenders that were not banks — so the CRA did not cover them.

? The non-bank lenders made more reckless lending decisions than banks did.

? Regulations didn’t drive the subprime lending boom. The pursuit of profits did.

I still think the enacting of the CRA is like loading the gun and even though you didn’t pull the trigger, you set the circumstances for someone to be hurt. I think those involved in this legislation should step up and take responsibility and admit they didn’t go far enough to examine the other side of the coin which was the potential for abuse and that it might get out in the hands of unscrupulous brokers; as if brokers just started in the business in 2000. There is such a symbiotic relationship between the bank and those who peddle the products or the investors (banks) that you are not kidding me when you act as if it is someone else’s fault.

No dah, the pursuit of profit drove the subprime lending boom…why wasn’t someone watching to prevent this and get additional regulation in early enough. When you see something booming you know it is going to get abusive so get proactive rather than were we are now which is reactive with a new deficit around $11.3 Trillion.

Sound off if you have any good ideas or analysis in finding a balance between helping struggling families of color or just struggling families and how to keep it from going haywire with abuse and greed.

James Burns, Esq.