Jim Rogers: We're Wiping out the Savings Class Globally, to Terrible Consequence

Jim Rogers decries the growing uncertainty and recklessness of global central planners as the world enters unchartered financial markets:

For the first time in recorded history, we have nearly every central bank printing money and trying to debase their currency. This has never happened before. How it’s going to work out, I don't know. It just depends on which one goes down the most and first, and they take turns. When one says a currency is going down, the question is against what? because they are all trying to debase themselves. It’s a peculiar time in world history.

I own the dollar, not because I have any confidence in the dollar and not because it’s sound – it’s a terribly flawed currency – but I expect more currency turmoil, more financial turmoil. During periods like that, people, for whatever reason, flee to the U.S. dollar as a safe haven. It is not a safe haven, but it is perceived that way by some people. That’s why the dollar is going up. That’s why I own it. Will I own it in five years, ten years? I don't know. 

It makes it extremely difficult for the investor looking for acceptable risk/reward or the saver looking to protect their purchasing power; as in Rogers' view, all options have their problems:

I own gold and silver and precious metals. I own all commodities, which is a better way to play as they debase currencies. I own more agriculture than just about anything else in real assets because of the reasons we discussed before. We were talking before about the risk-free or worry-free investment. Even gold: the Indian politicians are talking about coming down hard on gold, and India is the largest buyer of gold in the world. If Indian politicians do something -- whether it’s foolish or not is irrelevant -- if they do something, gold could go down a lot. So I own it. I’m not selling it. But everything has problems.

To Rogers, the bigger danger that concerns him is the hollowing out of the 'saving class' resulting from this situation. Central planners' policies are punishing the prudent in favor of rescuing the irresponsible. This has happened before in world history, and the aftermath has always had grievous economic, social -- and often human -- costs:

Throughout our history – any country’s history – the people who save their money and invest for their future are the ones that you build an economy, a society, and a nation on.

In America, many people saved their money, put it aside, and didn’t buy four or five houses with no job and no money down. They did what most people would consider the right thing, and what historically has been the right thing. But now, unfortunately, those people are being wiped out, because they are getting 0% return, or virtually no return, on their savings and their investments. We’re wiping them out at the expense of people who went deeply into debt, people who did what most people would consider the wrong thing at the expense of people who did the right thing. This, long-term, has terrible consequences for any nation, any society, any economy.

If you go back in history, you'll see what happed to the Germans when they wiped out their savings class in the 1920s. It didn’t lead to good things down the road for Germany. It didn’t lead to good things for Italy, which did the same thing. There were plenty of countries where it wiped out the people who saved and invested for their future. It’s usually a serious, political reaction, desperation in some cases, and looking for a savior and easy answers is usually what happens when you destroy the people who save and invest for the future.

The Best Ways to Prevent Money Arguments With Your Spouse

By Daniel Bortz
Fri, Sep 7, 2012

Are you fighting with your spouse over money? If so, you could be doing more damage than you realize.

Twenty-seven percent of Americans say disagreements over finances are most likely to erupt into an argument, ahead of arguments over children, chores, work, and friends, according to a recent survey of married or cohabitating couples by the American Institute of Certified Public Accountants.

Fights with your spouse are never easy, but evidence shows that arguments over money can be particularly distressing. A 2011 study by Jeffrey Dew of Utah State University found that married couples who disagreed about money once a week were twice as likely to divorce as those who differed less than once a month. This is partly because money arguments encompass more than just finances. "Money doesn't just represent money; it represents love, power, control, self-esteem, freedom," says Olivia Mellan, a money coach and author of Money Harmony: Resolving Money Conflicts in Your Life and Relationships.

"Money decisions are such personal decisions, which is why they can lead to nasty fights," says Scott Palmer, who co-authored the book First Comes Love, Then Comes Money: A Couple's Guide to Financial Communication with his wife, Bethany.

When it comes to money, many couples are blinded by their own views on spending and saving, and often can't see or understand their partner's perspective. "We always think our own way of looking at money is the best, and it creates a tug-and-pull inside the relationship," says Bethany Palmer.

Communication is key to resolving money issues, experts say. Gaining a better understanding of your partner's financial habits will enable you to prevent arguments with your spouse over money--or at least quell them before they escalate. U.S. News spoke to experts for their recommendations:

Be financially transparent. Financial transparency is the foundation of good communication, says Bethany Palmer. "If you're not open with your spouse about your finances, it's very hard to have an intimate relationship," she says.

Being honest about your finances from the start--including any debt you carry, for example--will enable you and your spouse to avoid financial infidelity. "If both parties aren't on the same page, it leads to secrets, which can undermine a marriage," says Matt Bell, author of Money & Marriage: A Complete Guide for Engaged and Newly Married Couples.

Exchange information. Jean Dorrell, a certified estate planner in Longboat Key, Fla., who counsels couples about money, recommends that couples share credit reports and tax returns--that way, nothing is kept secret. This ideally occurs before they tie the knot, but it can still be effective if done at the beginning of the marriage. "When you fall in love with somebody, you don't think about going, 'Oh, by the way, how's your credit score?' But it's a conversation you need to have," Dorrell says.

If your partner has significant debt, Dorrell suggests you consider signing a prenuptial agreement so that you're not legally responsible for paying off their debt in the event that you divorce.

Establish a budget. Creating a budget for you and your spouse will take the guesswork out of your money arguments. "A budget gives you factual information," says Bell. "A lot of arguments around money have to do with assumptions and emotions. But if you have a budget, you can take a look strictly at the numbers, which will enable you to have a fact-based discussion about any disagreements."

Even if one spouse doesn't stick exactly to the budget, having one in place creates an expectation of how much each of you should be spending. Just be sure to allow some wiggle room for discretionary purchases, suggests Lynn Mayabb, a certified financial planner with BKD Wealth Advisors in Kansas City. "Everybody is going to have something they want to buy that the other person thinks is frivolous," she says. "Each person needs a certain amount of money that they don't have to explain where they spent it. If you have a budget that's too constricting, people have a hard time sticking to it."

Understand each other's money personality. Scott and Bethany Palmer believe each person has a money personality--a spending style that dictates their money habits. At the most basic level, someone is a saver or a spender, according to the Palmers. If a saver and a spender wind up together, which the Palmers say often happens because opposites attract, the couple's day-to-day lives are in conflict. The saver wants to make dinner at home; the spender wants to eat out. The spender buys himself a nice bathrobe and the saver resents it each morning when she sees it hanging on the hook. "You would think the biggest arguments about money would be over a big subject like a house or a car, but it's over everyday decisions," says Bethany Palmer.

However, if you take the time to evaluate and understand each other's respective money personalities, you'll likely fight about money a lot less. "We find if couples can understand how they look at money and understand their partner's perspective of money, that will start their relationship off on the right foot," Scott Palmer says.

If both parties are aware of the other person's spending style, the lines of communication are open and each person will have a better idea of where the other one is coming from. "Walk half a mile in your partner's moccasins," says Mellan. If you stop and think how your partner feels about the situation, Mellan says you and your spouse become less polarized.

Discuss family history. The way people approach money is, in large part, related to how their parents treated money, says Mayabb. Was money openly discussed in your household growing up? Did Dad make all the decisions or was it a team effort? Did you admire your parents' spending and saving habits or did you vow to do the opposite of what they did? Having a discussion about your families' money habits will help bridge the gap between you and your spouse's outlook on money, Mayabb says.

With the potential for money arguments to lead to serious marital problems, consider setting up weekly chats to tackle money disagreements before they evolve into fights.

http://finance.yahoo.com/news/best-ways-prevent-money-arguments-163024950.html

UK: Helping savers would push Britain back into recession

Mervyn King: helping savers would push Britain back into recession
The Governor of the Bank of England has ruled out help for savers hit by “negligible” returns on their savings, warning that moves to reward their prudence would tip the economy back into recession.

By James Kirkup, Deputy Political Editor

15 Feb 2012

Sir Meryvn King also suggested that growing household savings rates are one reason for Britain’s recent poor economic performance.

He also warned that the UK economy is set to “zig-zag” between growth and contraction this year, partly because of an additional bank holiday for the Diamond Jubilee.

The Governor was speaking amid growing public and political unease about the impact of the Bank’s emergency measures – pumping £325 billion of new money into the economy and Bank rate at a historic low – on savers and pensioners.

Those policies have cut the returns on savings and annuities to record lows. Saga, a campaign group, estimates that more than 1 million pensioners have retired with permanently lower retirement incomes because of the impact of the Bank’s quantitative easing programme.

Savers have also been hit by high inflation, though the bank predicted that inflation will fall back to 1.8 per cent by the end of 2014, easing the recent squeeze on household budgets.

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Sir Mervyn insisted he understood the problems facing savers, but made clear he believes he can do nothing to help.

“I have deep sympathy with those who are totally unconnected with the origins of the financial crisis who suddenly find that the returns on their savings have reached negligible levels,” he told a press conference. "These are consequences of the painful adjustment prompted by the financial crisis and the need to rebalance our economy."

The Bank could respond by increasing Bank rate from its current level of 0.5 per cent to 4 or 5 per cent, he said. But that would push up the exchange rate, depress investment and consumer spending “and we would go back into a recession.”

“All groups in society are suffering from the financial crisis,” Sir Mervyn said, insisting that there can be no special help for particular groups. “Difficult though it is, we have to make a difficult judgement about the right course of action for the economy as a whole.”

During periods of economic turmoil, many people save more because they are worried about their future prosperity.

According to the Bank’s latest Inflation Report, the household savings ratio increased sharply during the recession. Even though it has fallen back since, the latest figures show households are still saving 6.6 per cent of their disposable income on average, well above the pre-crisis levels of 2007.

The report also suggested that saving may yet rise again, because “households may want to increase the amount that they save due to other factors, such as the need to save more for future retirement provision.”

Sir Mervyn said that savings were effectively acting as a brake on the economy: “One of reasons for slow growth in the last year was weakness of consumer spending and higher savings by household.”

The economy shrank in the last quarter of 2011, but the Bank predicted there will not be a second consecutive contraction, meaning no “double-dip” recession.

Growth this year will be around 1.2 per cent, but the expansion will be uneven. “For much of this year, there is likely to be a zigzag pattern of alternating positive and negative quarterly growth rates,” Sir Mervyn said.

http://www.telegraph.co.uk/finance/personalfinance/savings/9084399/Mervyn-King-helping-savers-would-push-Britain-back-into-recession.html

Personal finance should be compulsory in schools, say UK MPs

Personal finance should be compulsory in schools, say MPs
Personal finance lessons should be compulsory in schools because even high-flying Maths students struggle to understand APR and compound interest, MPs say.

Personal finance lessons should be compulsory in schools Photo: ALAMY

7:00AM GMT 12 Dec 2011

After an eight-month inquiry, the All-Party Parliamentary Group on Financial Education for Young People called on ministers to ensure school-leavers are better equipped to avoid running into money problems.

It published a report today demanding that personal finance education be made compulsory in schools.

This would mean children as young as five being taught the basics of saving.

Financial numeracy should be taught within mathematics and ''subjective aspects'' as part of Personal, Social Health and Economic (PSHE) education, the report said.

The group recommended the appointment of a co-ordinator or ''Champion'' within each school responsible for bringing personal finance education together.

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Personal finance teaching is currently ad hoc, with only 45% of teachers responding to a survey by the inquiry saying they had ever taught it.

Today's report comes ahead of a Commons debate about the issue on Thursday, secured after more than 100,000 people signed a petition by money expert Martin Lewis calling for financial education to be made compulsory.

Tory MP Andrew Percy, who chaired the inquiry, said: ''Credit cards, mortgages, hire purchase agreements, mobile phone contracts, tuition fees and even supermarket offers all require us to apply functional maths skills, such as being able to calculate APR, compound interest and percentages, to real-life situations.

''But too many of our school leavers, who can perform complex mathematical equations and algebra, have no idea what basic financial terms like APR and PPI mean - leaving them without the necessary level of financial literacy to make decisions in an increasingly complex financial world.''

He added that financial education would be a long-term solution to irresponsible borrowing and personal insolvency.

''Furthermore, teaching people about budgeting and personal finance will help equip the workforce with the necessary skills to succeed in business and drive forward economic growth,'' he said.

Wendy van den Hende, chief executive of the Personal Finance Education Group (PFEG), said: ''Young people want to learn how to manage their money, and school is an excellent place for this to happen.

''Teachers clearly want it to be part of the curriculum, so that it is taken seriously and has the support it deserves to be taught effectively.''

Mr Lewis, who is behind the MoneySavingExpert.com website, said: ''We need compulsory financial education in our schools.

''Our nation is financially illiterate, for over 20 years we've educated our youth into debt when they go to university, but never about debt.

''Breaking this cycle will mean less mis-selling, fewer bad debts, better consumers and could save the public coffers a fortune.''

http://www.telegraph.co.uk/education/educationnews/8949087/Personal-finance-should-be-compulsory-in-schools-say-MPs.html

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Education minister Nick Gibb claims celebrity culture and obsession with wealth is harming children

British children are growing up in an “destructive” society obsessed with the celebrity way of life and need to be taught to live within their means, an education minister has warned.

Nick Gibb blames celebrity culture for giving children unrealistic expectations 

By Rowena Mason, Political Correspondent

6:09PM GMT 15 Dec 2011

In an attack on contemporary values, Nick Gibb argued that a “got to have it now” culture was breeding unrealistic expectations of wealth in young people.

The schools minister said millions of children were being raised with the wrong priorities and equated wealth with success. He was speaking in a Commons debate about whether children should get a better financial education.

“Young people are growing up in a materialistic world for which they are often not fully prepared,” Mr Gibb said.

“The 'got to have it now’ culture means young people have high aspirations for branded or designer goods, often without the means to pay for them. People have unrealistic expectations about the lifestyle they can afford, fuelled by the glittering trappings of celebrities.”

Mr Gibb also told the Commons that he would like to see schools put a greater emphasis on maths teaching.

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“We all have a job to do in moving young people’s aspirations away from this empty and often destructive perception of what success means,” he added.

“Developing children’s intellectual capabilities and interests is a direct antidote to materialism.

“Alongside that, young people must acquire a sense of responsibility. They need to contribute to society as responsible citizens and not take wild risks. They need to learn to live within their means.”

The Commons debate was tabled after more than 100,000 members of the public signed an online petition calling for schools to give lessons in personal finance. The campaign was backed by Martin Lewis, who runs the website MoneySavingExpert.com.

It was brought to Parliament by Justin Tomlinson, a Tory MP, who argued that people were making poor financial decisions “not necessarily through their own fault but because they didn’t have the skills”.

He said some people might have avoided crippling debt if they had been taught about interest rates at school.

Mr Gibb stopped short of backing compulsory financial education for all but pointed out that the Government was reviewing the National Curriculum.

The education minister’s attack on the “got to have it now culture” was made just weeks after Lord Sacks, the Chief Rabbi, criticised the selfishness of the consumer society.

He said the iPad and iPhone products sold by Apple helped contribute to a culture of egotism, because of their emphasis on personal ownership.

“The values of a consumer society really aren’t ones you can live by for terribly long,” the Chief Rabbi said.

“The consumer society was laid down by the late Steve Jobs [the founder of Apple] coming down the mountain with two tablets, iPad one and iPad two, and the result is that we now have a culture of iPod, iPhone, iTune, I, I, I.”

http://www.telegraph.co.uk/news/8959344/Education-minister-Nick-Gibb-claims-celebrity-culture-and-obsession-with-wealth-is-harming-children.html

Borrowers in Australia lose to retirees if banks don't pass on fall.

Michael Evans

December 8, 2011

Retirees will see 'a transfer of wealth' from mortgagees. Photo: Quentin Jones

RETIREES and savers with bank deposits stand to be surprise beneficiaries from any move by the big four banks not to pass on in full this week's 25 basis point cut in official interest rates to home mortgage holders.

As the banks continued their game of chicken last night, refusing to blink and reveal how much of the Reserve Bank's rate cut they would pass on to borrowers, analysts said one consequence of a reduced cut would be a transfer of wealth from mortgagees to retirees.

With offshore credit markets effectively shut due to the European debt crisis, home-grown deposits are becoming increasingly important to local banks as a source of funding. And to ensure access to the funds, banks will consider keeping some of the cut to borrowers to pay those with money to lend, analysts said.

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''You're subsidising your grandparents' retirement,'' one analyst said. ''The banks aren't making any more money on their spread.

''All that's happening is if you're a borrower and want to borrow money, you've go to pay the people who have money. And the people who have the money are the retirees and the people who don't are the first home owners. It's nothing more than an intergenerational transfer.'' Analysts argue that the money raised by the banks from withholding some of the rate cut will not be going to their bottom line - but note that in using the money to offset the higher cost of funding it will protect their margins from contracting.

Another analyst said a deposit rate battle between the banks was on the cards, but noted that it might be relative given markets were expecting up to 125 basis points in rate cuts in the next year, meaning deposit rates would also tumble.

One analyst calculated that for every five basis points banks did not pass on to home owners from the rate cut, $400 million of the $1.2 trillion in mortgages in the banking system would be transferred from home owners via the banks to the providers of funds, increasingly deposit account holders.

Another calculated the five basis points that NAB did not pass on from the Melbourne Cup day rate cut were worth about $100 million to the bank.

Banks normally rush to cut interest rates on deposit accounts after a cut to official rates, but analysts expect to see a game of cat and mouse as they assess the value in keeping deposit rates higher.

Shane Oliver from AMP Capital called chances of the big banks passing on the full 25 basis points ''a big if''.

Australian Bankers Association chief executive Steven Munchenberg said: "It's not going to be a surprise to the RBA should one or more banks decide not to pass along the full rate cut. The RBA would have factored that in to their decision."

Read more: http://www.smh.com.au/business/borrowers-lose-to-retirees-if-banks-dont-pass-on-fall-20111207-1oj6t.html#ixzz1ftJBwR66

Inflation robs savers, pushing gold and share prices higher

Inflation robs savers, pushing gold and share prices higher
By Ian Cowie
Your Money Last updated: November 16th, 2010

Another month, another missed inflation target for the Bank of England. Readers of a certain age who can remember double digit inflation in the 1970s may be tempted to think that today’s problem is pretty small beer. But the stealthy erosion of the real value of money – its purchasing power – is an insidious enemy of millions of savers.

Some of the most vulnerable are older people. It would take just 16 years – or less time than most people can expect to spend in retirement – for inflation to cut the real value of money in half if it continues to rise at 4.5 per cent; the annual rate of increase in the Retail Prices Index (RPI) during the year to October. Bear in mind that RPI was actually shrinking by 1.4 per cent last year and you can see how sound money is deteriorating.

You can see why the Government proposes to measure inflation by the Consumer Prices Index (CPI), which consistently produces lower figures – including its current annual rate of 3.2 per cent. CPI will produce much lower costs for the Government and employers when they calculate how much pensions should rise in future.

Unfortunately, as far as many pensioners’ daily experience of the rising cost of living is concerned, the CPI might as well be the Chinese Prices Index, as I have pointed out in this space before. It bears little or no resemblance to the bills they must pay because, among other factors, CPI does not include housing or heating costs.

Falling prices for electronic goods such as iPads and iPods may be good news for the young but largely irrelevant to older people who may spend more of their income on food and keeping warm. For example, gas and electricity absorb twice as much of many pensioners’ income than these fuel bills do for younger people, who earn more and spend less time at home, according to calculations by Alliance Trust.

However, for the first time in 30 years, from next April pay rises will be taken into account when the basic state pension is uprated in line with inflation. At present, indexation of pensions is calculated in line with the annual rate of increase in the retail prices index (RPI) in September or 2.5pc; whichever is greater.

In his Emergency Budget, the Chancellor introduced a ‘triple lock’ to index 11m people’s pensions plus State benefits and tax credits received by millions of others. These will rise in line with the bigger of earnings or price inflation or 2.5pc per annum.

Most people welcomed the change because earnings have tended to rise faster than prices in the past – although whether that remains true in ‘austerity Britain’ remains to be seen. Pay cuts are more likely for many than pay rises in the years ahead.

But a less obvious and potentially bigger problem to bear in mind is that next April will be the last time RPI is used to measure price inflation for the indexation of State and company pensions, benefits and tax credits. After that, the CPI will be used. It’s just a pity that in the real world most pensioners will have to buy food and fuel at British prices rather than the knock-down rates available in Kowloon or Shanghai.

Here and now, inflation is the spur that is turning many savers into investors. Supposedly risk-free bank and building society deposits are a waste of time and money when inflation is eroding its purchasing power at six or eight times the gross rate of interest being paid. By contrast, many shares and share-based funds look attractive – despite the absence of any capital guarantee – when the FTSE 100 index is yielding more than 3 per cent net of basic rate tax. No wonder share prices are rising, despite fears about the collapse of the euro and a double dip recession.

For those who require no immediate income but whose priority is the preservation of capital, whatever happens to paper money or fiat currencies, gold continues to shine. When RPI hit 5.3 per cent in May this year, Adrian Ash of the gold dealers Bullion Vault told me: “With the widest gap between RPI and Bank of England base rate since 1977 it is little wonder the gold price in Sterling jumped to a fresh all time high. When cash-in-the-bank pays less than zero, there is no such thing as a risk-free investment.”

Six months later, the slow-motion great bank robbery continues and gold has soared through $1,400 an ounce. Rising numbers of savers and investors are taking the plunge into precious metals and shares – despite fears that current prices look toppy – because, by contrast, inflaton means deposits are merely a slow and certain way to lose money.

http://blogs.telegraph.co.uk/finance/ianmcowie/100008651/inflation-robs-savers-pushing-gold-and-share-prices-higher/

Don’t Lose Money!

W. Clement Stone once said, “If you cannot save money, then the seeds of greatness are not in you.”

Throughout the history of American enterprise, you’ve heard the words, "work hard and save your money." Work hard and save your money. It is the oldest rule for success in America. It’s so important, as a matter of fact, that W. Clement Stone once said, "If you cannot save money, then the seeds of greatness are not in you."

Saving is a Discipline
Why is it that saving money is so important? Because saving money is a discipline and any discipline affects all other disciplines in your life. If you do not have the discipline to refrain from spending all the money that you earn, then you are not qualified to become wealthy and if you do become wealthy, you’ll not be capable of holding on to it.

The Law of Attraction
A principle with regard to saving your money is the law of attraction. The law of attraction is activated by saved money. Even one dollar saved will start to attract more money. Here’s what I suggest that you do. If you’re really serious about your future, go down and open a savings account. Put as much money as you can into it, even if it’s only ten dollars. And then begin to collect little bits of money, and every week go down and put something into that account.

Attract More Money Into Your Life

You will find that the more you put in that account, the more you will attract from sources that you cannot now predict. But if you do not begin the savings process, if you don’t begin putting something away towards your financial independence, then nothing will happen to you. The law of attraction just simply won’t work.

Invest Your Money Conservatively
Once you begin to accumulate money, here’s another rule. Invest the money conservatively. Marvin Davis, self-made billionaire, was asked by Forbes Magazine, "How do you account for your financial success?" And he said, "Well, I have two rules for financial investing." He said, "Rule number one is, don’t lose money." He said, whenever I’m tempted, whenever I see an opportunity to invest where there’s a possibility I could lose it all, I just simply refrain from putting the money in. Rule number two is, whenever I get tempted, I refer back to rule number one. Don’t lose money.

Get Rich Slowly
George Classon says, in The Richest Man In Babylon, that the key is to accumulate your funds and then invest them very conservatively. One of the characteristics of self-made millionaires, one of the characteristics of old money in America is that it’s very cautiously, conservatively and prudently invested.

Don’t try to get rich quickly. Concentrate rather on getting rich slowly. If all you do is save ten percent of your earnings, put it away, and let it accumulate at compound interest, that alone will make you wealthy.

Action Exercises
Here are two things you can do to apply these lessons to your financial life:

First, open a separate savings and investing account today. From this day forward, put every single dollar you can spare into this account and resolve to never touch it or spend it for any reason.

Second, whenever you consider any investment of your savings, remember the rule, "Don’t lose money!" It is better to keep the money working at a low rate of interest than to take the chance of losing it. Be careful. A fool and his money are soon parted.

Posted by Brian Tracy on Jul 25, 2008

http://www.briantracy.com/blog/financial-success/dont-lose-money/