Archive for November, 2008
I’m generally suspicious of anyone who worked in the Nixon administration. That’s one of the many reasons why I can’t take Pat Buchanon seriously even on those rare occasions when he actually makes sense.
I’m equally suspicious of people who have affiliations with game shows. Although St. Elsewhere was a fairly critically-acclaimed program, I have developed a strong bias against Howie Mandel over the last few years for that very reason.
The article in question, “How to Ruin Your Morning“, was a somewhat rambling account of what Mr. Stein is currently buying as he attempts to adjust his investment portfolio within the ugly current economic climate. Bookending the details of Stein’s planned approach is a recognition that it’s all too easy to allow these days of roller coaster markets and troubled big industries to decrease the quality of your life a little too much.
I experience a lot of this firsthand. I deal with a few people every day who are spending the bulk of their time engaged in hand-wringing and compulsively staring at monitors tuned to CNBC. I’ve seen how the big Dow drops have completely upended their lives.
I can completely understand why that’s the case, but I can’t escape the feeling that they should be able to draw a line that somehow separates their overall sense of personal well-being and quality of life from the day-to-day bobbing and weaving of the markets. Living and dying with the NYSE isn’t really much of a life–and I say that with a full understanding of how devastating a series of substantial losses can be for someone.
In the end though (and I can’t believe I’m actually writing this), I agree with Ben Stein:
Lastly, I am trying to enjoy life so that I am more than the mere composite of the stocks and bonds I own. I hate myself for being so dependent on how much money I have for my self image. I am going to change that. I do not want to endlessly think of myself as worth x dollars one day and half of that another day. I hope I am more than that.
And he is. And so am I. And so are you.
Our financial identities don’t define us, even though they do have a big impact on our lives. At times like this, it’s important to retain some larger sense of perspective–and I’m not just talking about a “what went down will go up” kind of big picture financial positivity. It’s more than that. It’s about re-realizing that the old line about money not being everything is true.
In a post that’s definitely worth reading, Jim at Bargaineering noted:
See, life isn’t about making more money, it’s about being happy and enjoying the time that you have with the people that you care about. The funny thing about money is that if you let it become everything, you’ll find that you never have enough of it and you always want more. And the more that you get, the more you will want. It’s an endless cycle that can easily consume you if you’re not careful. How many “rich” and “successful” people ask themselves what happened in their lives the last twenty years? How did their kids grow up so fast? How did they get so old?
Keep that in mind. When personal finance bloggers and a former Nixon speechwriter agree on something, it’s probably worth considering.
We’ve seen a lot of that recently. Bailouts, stock dives, bubble busts and stimulus packages have seemingly brought out the hyperbole hidden within everyone. This time around, the tall tale involves the alleged pending death of capitalism itself.
Primed by a Presidential election in which any finger lifted by government could be sophomorically labeled as “socialist” and in which any proposed adjustment to tax policy was tagged as a redistributionist experience in social engineering, it’s become all to easy for people to interpret the recent spate of government tinkering with the economy as proof positive that capitalism is dead or dying.
The Invisible Boot claims that we’re now a socialist nation dedicated only to the protection of the ultra-rich. France’s Nikolas Sarkozy said, “Le laisser-faire, c’est fini” as the G20 summit wound down and journalist Steven Brant saw “the death of capitalism” in the AIG bailout.
Everyone seems to be on the same page with this one. The folks who cling to some kind of wild-eyed Marxist vision for the future are pleased as punch that capitalism is dying. Those who are still upset at Democratic election wins are convinced that more liberal influence will unplug capitalism’s life support machine. Libertarians see all of the intervention as an organized assault on the natural wisdom of the marketplace. Conservatives, liberals, geniuses, whack jobs and everyone else who manages to escape such easy categorization seems to be on the bandwagon.
Capitalism is dead.
The problem with all of this tombstone authorship is the fact that they’re wrong. Capitalism isn’t dead. Not even close. There may be increased regulation of the markets ahead, but it’s not like the marketplace has ever been the open playing field of Freeman fantasies. Claiming that the changes underway represent a death knell for market-based economies is just as sensible as arguing that a slight increase in the marginal tax rate for individuals making a quarter of a million dollars per annum is akin to socialism. That’s a good-natured dig, McCainiacs, in case you missed it.
The point is that we haven’t operated in a true free market economy in the past and that likely forthcoming regulations and/or government inteferences in the marketplace don’t represent a wholesale shift in perspective.
Now, you can make a very good argument against proposed and existing policies that fiddle with the free market. My natural inclination with respect to economics is to embrace those arguments, in fact. You can talk about inefficiencies, the destruction of incentives and all sorts of other nastiness that tends to come with interference in the marketplace and it shouldn’t be hard to find a few bright people to nod along with you.
However, that doesn’t make those interventions a capitalism killer any more than government-encouraged settlements of tulip options contracts represented the death of the markets.
I’m referring to Tulipomania, the scourge of the 16th century Netherlands. Tulips became incredibly popular and speculation in the tulip marketes reached unfathomable levels. When the bubble did what bubbles do (POP!), people were left with contracts requiring them to buy nearly worthless bulbs for big money. They couldn’t or wouldn’t pony up. Eventually, the government decided to mandate account settlement at a ten percent rate.
This was a massive market intervention. Instead of forcing those who made their own beds to take a long nap in them, they were given a chance to walk away for next to nothing. Unfair? Sure. Inconsistent with market principles? You betcha. The death of capitalism? Nah.
Capitalism didn’t keel over when Lee Iacocca came to Washington looking for a loan. Capitalism didn’t disappear with the invention of a progressive income tax policy. Adam Smith didn’t vanish from the history books when AIG got its bailout and when the Big 3 get their cash, he’ll still be in there.
Sure, Adam might be rollig over in his grave fast enough to register on the Richter Scale, but capitalism isn’t dead. Pure capitalism might be a step or so more distant than it was in the past, but it’s still the core underlying principle guiding our economy.
Would it be possible to gut capitalism little by little until it was functionally dead? Probably so. And some day we might actually reach that stage. Today’s “cheats” on the system to save particular businesses and industries, however, don’t represent a real threat to market-based economies.
We might not be rallying around the core principles of the market in the most efficient of ways, but we certainly aren’t giving up on it. Marx and Lenin are not about to make an appearance on Oprah’s must-read list. We’re running with an inefficient “mixed” economy that has a decidedly capitalistic engine.
I won’t be participating. I could come up with a long list of reasons why I refuse to go through the nightmare of Black Friday, but I think The Consumerist’s list of 28 bad things should be enough to dissuade anyone from joining the not-so-merry masses of bargain hunters.
Many of you, however, are hellbent on crashing the doors of some big box store before the sun crests the horizon in order to save money on gift purchases. Although I can’t bring myself to join you, I can’t blame you. There are some great deals to be had for those who are willing to invest the energy and who can maintain the necessary attitude.
In recognition of the fact that my opinion of Black Friday shopping won’t be embraced by most readers, I found some great tips for those who will be fighting the crowds.
Thrifty Mama. Thrifty Mama has a list of eleven reasonable tips for Black Friday shoppers. She starts with having a budget (a very good idea) and carries at the way through to having a shopping buddy with you (another good idea on a day like this).
And She Lived. The author loves doing the Black Friday thing and she offers one very interesting suggestion: if Wal-Mart is on your “hit list”, start there. The reason? Most of the bigger stores are open 24 hours a day, which gives you the chance to wait indoors for the sales to start. Any tip that might cut down on the risk of frostbite is worth mentioning.
Unclutterer. Unclutterer offers a list of ten recommendations that focus on the details. As a non-participant, I’d never think of some of these seemingly wise tips. For example, the post discusses concealing your purchases effectively in the car and the need to enter the fray with a fully-charged cell phone.
Penny Pinching Diva. This entry offers one of the smartest possible tips from a financial management perspective: Use cash. You’ll spend less and will find it easier to stick to your budget. Penny Pinching Diva provides a total of six recommendations. My other favorite? Save your receipts and keep them organized. It makes returns easier in case you make a poor purchasing decision or need to cut back spending ex post facto in order to stay within your budget.
I’m not convinced that following all of that great advice will really make Black Friday a fun experience. Then again, I really would prefer to spend a morning battering rocks into gravel with my forehead than wrestling some guy for a loss-leader special in Aisle 5. However, I do think that you can probably cut the list of 28 bad things that will happen on Black Friday down to 14 by following these recommendations. And that’s not bad.
Let me make one last pitch for skipping Black Friday: You can selectively pick off awesome deals over the course of the next month. You can make many great purchases online in the comfort of your own home and in a setting of relative peace and quiet. You need to calculate the “cost of punishment” into your approach to holiday shopping–is it really worth the chaos to save the money? If you don’t have a massive list, it would seem hard to justify the excursion.
I doubt that worked. Most people don’t see it my way and millions of people adore jumping into the action. I’m betting that you’re tying your shoes right now, grabbing your fully-charged cell phone, collecting those advertising circulars and slamming back that last cup of high-powered coffee in preparation for your mission.
Happy Thanksgiving. While other personal finance sites have spent time detailing the cost of a big holiday feast and how to trim costs on turkey and all the trimmings, I thought we might run down a list of things for which you can be thankful today.
You don’t play for the Lions. Detroit is having a tough time this year. The Big 3 automakers are spending the holiday coming up with a plan good enough to persuade Congress to fork over $25 billion. Their plight, however, may be less frustrating than that of another crew of Michiganders. The Detroit Lions are stumbling through a winless football season. The turkeys of the NFL don’t get the holiday off, either. Calvin Johnson and Co. will be forced to take the field today and they’re massive underdogs.
You won’t be watching the ticker. The NYSE is closed for Turkey Day and they’ll be shortening Friday’s trading session. If you’re one of the countless people who’ve been spending every day with one eye on the Dow numbers, this is a great chance to watch parades and to interact with your family instead of spending the day with the staff of CNBC.
You can get a head start on National Listening Day. Although the first two items on our list are offered with tongue in cheek, this one’s legit. It’s your chance to play Studs Terkel, recording someone you know as they discuss their life. It’s a StoryCorps project. If you aren’t familiar with StoryCorps, you’re missing out. This group, sponsored by NPR and the American Folk Life Center at the Library of Congress encourages the creation of oral histories. Their work is outstanding and they’ve decided that the day after Thanksgiving–Black Friday–would be a perfect day for you to contribute to the collection.
I don’t think you need to wait until Friday, though. Most of us are surrounded by interesting relatives who’ve been through a lot over the years. This is a perfect chance to catch them on tape. Oh, and you can add a personal finance-related twist to the affair. Ask an older relative about the Depression or someone who’s been through tough times about what turned it around for them. Use it as an opportunity to gain some firsthand wisdom about money management.
Wired has details about participating in National Listening Day.
In terms of dollars and cents, things have been very bleak for many people lately. When you’re most recent 401(k) statement shows a drop of over 30%, it’s a little tough to get into the holiday spirit. When you or someone you know has either lost a job or may be on the brink of joining the ranks of the unemployed, cranberry sauce might not seem that exciting. The bad news has been coming at us hard and fast lately and it’s easy to develop a somewhat negative attitude toward all things celebratory. That’s a mistake, though.
MoneyNing reminds us that these are the times when Thanksgiving probably matters the most. Take some time to find the things that make it all worthwhile and spend a little time being genuinely thankful for them. Irving Berlin is responsible for this little contribution to the world of Thanksgiving quotations:
“Got no check books, got no banks. Still, I’d like to express my thanks. I got the sun in the morning and the moon at night.”
Most of us do have a checkbook and we haven’t experienced a massive bank run yet. It should be easy for us to find a few things to appreciate.
A One-Day-Too-Late Personal Finance Tip: Make sure you have whipped cream before Thanksgiving dinner. A grocery store container of Cool Whip will cost about 1/3 as much as a spray can of whipped cream from the only convenience store in town that’s still open. Sorry I forgot to mention that yesterday.
We all know that savings are important. You need to stash cash away in case of emergency and, as we pointed out recently, an adequate level of savings can act as a platform to increase your overall investment profitability.
The problem wtih dumping money into a savings account, however, is that it’s not growing very much. Interest rates on savings accounts are low. The only difference, in real terms, between putting money into your run-of-the-mill savings account and stuffing it into a mattress is FDIC insurance. In the end, that can actually make savings a negative experience. If inflation outstrips the interest earnings on the account (which it usually will), you’ll be losing buying power every day that your cash sits in the account.
And that’s why you might want to take a look at savings bonds. Specifically, I Series bonds issued by the U.S. Treasury Department might be the right way for you to save your money. Unlike EE Series bonds that offer a set level of interest over time, I Series bonds have a rate based on inflation levels (plus a little extra). You’re guaranteed that your savings bond purchase will not lose buying power due to inflation.
Currently, I Series bonds are set to inflation + .7%. That .7% kicker is a recent development. For a short period of time, the U.S. was issuing I Series bonds that were keyed only to inflation. The extra .7% in interest earnings was instated earlier this month. You have to hold the bonds for at least twelve months before cashing them out. If you hold them for less than five years, you will get hit with a three-month interest earning penalty.
I Series bonds aren’t a great investment. They aren’t the kind of long-range move that will single-handedly provide you with retirement security. You won’t get rich by sinking a few grand into I Series bonds. What you will do, however, is create a relatively liquid “savings account” that will accrue interest at a level guaranteed to outstrip inflation. That makes them a very good substitute for traditional savings accounts.
That’s only true, however, if you feel comfortable locking up your savings money for at least twelve months. If you’re operating with nothing more than an emergency fund and you need to maintain access to that cash at all times, purchasing bonds might not be the way to go. Jeremy Vowinkle from About.com explains:
U.S. savings bonds are certainly a safe place to save money, but you want to make sure that you’re putting money into bonds for the right reasons. Remember, the interest rates can be higher than a typical savings account, but there may be some liquidity concerns to contend with first. If there is a chance you may need access to the money inside of one year, keep in mind that you cannot redeem a savings bond until one year has elapsed. In addition, you will forfeit three months’ interest if you redeem a bond prior to five years.
Purchasing I Series bonds is easy. You should be able to conduct the transaction at just about any bank. You can also set up an account at Treasury Direct, the Treasury’s Department’s website, and handle the matter online. If you want details about purchasing bonds at a bank, check out this great rundown from My Money Blog.
Bonus Tip: If you want to improve the performance of your I Series bond performance, make your purchase at the end of the month. My Money Blog explains why this little “trick” makes sense:
A known “trick” with I-Bonds is that if you buy at the end of the month, you’ll still get all the interest for the entire month as if you bought it in the beginning of the month. Let’s say we buy on October 31st. You’ll be able to sell on October 1st, 2009 for an actual holding period of 11 months. (3-month interest penalty still applies.)
Yesterday, we took a look at sites like Rip Off Report that purport to give consumers a “heads up” on the kind of businesses we’re better off avoiding. After explaining why consumers should take these sites, which are based on unedited and barely-moderated user-generated content, with more than a single grain of salt, I promised a little information about how you can conduct more meaningful consumer research.
Here are a few of the best online resources for uncovering some of the potential scams, rip-offs and bad deals out there:
Consumer.gov- This U.S.-government operated site provides information about scams and issues ranging from food safety to transportation concerns. It’s a good place to find federal news updates and can quickly connect you to a variety of government-produced consumer awareness handbooks.
Federal Trade Commission’s Consumer Site- The site announces that “[t]his section of the FTC website offers practical information on a variety of consumer topics. The information here can help you avoid rip-offs and exercise your consumer rights.” It will also put you in touch with necessary information to file FTC complaints if you’ve been victimized by an unscrupulous business.
Better Business Bureau- The BBB provides information about rip-offs and allows you to check out businesses and charities to see what complaints (if any) have been filed against them by unhappy consumers. Membership in the BBB isn’t necessarily proof that a company is on the up and up, but it is a valuable indicator, as the organization won’t ally itself with known troublemakers.
Direct Marketing Association- This is a trade association of sorts, whose membership consists of those in the direct mail business. If you have problems or questions about junk mail, this is a good place to start your research. The DMA has also produced a variety of guides focused on improving your online consumer experience.
The Google Directory- Google has catalogued a variety of sites dedicated to consumer affairs and consumer protection issues. Their list of sites can be a valuable research for those with questions about everything from the veracity of advertising claims to the quality of individual products. Note that the sites listed in the directory are not operated by Google and that you should use due diligence when evaluating any claims made on the sites listed therein.
Which brings us to the real key to being a smart consumer. Although the above sites can be extremely helpful, they may not have the kind of specific information you need about an individual product or service. In those cases, you’re left with your own wits and the ability to search the Internet to get the scoop. As we learned when looking at Rip Off Report, not all information sources are necessarily the kind of collections in which you want to put your trust.
When you’re evaluating reviews and comments about companies and services you need to do so properly. Here are a few hints for being a smarter consumer that should help you to effectively protect your financial interests.
Consider the source. Consider the source of the information you’re reviewing. That means “testing” the claims you’re reading against your own personal experience and knowledge base for credibility. It also means looking at the possible motivations of the person or company who has posted the information. Do they appear to have a financial interest in influencing your perspective? Are they affiliated with the company under consideration or are they working for the competition? You need to assess consumer information with an understanding that peoples’ motivations aren’t always pure and that biases (intentional or not) may influence the quality of reporting you receive.
Consider the quality of argument. If a complaint or review seems wildly “over the top” or hard to believe, approach it critically. There are troublemakers and “griefsters” out there who are more than happy to attack others without any real basis in reality. There are also many people who have more time on their hands than they do sense in their heads. If you find material that seems bizarre or out of whack, remember that you don’t need to be honest or sane to type something that appears on the ‘net. You just need a keyboard and an attitude. If the arguments that form a complaint or review seem weak, scattered or strange, don’t let them govern your decision making.
Consider corroborating evidence. If someone has ripped off one person, they’ve probably nailed others, too. If a company is doing a great job, they’ll probably have their own little fan club. Don’t let any single evaluation determine your perspective. Find out if a particular complaint or concern that resonates with you has support from other sources. If you’re finding hundreds of similar reviews, there’s a stronger likelihood that their true than if you just find one attack piece.
The bottom line: Use your head. Approach consumer protection intelligently and don’t check your common sense at the door. If you do your due diligence using a smart approach and quality resources, you’re likely to avoid making decisions that will have an adverse impact on your financial well-being.
Personal finance is all about watching your money. You need to spend, invest and save wisely to reach your maximum potential.
As someone with an interest in personal finance, I’m a massive fan of consumer education. Smart consumers spend more wisely and make better decisions.
I want you to avoid bad deals and bad companies. I strongly support online research as a means of protecting your interests as a consumer. Knowledge really is power and individual consumer self-empowerment is great.
So, it would stand to reason that I’m also a fan of websites dedicated to revealing scams and rip-offs, right?
At least I’m not a big fan of the most successful online “pro consumer” site and I’m actually very suspicious of many others.
The reigning champ among sites that purport to give consumers the low-down on bad businesses is Ed Magdeson’s Rip Off Report. For reasons that defy both logic and Google’s stated preferences, Rip Off Report is often one of the top results when you query search engines with company names. It’s a busy place, frequented by thousands upon thousands of Internet users looking for information about businesses.
If you aren’t familiar with the way Rip Off Report works, here it is in a nutshell: Anyone can sign up with the site and then submit a warning or complaint about a business that consumers engaged in pre-purchase research can then find.
That sounds good, but the reality is a little stickier. Although I’m sure there have been many people who have avoided bad deals because they read a post on Rip Off Report, there are big problems with relying upon it for smart guidance.
Many of these reasons to be wary of Rip Off Report apply to other similar sites, where user-generated content or reviews serve as foundational material, by the way.
Here’s why you need to take those negative reviews with a grain of salt (and then some).
The customer isn’t always right. I know that people love to say that the customer is always right, but that doesn’t make it true. Anyone who’s ever worked in a retail environment knows that a hefty percentage of customers are very wrong. They’ll also tell you that the ones who are the most wrong are also the ones who are most likely to complain. The folks who are willing to take the time and effort to unload on someone via Rip Off Report may not be your best source of entirely accurate and sane assessments of situations and transactions.
There’s zero editorial control. There’s very, very little exercise of editorial control at Rip Off Report. That isn’t an accident, either. The lack of editorial meddling is one of the reasons why its ownership can deftly avoid losing defamation lawsuits via the safe harbor provisions of existing laws. In any case, though, no one is actually monitoring or investigating the often wild complaints lodged by site users. These entries could’ve come from a perfectly reasonable person who wants to warn others of bad business tactics. They could also come from a frustrated fiction writer on a two-week whiskey bender who has a series of psych diagnoses and has opted not refill necessary prescriptions. The comments can be 100% accurate or complete fabrications and no one is testing them before publication at the site.
Where there’s a lot of smoke… Rip Off Report is a fairly frequent target of lawsuits. Some are tossed out, some are settled and others end up resulting in uncontested judgments against the site’s ownership. We can argue about the legal and overall merit of individual cases, but when you start hearing the same accusations from a variety of seemingly reputable people, you might reasonably assume that something might be wrong.
Following the money. If you run a business and someone unleashes on you with a scathing review, you can get the folks at Rip Off Report to intervene on your behalf. You’ll just need to pay them. Alot. Charging companies to battle negative reviews appears to be a key component of the ROR business strategy. That’s alarming, to say the least.
There are other reasons to question the veracity of the complaints lodged at sites like Rip Off Report. Some contributors are obviously disturbed and/or of limited intelligence. You’ll notice a variety of obviously baseless reports and a tendency amongst those “squeaky wheels” to wedge any inconvenience into the “evil conspiracy” category.
Being a smart consumer is great. Self-education can be one of the best ways to protect your money. Sites like Rip Off Report, however, aren’t the best place to get an education.
In our next post, we’ll discuss a few ways to get better information about the quality and legitimacy of those with whom your considering doing business and a few other consumer education tips.
NOTE: By the way, if you’re interested in learning more about ROR and its founder, I strongly recommend a rather lengthy article that originally appeared in the Phoenix New Times. I think it’s at least somewhat fair to the site and its operator, Ed Magdeson, and it’s a lot more comprehensive than other criticisms of the site. Let me add that whether you love or hate the site, it’s certainly a very interesting story.
Here are the Blog Carnivals that we participated in last week. Please visit the carnivals as there are informative personal finance posts for you to enjoy.
- Carnival of Personal Finance #178 (The Struwwelpeter Edition) was hosted by The Digerati Life and you can find our post entitled Investing vs. Paying Down Debt – Which Way Should You Go? listed there.
- Carnival of Debt Reduction #165 (A History of National Debt Edition) was hosted by Greener Pastures and you can find our post entitled Dave Ramsey’s Debt Snowball – Bad Math, Great Results listed there.
- Money Hacks Carnival #38 (The Aviation Month Edition) was hosted by Taking Charge and you can find our post entitled Wendy’s Coupons & Deals: Eating Healthier at Wendy’s listed there.
- Finance Fiesta #22 (The Catching Up Edition) was hosted by The Financial Wellness Project and you can find our post entitled IRS Tax Liens: What Legal Issues Should Be Considered When Buying Your First Home? listed there.
If I could give people a one-word recommendation for their own financial success and that of their children it would be “education”.
Education is a great thing on a variety of levels, of course. Education correlates to better health and longer life. There’s also that very true thing about the way knowledge enriches your life. Even if a good education didn’t put a dime in your pocket it would have tangible and intangible advantages that made it worthwhile.
But it’s also a massive winner in personal finance terms.
I just took a look at BizJournal’s list of the 20 highest-paying occupations. All of the usual suspects are there–CEOs, lawyers, doctors, engineers, dentists, etc.–and almost all of the jobs have one thing in common. They come with significant educational requirements.
The power of education isn’t just in its ability to land you a gig as a commercial pilot or an optometrist, though. There’s more to it than that. It’s not just a matter of hooking up with one of those top-20 jobs. The correlation between education and earnings remains strong across the board.
According to a Census Bureau study, education really matters. According to an article addressing the Bureau’s work, “In 1999, average annual earnings ranged from $18,900 for high school dropouts to $25,900 for high school graduates, $45,400 for college graduates and $99,300 for the holders of professional degrees (medical doctors, dentists, veterinarians and lawyers).”
If you do the math, a person with a Master’s degree is going to make a whopping $1.3 million dollars more than a high school graduate, on average, over the course of a lifetime. Not interested in a grad school stint? You still shouldn’t skip the undergrad experience. State Farm insurance states, “According to The College Board, college graduates earn 80% more on average than high school graduates.”
Obviously, even an education obtained at the most expensive schools would still offer an amazing return in financial terms.
That’s why anyone who’d like to see their earnings increase should consider advancing their education. If you dropped out once upon a time, find a way to get back into class. The stigma of the “non-traditional student” is all but gone and most schools offer flexible programs designed to assist those who have adult responsibilities to manage while trying to complete their educations.
If you finished your education and have a degree, consider going back for more. Gabby Hyman, in an article sponsored by the Keller School of Management offers:
The facts are clear: to make the most money, no matter your chosen field, hitting the books helps. Once upon a time, holding a bachelor’s degree and landing a job with a solid employer meant life-long career stability. In today’s world, ongoing job training, the pursuit of advanced degrees and leapfrogging from company to company–or starting your own business–are hedges against an uncertain professional existence. When it comes to earnings and education, more is better.
There are a couple of lessons to glean from all of this. First, if you have a chance to go to school, do it. Second, if you have children one of the best things you can do is to encourage them to get a solid education–and prepare to help them, if necessary, to pay the bills associated with it.
Let’s play with that $1.3 million dollar figure for a moment to underline what a great deal education really is. This is what that really means to an eighteen year-old potential college frosh:
Let’s say that a four-year undergraduate degree and two years of grad school will cost a whopping $120,000. That accounts for $20K per year in tuition. Let’s also make the very generous assumption that our hypothetical student will need another $120,000 in loans or other spending to make ends meet while studying. We’re going to tack another $150,000 onto that total by making the probably-unrealistic assumption that he or she could be making $25K per year somewhere out in the workforce if he or she wasn’t going to school.
Total “cost”: $390,000
Compare that to $1,300,000.
The educated hypothetical student is still going to be about $1 million dollars ahead when the dust settles–even when using inflated cost projections. And he or she is also going to live a longer and fuller life.
Education is an amazing investment.
Those who’ve focused on the shortcomings of the recent G-20 Summit have dismissed it as a “circus without a ringmaster,” “Hamlet without a prince”, and “a rather dull scrum“.
If anyone was expecting the one-day conference to become a “Bretton Woods II”, they were certainly over-optimistic. We didn’t witness a complete reinvention of international monetary management rules and no one walked away believing that a new framework for global cooperation had been set in place.
G-20 Summit Shortcomings
The limits of the summit’s significance are readily apparent. For instance, although those gathered pledged to do whatever might be necessary to stabilize the financial system, no one seemed willing to divulge any specific numbers with respect to individual nation members’ stimulus plans.
The G-20 was basically silent on the hot topic of re-examining and re-calibrating exchange rates, too. Sometimes silence is significant and the failure to address this topic in a meaningful way definitely cut against the significance of the session.
It’s no surprise that the group will need to gather again in April. Some analysts argue that this production of “Hamlet without a prince” was doomed to fall short of major change due to the absence of the next U.S. President, Barack Obama. Although globalization is slowly but surely rendering the U.S. a significant player instead of the player in the field, the presence of a lame duck certainly curtailed the drive for members to try to iron out future plans.
A recent BBC News story from Bridget Kendall wondered if a second version of Bretton Woods, the 1944 agreement between allied nations on the management of international financial and monetary affairs, might be on the way. The article noted the possibility of a major power shift on the immediate horizon and the potential to see substantial changes in the way the world approaches an increasingly globalized economy.
The G-20 Summit didn’t measure up to those lofty standards. However, a closer examination of the summit reveals that it’s limitations didn’t prevent it from planting seeds that could result in significant changes for the global economy.
A Departure from Old Models
The most important part about a G-20 gathering may be the simple fact that it is not another G-8 meeting. The expansion of participating voices represents a significant departure from a system dominated by the U.S. and Europe.
The G-20 may very well represent a crumbling of the “old guard” and it certainly creates previously non-existent opportunities for other nations to add their perspective to international economic questions. That recognition of increasing globalization could set the stage for even bigger changes in the nature of international agreements.
Although we may be a long way from the G-125 some advocate, there is no question that the days of trying to manage a world economy from a handful of western capitals are numbered. The meeting involved a great deal of discussion of how emerging economies should have an increased role in a variety of functions, particularly with respect to the International Monetary Fund.
Put simply, the very fact that a G-20 assembled is meaningful, regardless of the actual policy decisions that did or did not emerge.
That’s not to say that the sole value of the summit was symbolic, though. There actually were some interesting and potentially significant decisions to come out of the meeting.
One of the most staggering things to come out of the meeting was the expression of the sentiment that global financial markets are not sufficiently self-regulating and that governmental interventions would be a necessity if the global economy is to be stabilized. Although it would be a stretch to argue that international policy since Bretton Woods has never been truly “laissez faire” in nature, this up-front support of active intervention represents a significant change in overall expression and may be evidence that those with a more market-oriented approach are losing influence.
The pledge of G-20 nations to stabilize international markets came with some specific policy proposals, too. There was a strong call to increase the regulation of hedge funds and advocacy for heightened oversight of credit rating agencies in recognition of stubborn credit problems.
Trade issues also made it to the table. Notably, the membership agreed to a 12-month prohibition on new protectionist measures. Calls for the re-initiation of the Doha trade talks were also well-received. Those who had wondered if recent global events would lead to more cooperation or increased isolation seemed to have received an answer in support of cooperative trade and engagement.
It would be premature to argue that we’re on the brink of a massive structural change in international monetary and trade policy. The G-20 conference clearly didn’t yield a sea change. However, despite its limitations, it does appear as if the foundation for a different approach to world economic issues may be in place.
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