A Warning

How the Economy Works

Americans are not taught enough at young age about how money and the economy works. It’s an uncomfortable subject and most believe it’s impolite to talk about money. So, we go on through life not fully understanding the subject of finance or how succeed in accumulating wealth. Most of what I know, I had to learn through trial and error as well as reading about how ultra wealthy people think and act. Unfortunately, despite volumes of literature having been written about the subject, most people consider economics a boring and complicated issue that should be left to the experts. I feel the need to dispel some myths about economics so a better understanding can be reached about where we stand economically today.

Myth 1. The economy is complicated. This is false. An economy is simply the sum total of all the transactions that take place in a given market. Everything can be boiled down the basics, the broad economy is nothing more than individuals trading goods and services for something they deem more valuable than what they are trading. If people are spending less, the economy slows. If people spend more, it expands.

Myth 2. Savings doesn’t matter. We are told to save money at a young age, but if you look at the pundits on television talk about the health of the economy, rarely do they refer to how much a family has stashed away for savings. Instead, they talk about consumer spending. Now, spending is an important indicator of economic health, but so is savings because savings is a measure or future investment and spending. If you are saving your money, it’s because you intend to spend it at a future date for something you need at that time. If you are not saving, you are limiting your ability to spend money in the future, instead opting to spend it now. Savings is one factor that leads to the creation of new capital investments and businesses. If the savings rate is low, this is an indicator the future business creation may slow.

Myth 3. All debt is bad. This is wrong and it keeps people from thinking and expanding in a big way. Most big companies use leverage, (debt) as a way to expand business and income. There are two types of debt, consumer and business. Consumer debt can be bad because generally we are using it to buy goods and services that do not produce future income. Business debt can be good if it is used to produce future income.

Myth 4. People spend based on how much money they have. This is wrong. The ability to spend and the total economy is based on two things; income and the credit (debt). You can buy things with cash, or with credit, which is a future promise that you will pay. The biggest indicator is how people will spend is based on their available credit. Unfortunately, people buy things based on what they believe their future income will be, not what they make now. So, they use credit to buy things that don’t produce income. Eventually when the bills come due, if their income has not gone up enough to cover the new debt plus interest, the person has to default on their credit payments. The company that holds the debt must now take a loss of income and subsequently reduce the amount of credit to consumers. If this happens on a large scale with many people, the reduction of credit will lead to less available purchasing power and less transactions in the economy. Less transactions leads to a slow down in the economy, job losses because companies are selling less and often a reduction in pricing of products.

Myth 5. Wealth is money. False. Wealth is an increase in production and output. If you have a farm and are able to collect twice as much crop as the year prior, you have increased your wealth. People think that the government can just print money to take care of all debt and economic problems. If this were true, we could just all quit our jobs and have the government give us money. Obviously, this cannot happen or basic services necessary to living would never get accomplished. Moreover, an increase in the money supply, if credit levels are still high, without a corresponding increase in the production of goods can lead to an inflation in pricing. In other words, the ability of your money to buy products and services is reduced as more money enters the economy.

Where We Stand Today

At the time of this writing, household debt and government debt has reached record levels. (1.06 trillion for consumer credit card debt, 1.5 trillion in student loans and a total of 18 trillion if we include personal mortgage debt). Government debt has also reached a record 20.6 trillion largely due to unfunded liabilities such as pensions, MediCare and Social Security. The average cash savings of the typical American family is less than $1000 dollar. Nearly 40 percent of families have no cash savings at all, meaning the ability for these families to make future purchases is significantly reduced unless their income expands greatly. Already, auto loan defaults, student loan defaults and credit card defaults are on the high and expected to reach higher levels. In my own businesses, I have seen more credit card declines every month. We have a serious debt problem happening right at the same time the stock market is at an all time high.

What It Means

The American consumer is tapped out as far as their available credit. This likely means that despite all time record level stock prices (which have very little to do with the real economy for most people) their ability to make future purchases will decline, leading to a slowing economy. Of course, no one can predict the future, but if the numbers are any indication, we are at the peak of the debt cycle and what follows will likely be more defaulting on debts and subsequently job loss and a retraction for many businesses. Be warned. Invest in yourself, your skills, your health and save the rest of your money so you can capitalize on lower prices during a downturn. Remember, people always sell things for less when they believe times are bad.

Sorry for the negative note. I’m just trying to be clear on what I see happening so I can help you and your family thrive! If you want a great YouTube video on some of these concepts, look up Ray Dalio’s video on “How The Economic Machine Works.” I promise you’ll learn something.

Transcendence Now!

7 Steps to Achieving Transcendence

What is the most powerful word you can think of? Is it love? Is it power? Perhaps it’s something else. For me, the most powerful word in the English language is transcendent. I don’t know of any other word that articulates the possibility of the human experience. From Merriam Webster dictionary:

  • Transcendent: exceeding usual limits :  surpassing, extending or lying beyond the limits of ordinary experience; being beyond the limits of all possible experience and knowledge; being beyond comprehension.
  • Being beyond comprehension! Doesn’t that pretty much sum up our experience in this universe? I believe it does. I cannot even fathom why we are here or what our destiny is as a species, except to say that I know humans tend to transcend the limits of what our perceived limitations are. In fact, I believe the purpose of life for all humans is to transcend- to push beyond. We are all destined to evolve, to grow into new beings. If this sounds too far out for you, consider this; do you want to be the exact same person, with the exact same consciousness, knowledge, philosophies, world view and relationships in 10 years? Stated differently, how will your life unfold if you believe the same things and act in the same ways for the next decade of you life? Will you grow? Will you achieve what you desire? What will be lacking in your life? These are questions I ask myself everyday and the answer to the questions always leads me to the same conclusion: I must transcend. I must grow.

 

  • What follows are Seven Steps to achieving transcendence. All of these are my opinion of course. However, I can confidently state that by following these steps I have grown into a completely new person in the last decade. I’m much more proud of who I am now, than who I was. I truly hope these steps will help you as much as they have me.

 

  1. Get a philosophy to deal with the daily occurrences in life. If daily events upset you and deter you path to growth, adopting a philosophy towards life will be incredibly beneficial for moving forward and growing your potential.

 

  • Stop blaming others. Take full ownership of your life.  In fact, stop wasting time blaming or complaining about anything or anyone who is outside of your control. The Stoics believed that we should divide the world into two categories; things that are in our control, and things we have no control over. Start figuring out what you can control and what you have to let go of and your life will transcend immediately.

 

  1. Read every single day. For thousands of years, humans have been writing about their experiences, problems, successes, triumphs, discoveries, adventures, failures and much more. There is not a problem you are experiencing now that someone throughout history has not faced and written about. Take the time to learn how they triumphed. Both success and failure leaves clues. Don’t be blind to them.

 

  1. Live with virtue. Having high moral standards is the only path to true fulfillment. If your destiny is to grow, you can only do so by treating others as you would have them treat you. This is known as The Golden Rule and it’s a philosophy that transcends all cultures and religions.

 

  1. Train yourself physically and mentally everyday. To transcend, you must train your body and mind to grow by experiencing and studying new things. My favorite quote about physical training comes from Socrates, “No one has the right to be an amateur in the matter of physical training. It is a shame for a man to grow old without seeing the beauty and strength of which his body is capable.” So true

 

  1. Realize that you don’t know what you don’t know. And there is a ton that you do not know. If you believe you already know something, it becomes impossible for your mind to allow you to learn anything new about it. I like to say “there is always something to learn from everything and everyone. Sometimes it is learning what not to do.”

 

  1. Set the game of life up in a way you can win. We all experience certain emotions because of the rules and beliefs we have in life about certain things.   For instance, I feel fear when I believe that I may not fulfill my true potential. I do not feel fear if I see a spider, or a wild dog. I feel happy when I wake up and see my family, or a picture of them. I feel joy when I see someone smile. I’ve set up certain rules for the emotions I feel.   Most of us don’t believe so, but we are all responsible for the emotions we produce and the subsequent actions we engage in. Understanding that you are responsible for your life and that you can set up your rules and beliefs in a way that will serve you. If the only way you can be happy is making a billion dollars or having someone else treat you a certain way, I can promise that you are setting yourself up for a lifetime of disappointment.

 

  • Follow these seven steps and you may not become emperor or president or CEO, but you may transcend to the next level of understanding and fulfillment. (It all depends on you.)  At the very least, I hope that by adopting these actions you will find tranquility in your life.

 

In Health,

 

Sean

Life and Death

These are troubling times. Not that there haven’t always been troubling times, it’s just that more of humanity is aware of problems in various parts of the world thanks to technology. Unfortunately, there will be more troublesome events to come. It is unlikely bad things will stop happening. However, it’s important to remember that you choose where you get to live emotionally. You can live in despair and fear. You can live in gratitude and abundance. The choice is yours. Do you want change in the world? Change yourself first. Specifically, there are two things that must change for positive transformations. The first is having a productive philosophy towards life. The second is to live in harmony. If you have these two characteristics, you will thrive. These are the traits needed to maintain life. If you lack these, you will begin to break down and devolve. Life needs harmony and clear thinking. Death does not. Death must be staved off–the death of the business, the relationship, the organism. It is the natural consequence of not having a philosophy of productivity and being in harmony with those around you. Growth or death—it is all very simple.

Those who develop and maintain a positive, productive philosophy will always do well because they take responsibility for everything in their life and control their emotions and responses to the world. These people will also have a natural tendency towards harmony with others. Those who have a productive and positive philosophy understand that harmony is essential for life. Your body must work in perfect harmony to sustain energy and life. If not, it begins to decay and the damage may be irreversible. The same is true with a business culture. A relationship is perhaps the clearest example of why philosophy and harmony are necessary to life. Both people in a relationship must give 100% effort for it to work. They must each have a philosophy of love, responsibility, and compassion. Each must strive to be in harmony with the other. Yet, half of all marriages end in divorce. It’s so simple to see why. It’s the lack of harmony and maintaining a philosophy of positivity. The same goes for the violence so prevalent amongst mankind. All of it can be traced back to the lack of the fundamental characteristics needed to grow and maintain life.

I urge all of my employees to strive for harmony with each other. Most workplaces are toxic and a majority of polls taken of employees show that most have significant issues with their coworkers and managers. This is all due to a lack of harmony. There must exist a desire to be in harmony with all those in your workplace (and in your life) to realize an incredible workplace. Without that desire for harmony, the natural tendency towards problem and decay will occur. If this continues in a business, it becomes part of the workplace culture. Once it’s a part of the culture, it’s nearly impossible to stop without replacing every individual. Often, even the great employees cannot free themselves of the damage done to them by a toxic environment. It warps their philosophy to see the worst in others and seek out problems. If people only knew it was within their own power to change this. An incredible workplace, an incredible relationship—an incredible world begins with each person acting incredible and developing an incredible philosophy. Be mindful of your own personal philosophy. Is it geared towards harmony and growth? Or are you letting your mind erode with the problems of life? Are you thinking clearly—thoughts leading to positive consequences for those around you and your loved ones? If not, change it. Be the change you want to see in the world.