Stronger Beings Exploit Weaker Beings

In nature, stronger beings exploit weaker beings. Strong humans exploit weak humans who in turn exploit weaker humans who in turn exploit animals. This chain of domination and subordination ends up enslaving almost every being to some degree, and freedom is rare. It is possible for slaves to break free of their shackles. Slavery thousands of years before was achieved using whips and chains, but today it is primarily achieved using debt, inflation, and marketing. Men are piled with debt: student loans, mortgage, car loan, phone plans, school fees, and credit card debt. We slave away in a 9 to 5 job to pay off these debts, and we typically work till we are very old. Money printing and fractional reserve banking increase the supply of money in the economy, which increases the price of everything. Marketing increases the demand for everything by making us spend more on stuff (benefiting retailers). To afford all, this we borrow money and end up paying interest (benefiting banks). If we spend more, we divert less of our income into what really gives us freedom, namely dividend-paying shares and interest-paying bonds. If you pay debt, you are a slave and you work for others. If you own debt, you are a slave owner, and others work for you. Don't borrow from the bank. Own the bank instead. Avoid debt, avoid obligation, and avoid commitment. Free yourself first, and once you escape from slavery, help other slaves free themselves. Be a free man, be accountable to no one, owe nothing. Do what you want, when you want, where you want, with whom you want, how you want.

Human Cattle Are Victims of the Conformist Consumerist Narrative

Don't be gullible. Don't buy into the conformist consumerist narrative that, to be a normal person, you must get married, get a mortgage, and have children.

Of course you will be fed the lie that if you have a spouse, a mortgage, and children, these status symbols show that you have conquered in life and have dominated, but in reality these expenses are huge (it costs $400,000 to raise one child) and you will be in debt up to your eyeballs. You will be forced to work a 9 to 5 all day and every day until you are very old, and then you retire and shortly thereafter you will die.

Even if you think you are lucky because you have found a spouse who financially supports you, being financially independent on someone means that you are their slave. There are many women who marry rich men only to find that they are financially dependent on the man. They spend no time at work thereby having no skills, which means if the man leaves them, they become unemployed and on the streets, which means they endure any abuse the man imposes on them.

Just like a cow in a dairy farm exploited for its milk and slaughtered thereafter so too human cattle are fed the narrative of marriage, mortgage, and children, and rather than giving up milk they give up their labor, their time, their effort, their freedom, their lives.

Work hard. Invest for yourself. Retire by 35. 

Debt Seen By Most as Harmless

There has been a study done that shows a correlation between a person's credit score and his or her ability to be in a committed relationship.

I have no idea what my credit score is, but I am fascinated by how many people are obsessed over the number as if their ability to pay a debt is very important.

I believe the reason why so many people believe they must get a good credit score is because they believe that it is inevitable that they will go into debt in their lives, and if they are going to go into debt anyway, why not pay a lower interest rate by having a good credit score?

All this underlines how successful banks are in duping people into believing that they absolutely must go into debt. Most people today see debt as a normal part of living.

I see it different. Debt is a promise by you to pay someone in the future. You are binding or enslaving your future self. It is an act that goes against personal freedom.

Of course, you consent to debt, but think about how you thought and behaved ten or twenty years ago. Chances are it is nothing like how you behave today. As humans we change. When you think about who you are today and who you will be decades into the future, we may as well be talking about completely different people.

The credit score is a measure of how good of a slave you are, how well you can submit and grovel at the feet of the powerful. A high credit score is nothing to be proud of, in my opinion.

Five Rules of Wealth Accumulation

Is there more to life than money? Of course there is, but money is still important. For society, money (or currency) provides a medium for exchange that eliminates the need for barter and therefore avoids the inefficiencies of barter. For the individual, money gives you the means to buy essentials for life, that is, food, clothing, and shelter. Of course, if you have enough money to provide you with food, clothing, and shelter for the rest of your life, money is a luxury rather than a necessity. Regardless, below are important rules for accumulating wealth. Although some of these rules may be repeated in other posts, I think if an idea is important, it needs to be repeated.

1. Pay yourself first, automatically

I was made aware of this piece of advice from the book The Automatic Millionaire. The basic idea is that, rather than spending your income and investing what remains, it is better to invest a fixed amount as soon as you receive your pay and then spending whatever remains.

There are two ways to achieve this. One involves simply talking to someone in HR to put a specific amount from your pay into a separate savings account or fund. If you are a salaried worker who received a fixed amount every fortnight, another way to pay yourself first involves having two different bank accounts. You set your bank accounts up so that your pay goes into one bank account and then automatically, a few days after, a fixed amount goes into another bank account. You carry around a card for access to only the bank account you use for spending.

Regardless of the details on how you achieve this, you are fundamentally trying to make saving automatic. Life throws things at you. You don't want to have to think too much or bother with transferring money here and there in order to reach your savings goals. By making savings automatic, you don't have to do anything other than keeping yourself employed.

How much do you save? That is going to be different for different people, but I suggest that you start with an amount that is challenging and sticking to it. When I started working full-time out of university, I was only earning $40,000 a year before tax ($1538 a fortnight), and I automatically saved $1000 per fortnight simply because it was a nice-looking number. After a few years, I increased this to $1300 per fortnight.


2. Diversify

"Divide your investments among many places, for you do not know what risks might lie ahead."

~Ecclesiastes 11:2 NLT

It's one thing to automatically save your money but it's another thing entirely to make sure your money is safe. Personal finance experts often tell people to minimise risk by researching and doing your due diligence, but investments can be incredibly complex. Warren Buffet, the world's greatest investor, advises people to only invest in what you know. However, I believe that even if you think you know an investment, you may not. For example, if you buy shares in a company, you may know the business model, the products being sold, and so forth, but will you know every decision the managers make or what strategies they have to make the company profitable. You cannot possibly know all the conversations that go on behind closed door among the directors and executives. The problem of asymmetric information that exists between investors and managers is to an extent fixed with financial reporting and accountancy but there are limits to the accuracy and usefulness of this information.

In my opinion, when choosing investments, it is wise to research your investments but don't be afraid to go with your gut and, most importantly, regardless of what your gut says, you must diversify. In other words, do not keep your money in one place. Spread it across different types of investments in different financial institutions.

Diversification is hard work. It's not easy opening multiple funds or accounts in multiple financial institutions. The paperwork can get overwhelming and during tax time it can be difficult to account for the different tax treatments that different investments require (if this is the case be sure to use a qualified accounting at tax time). However, diversification is important, and if you have any doubts about this, do some research into Bernard Madoff. No matter what your research tells you, no matter what your gut tells you, and no matter what the financial statements say, all investments have risk, and the only way to mitigate risk is to diversify.



3. Invest for income

Whenever I invest, I like to invest in assets that produce income. The main appeal of these investments come from the idea that I can have money automatically dropped into my bank account without me doing any work at all. We all have expenses. We need to eat, buy clothes, and put a roof over our heads. If the income from your investments can cover the cost of these necessities, you do not need to work ever in your life and you may find that you enjoy your work a lot more because the pressure is off. You can take risks and be yourself rather than kowtowing to your manager. If your employer won't pay you, your investments will.

Positive cashflow is freedom and negative cashflow is slavery. It's as simple as that.

Of course, when investing for income, don't forget to diversify because high-income investments are risky. The higher the yield from an investment, the riskier it is. Some companies have high yields because their prices are going down because investors foresee future problems. Sometimes dividends are paid not from earning but from borrowings, which puts into question the sustainability of these dividends. You should invest for income but also remember to diversify.



4. Avoid debt, obligations, or commitment as much as possible

"The rich rule over the poor, and the borrower is slave to the lender."

~Proverbs 22:7

Debt is slavery. Try to stay out of debt as much as possible. Debt occurs when you borrow money from someone and have an obligation to pay back at a later date. The problem lies in the uncertainty of the future. Can you know for sure that you will earn the money to pay the money back?

But I will go so far as to say that it is not just debt you should avoid but all future obligations or commitment. This means, for example, avoiding phone plans that obligate you to pay a fixed amount (say $60 per month for 24 months) and getting a cheap but good phone and using a pre-paid SIM card.

Don't get a car loan. Save up money and pay cash for a second-hand car. Some people think a new car must be more reliable and that, when you buy a second-hand car, you are buying someone else's problems. Before you buy a second-hand car, you can easily get it independently checked for defects. Buying second-hand means you avoid the massive depreciation associated with new cars. When you drive a new $30,000 car from the dealer, automatically about $5,000 in value is wiped away. If you buy a $7,000 second-hand car, there will still be depreciation, but not as much.

You should also be extremely careful with intimate relationships with others as this creates commitment or obligation. One of the weirdest observations I have made is how society labels men who are cautious with commitment as "commitment phobes" who need to "man up" quickly. They talk about commitment phobia as if it were negative. If anyone tries to manshame me by labelling me a "commitment phobe" I will simply tell them that yes I am cautious about signing up to something that would bind me and that I am proud of it. If a car salesman tried to sell you a Ferrari and wanted you to go on a car loan and you hesitate, that is commitment phobia. You're expressing reluctance to commit to a long-term arrangement. It is a prudent thing to look before you leap. 

If you sign a marriage contract, you are entering into a serious commitment of your time and cash and there are extreme risks associated. Everyone needs intimacy but too many people rush into securing themselves what they believe is an infinite supply of intimacy without fully considering cost and risk. As a man, how I handle this issue involves treating female intimacy as a product that you buy. You pay a female money in the form of gifts, dinner, lunch, and events and in return she provides you with the intimacy, and you can alter how much you spend on her depending on the quantity and quality of the intimacy she supplies. Do not have the mindset that your girlfriend is the monopoly supplier of female intimacy because otherwise she will charge monopoly prices. Always have the attitude that whatever your girlfriend is supplying, you can get it somewhere else, and this will keep prices competitive.

Of course, there are some obligations you cannot avoid, for example, you need to eat, so you are obligated to spend money to buy food to eat in order to keep yourself alive (unless you grow your own food, but then you are obligated to harvest that food). There are also those necessities that you just must have that only come in contracts that involve future payments, e.g. broadband internet, private health insurance, utility bills, rent, and so forth.



5. Play the pauper

Once I have a fixed amount of my pay automatically invested in multiple investments, I don't keep track of how much money I have saved up. Many people track their net worth every month and proudly boast about it to the world. I don't because I know that I already have enough money saved up to fly off to Asia and retire if I need to. If I save up more than what I need to save up, why do I need to bother keeping track of how much I have? Being ignorant of my wealth helps because, if someone asks me how much money I have, I can, with all honesty, tell them I have no idea. It is genuine and plausible ignorance.

Why is it important to be ignorant of your wealth and be very vague about how much money you have? One word: theft. If other people think you're a pauper, they will leave you alone. If other people think you are rich, you have a target on your back. People will come up with all sorts of manipulations and cons to get to your money. This is especially true of people who are close to you, for example, relatives, parents, children, and spouses.

I would even go so far as to say that you should both conceal your wealth and also play the pauper. In other words, pretend to be poor. This goes against human instinct. Normally people purchase status symbols in order to show off wealth, but I do the opposite because the pride I would get from showing off wealth is nothing compared to the fear and anxiety I get from thinking about theft. This means you should dress modestly (but nearly, not like a bum) and avoid prestigious brand-name products. Constantly talking about how little money you have because of rising costs and try to convince others that you don't earn much money.

By playing the ignorant pauper, you avoid yourself a lot of heartache. Gone are the begging relatives or friends who want to borrow money off you or get you to invest in their coffee shop venture. People will leave you alone and theft risk is greatly reduced.

One potential problem with looking poor is that people who think they are richer than you may put you down. Class warfare is as old as human history. It will never go away, and if someone thinks he or she is richer than you then it is likely they will ridicule you. You can fix this problem by not looking too poor. You can also fix this problem by trying to ignore the bully. If that is not possible, my strategy is to act like a psycho mobster. When someone ridicules you, simply shout back at them and make vague allusions to your connections with organized crime. Constantly read true crime fiction and constantly talk about death and killing and murder. Your friends should become wary and scared of you over time and will be fearful of provoking you. You need to be careful that you act psycho only and that you don't actually kill someone or even threaten to kill someone, as these acts are likely illegal. I only go crazy this when it is clear that someone is a snob and continues to ridicule me and I cannot ignore them or distance myself from them easily.

The Myth of Good Debt and Bad Debt

A friend once told me the following:

If you borrow money to buy an asset that depreciates, this is bad debt, and you should avoid it. If you borrow money to buy an asset that appreciates, this is good debt.

This is crap. One reason is because it's very difficult to actually know whether an asset will appreciate or depreciate. For example, most investors who purchased subprime securities before the GFC wrongly assumed house prices only went up. As a result, borrowing money to buy an asset really only magnifies risk because, if the asset goes down, you lose more.

Another reason why this rule is crap is because it completely ignores the cost of borrowing, the cost of holding the asset, as well as whether the asset generates any income.

For example, suppose you borrow money from a loan shark at 20% in order to buy a house and assume that this house appreciates at 5% per year. You will actually be worse off than if you took out a car loan at 8% and purchased a car that depreciates at only 1% per year. In other words, if the cost of borrowing is so high, it doesn't really matter if the asset appreciates or not.

Some assets may appreciate over time but have extremely high costs. For example, suppose you purchased a run-down apartment that needs constant maintenance. As the landlord you need to fix the showers, clean the walls, replace the tiles, put more concrete on the driveway, and so forth. You may purchase an apartment that appreciates at a mere, say, 1% per year but if it costs you $1,000,000 per year to maintain this apartment, what is the point? These holding costs aren't necessarily in the form of fixing showers and tiles but may include council rates, land taxes, and other taxes or fees.

Another factor ignored when focusing only on asset price changes is the income-producing potential of the asset. If you take out a margin loan with your bank and borrow money at 8% to invest in shares of a company whose stock price depreciates at 1% per annum but it has a dividend yield of 10% then you are better off than someone who takes out a mortgage and borrows at 6% to invest in a house that appreciates at 3% per year and pays rental yield of only 3%.

In summary, if you borrow money to buy an asset, you need to look at a lot more than asset price changes. You need to look at everything that influences on costs and benefits. The idea that borrowing money to invest is a good idea simply because you expect the price of the asset to rise is thoroughly refuted in the examples above. Other things to consider include holding costs, costs of borrowing, and how much income the asset produces.

GFC2's Impact on Australia

GFC2 is here. The US and Europe are piling on more and more debt and many investors are skeptical about whether they can pay it off. Here in Australia, many seems to be optimistic. In The Melbourne Age, this piece Forget US Woes, China Keeps Our Economy Strong claims that the Australian economy does not rely on the US economy anymore and that the Chinese demand for our resources will keep our economy strong. According to the article, "40 per cent of China's exports went to the US in 2001. Now that figure is down about 20 per cent and falling..." This means that even if US consumers were to become too poor to afford Chinese imports, China has other countries it can export to.

But one area that bothers me is how much US debt China holds: US$1.2 trillion worth (source: NPR, China Blasts US over Credit Rating Downgrade). If the US is unable to pay off this massive debt and defaults, the US$5 trillion Chinese economy will have a substantial amount of its wealth wiped out. This would have an enormous impact on the demand for Australian resources and hence the Australian economy. Even if the US were to avoid default by printing money, the outcome would be similar. The Americans would print money and hand these dollars to the Chinese. The printing of money will cause massive inflation thereby causing the American dollar to drop in value. Even though the Chinese hold US$1.2 trillion worth of US debt, if the US dollar is worthless then that will drop demand for Australian resources.

Many newspaper economists are going on about how China is now Australia's master and not the US. Be that as it may, these newspaper economists do not seem to give much description of the linkages between the US economy and the Chinese economy.

Just Default Already!

I'm not exactly sure why the US would default if the debt ceiling were not increased. If the debt ceiling were not increased, the US would not legally be able to borrow but could still pay off interest with revenue from existing taxation. I am assuming of course that the US is not just borrowing money to pay off the interest on money they borrowed earlier.

Regardless, it is clear that the Americans need to both increase taxes and cut spending, especially on useless expenditure. That Republicans are not willing to allow increases in taxes is outrageous. In my opinion, the Democrats should just allow a default to occur and let the American people see just how horrible it will be. Th government can cut spending and not built roads, abandon hospitals, stop paying pensioners, and let banks gouge homeowners and businesses with high interest rates. The Democrats can then blame the Republicans for destroying the economy and in the next election should comfortably win.

Why Debt is Bad

"The rich rule over the poor, and the borrower is slave to the lender." Proverbs 22:7

Whenever I exercise, I like to listen to podcasts, and one podcast I love to listen to is The Survival Podcast (TSP). TSP teaches about survivalism, but don't think this guy is a psycho right-wing racist who is accumulating guns and ammo to prepare for a war with the government. He (Jack Spirko) gives very useful and practical advice to teach us all how to live our lives and to increase our chances of survival if times get tough--or even if they don't!

One tenet TSP hammers home is that debt is bad. In Episode 193 - Debt Elimination is Survivalism 101, Jack explains how you cannot expect to be focused on survival and have the shadow of debt hanging over your shoulder. In Episode 438 - What Debt Freedom Means, Jack gets more personal, giving us a story about how he struggled with debt fifteen years ago--how the debt start out small but eventually grew like a cancer. He made a stand to fight the debt and how he is free of debt, and as an old man he is appealing to the younger generation to stay away from something that had a profoundly negative impact on his life. Both these podcasts are very insightful and it's incredible to see the sinister side of debt exposed by one of its victims, especially now in Australian during a period in time when many people seem to be so desperate to buy a home that they are throwing themselves at the banks because they want more and more debt to fund their dream homes.

Spirko claims that the cost of debt is not just the money (that is, the interest). Debt wastes money but it also wastes time and life. I would add that the cost of debt is definitely not just the money (although debt on, say, a standard home loan can be massive) but debt also comes at the cost of freedom. When you take out a loan, you lose not only money that you must pay back to the bank but you also force your future self to work, which reduces how much freedom you have. Quite literally, as the bible explains, debt is slavery. The people with mortgages, credit card debt, and car loans work like slaves. The banks and their shareholders are the slaveowners.

Mortgage debt in Australia is even worse than mortgage debt in America because in Australia banks have the right to sieze all others assets if you are unable to pay your mortgage. If you default on your home loan, the banks can sieze not only your house but your car, your savings, and all your belongings--and you're broke. In America if you cannot pay your home loan you can walk away and all your other belongings are safe. This means that in Australia those in debt have it tougher. They must focus on paying the mortgage and not consider anything else.

The Good Side of Debt

I'm not saying that you should never ever go into debt at all. I do believe that there are some times when debt is a good idea. I think that you should go into debt if you really need to go into debt. For example, if you are starving and you need to borrow money to buy food, then it's probably a good idea to go into debt. If you are living with your parents and your parents are sexually abusing you and you don't like it, you may go into debt to buy a home for yourself.

There are times when debt can be profitable. For example, if you borrow $100 and use that $100 to buy an asset that appreciated by 10 per cent to $110 and you pay back the bank $105, you make a $5 profit. You can use the borrowings to buy stocks, property, or even to start your own business. It is possible to make debt profitable. However, it is difficult. If there is such an asset that is guaranteed to go up in value more than the cost of borrowing, you can be certain the banks would rather buy that asset themselves rather then hand you the money to buy the asset. By handing you the money to buy that asset, the banks have determined that that asset is too risky for them to hold, so they give you to the money and you bear all the risk.

If you have great skill, you can borrow money to start your own business and make a lot of money, but this is highly risky. If you borrow thousands of dollars and your business fails, you not only have the disappointment of a failed business but also the stress of debt that still remains even after your business fails.

Don't think that debt is costless, that you can just borrow and there will be no consequence to your borrowings. By going into debt you are making a bold prediction about the future. When you borrow money to invest in shares, you are predicting that shares will go up in value. When you borrow money to start your own business, you are predicting your business will be profitable. You may be right, but you are more likely to be wrong. You need to be either very lucky or you need to work very hard.

The bible says that borrowers are slaves and lenders are slave owners. A bank's primary function is to coordinate the interests of borrowers and lenders. Hence the bank's primary function is to bring together slaves and slaveowners. The bank is a slave market. Instead of whips and chains used to inflict pain and limit freedom, instead the threat of default and seizure of assets are used to instill fear.