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Guarding Your Wealth for Senior Citizens
Single Greatest Threat to Retirees is America’s Loss
of Its Independence
Investors cannot let patriotism cause them to lose
their money
By Jeffrey D. Voudrie, CFP
 July 6, 2007 - Each year, our country proudly
celebrates its independence on the 4th of July. I am a flag-waving
American that still believes our nation is one of the greatest nations
in our world’s history. But I can’t let my patriotism result in my
clients losing money.
For investors to be successful, they must
understand the major forces that will shape our nation and the world
over the next 10-20 years. And chief among these are the twin forces of
debt and inflation.
I believe the single greatest threat to retirees
and near-retirees is America’s loss of its independence. The Bible has a
proverb that says, “The rich rule over the poor, and the borrower is
servant to the lender.” It’s true for individuals and it’s true for
nations. As a nation, we have become the servant and have lost our
independence.
It wasn’t always this way. Back in 1914 we became
the lender instead of the borrower for the first time in our nation’s
history. By 1983, the United States was the largest lender in the world!
But just two years later, in 1985, the nation became a borrower instead
of a lender. Now, in less than 25 years, we have become the biggest
borrower in the history of the world. We are becoming totally dependent
on other nations.
It’s easy for us as individuals to borrow money for
homes, cars, furniture, etc. But debt isn’t free. I have to pay interest
to each lender. And the more I borrow compared to what I make, the
harder it will be to make the monthly payments. Eventually, I may have
to borrow from one lender to make the payment to another.
If that’s the case, before long my lenders will
foreclose on my house, my car, etc. In fact, when the bubble starts to
burst, the lenders are going to rush in, each trying to get the little
that is left before the others do.
That’s the problem with debt. It’s very easy to get
and extremely difficult to pay back. But there are those that chose to
live beneath their means, actually save money and lend to others. They
become the ones in charge.
It works the same way with nations. Looking back in
history, it’s the nations that lived beneath their means that became
dominant in the world. They are the ones who lent money to other nations
and the more a nation owed them, the more control they had over that
nation. That’s the situation our country was in for much of the 20th
century.
My concern is that it may be another century before
we regain our independence. As a country, we are borrowing from Peter to
pay Paul. The numbers are staggering. Our nation’s debt is 9 times
higher in 2006 than it was in 1990. The average amount of debt increased
over 27% per year and is now $8.5 trillion. If you add in future
Medicare and Social Security obligations, the debt is estimated at $67
trillion.
When we buy more from another country than we sell
that other country, we have to borrow to make up the difference. Total
it all up and it’s called the Balance of Trade or the Trade Deficit.
Last year, we bought $750 billion more than we
sold--$200 billion of that just from China. Over the past 10 years, our
accumulated trade deficit has grown to $3 trillion dollars. But at the
current rate of growth, our trade deficit will double in only 4 years.
We are dependent on other nations loaning us that money. The question is
whether other countries will continue to want to do so.
Would you invest all your money in a company with a
balance sheet that looked like America’s? Probably not. And that’s the
point. At some time in the future, unless things change, other nations
will no longer be willing to fund our debt. And when that day comes, it
will have a drastic impact on our economy.
There is one big difference between the debt of an
individual and that of a nation. The nation can print more money; you
and I can’t. Printing more money results in higher inflation. That’s why
it’s important to understand both forces. I’ll talk about inflation next
week.
If you have a specific question or would like more
information, give me a call toll-free at 1-877-827-1463 or you can also reach me by email at
jeff@guardingyourwealth.com.
I will answer your financial question FREE.
About Guarding Your Wealth:
“Guarding Your Wealth” is a
nationally syndicated weekly personal finance column written by Jeffrey
D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group,
a private wealth management firm that employs sophisticated proprietary
strategies designed to protect and grow its clients' investments. Visit his website,
www.guardingyourwealth.com to read past articles under the Guarding
Your Wealth Article Archive that may not have appeared in
SeniorJournal.com.
Guarding Your Wealth for Seniors, on
SeniorJournal.com, is
a collection of columns by Voudrie that deal with issues of particular
interest to senior citizens.
Click here
for all columns.
In addition to being a nationally
syndicated columnist and Certified Financial Planning Practitioner, Mr.
Voudrie provides personal, private money management services to select
private clients
nationwide.
Looking for an energetic expert who
is passionate about financial and wealth management? Mr. Voudrie is an
excellent speaker who will excite and inspire your audience. Mr. Voudrie
is available for a limited number of speaking engagements, television
appearances and radio talk shows. For bookings, email
jeff@guardingyourwealth.com.
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