Mindset and Beliefs? By Chase Calton
Did you choose your current views and approach to life? This may seem like a silly question but if you examine this concept you might be surprised at what you discover. While this question applies to most of our beliefs and attitudes this is going to be directed to your financial beliefs and attitudes.
Most of us did not sit down and consciously research our beliefs and what we “know” to be right and decide on our current views and approaches to life (finances) –instead we mostly inherited them and gradually adopted/refined them from our environment.
Meaning if your parents were Republican or Democrat the odds are good you were raised in that belief system and heard the reasons against the other. This applies to things like trusting your government, being an entrepreneur versus the safety of a good job and a long list of other things you automatically bought into. This is because we trusted our parents (mostly) and were certainly brainwashed by them during our early formative years.
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Take that concept and link it with the fact that most US citizens are raised in what could be called a mono-culture. There is little news, talk or concern with other countries. We are so big and have a very insular approach to life.
Relatively speaking we do not visit other countries, learn other languages or have much curiosity about the economics or politics of even our neighbors, Mexico or Canada.
Do you know who the President or prime minister is for each? Go ask most people in those countries and they can tell you a great deal more about the US than most US citizens can about either country. Does any of this matter? You be the judge.
For countries like the USA it is very easy for the populace to believe local media and to be lulled into the comfort and complacency of trusting the everyday stories that surround you. If you live in a smaller country, Denmark for example, you grow up learning about the countries that surround and affect your country.
You know that there are 27 countries in the EU and 52 countries in Europe. You even pay attention to the politics of the USA and Russia. You speak several languages. You get a variety of media views and perspectives both on your homeland and your neighbors. In short you have a different mindset. This is true for residents of many nations that are not the giant superpowers like China, Russia India and the USA.
Consider the recent BRICS conference in Durban. What do you know about it and what did you hear about it in the media or in conversations with friends? What is clear is that the USA and Europe are considered a liability and the old order.1
The 5 BRICS countries are the worlds growing superpowers and they are dissatisfied with the World Bank, the IMF, the USA and the status quo. They have decided to form a new Development Bank to rival the World Bank.2 They have made trade agreements amongst themselves. What does this mean and how does it possibly affect you?
If your need for financial health is less than a year then perhaps there is no need to look further than the borders of your home country for economic safety and stability. As recent events in Cyprus have illustrated – having lots of money in your biggest ‘safest’ bank is no guarantee of financial safety.
One by-product of a limited perspective is you only see things in the way they are presented. A common delusion in this country is to think that what goes on elsewhere in the world really does not affect our day to day life very much.
So perhaps now is the moment to remove the rose colored glasses blinders long enough to look at clear patterns, news articles, and economic realities. To do this you might need to look at news and reporting beyond the local media conglomerates that are invested in painting a rosy picture that keeps the public calm like sheep (sports & TV drama being 2 safe exceptions).
China is well on its way to becoming the dominant economic nation. Spanish is a second language in the USA. The purchasing power of the US dollar has been and continues to steadily decline.
The US congress is neither effective nor making policy decisions which are increasing the economic safety of its citizens. The IMF is openly discussing the creation of five reserve currencies, each comprised of a basket of member nations.
Increasingly countries like China, Australia, Japan, Saudi Arabia, India and others are side stepping the US dollar as the World Reserve Currency. They are doing direct currency conversions.3 What did both Iraq and Iran threaten? They offered to make oil sales on a direct barter basis and to avoid using the Petro dollar.
What if the immediate nuclear threat that Iran poses is no more imminent a threat of nuclear disaster than Iraq was? Does the fact that Iran and Indonesia are imminent BRIIIC nations potentially create more problems for US economic policy?
If you have a portfolio of anything besides debt, then you have heard the consistent caution of diversifying – Do Not Put All Your Eggs in One Basket! Clearly if your money, property, stocks are all held within one countries system – you are not diversified.
If the central banks of the world will readily give haircuts to some of the wealthy 1%, then the other 99% are at risk as well.
Without the rose colored blinders we can see that the austerity measures in Europe, foreclosures, Wall Street bailouts and bank closures in the US, and seizures of bank accounts in Cyprus - are all variations on a theme. Closing the largest bank in Cyprus and selling all its assets for 430 million was a steal, in more ways than one.
Do you live in a country with growing trillions in national debt and a stalled economy? Would you be smart to investigate countries that have manageable national debt and a healthy economy?
Would it be smart to have some portion of your assets invested directly in currencies, investments, commodities –things that you could count on in the event that your home country developed inflation like Argentina’s 30%?
In the US there is plenty of talk in Congress about using pension plan funds, and everyone is painfully aware of the fact that the stock market bubble does not reflect the health of US. companies. Are these isolated facts or inter-related aspects of economic dis-ease?
While we are looking our reflections squarely in the mirror it is impossible to avoid noticing the lack of interest we are being paid for our money if it is invested in the US banking system. So why do we settle for options that do not always reflect our best interests?
That question moves us out of the realms of finance and into the makeup of the person staring back at you in the mirror. Can you wander outside your comfort zone? What do you perceive as risk and how do you respond to it? How well developed is your denial system or alternatively what do you do when confronted with unpleasant information?
The younger you are the more likely it is that one or more major market corrections will occur during your lifetime. History points to less than 30 year cycles. The bigger the correction the longer the recovery.
The frequently quoted statistic about the ups and downs of the market averaging out - is meaningless unless you have a 50 to 80 year time line before you want to use your assets. If you have all your investments tied up in dollar denominated assets will you be OK with a 20% - 50% asset hit - if it occurred within the next 5 years?
Would you have the capability to weather 10+% inflation or another major stock market or real estate correction? The estimates are that when (not if), the US dollar is no longer THE world reserve currency, the purchasing power of the dollar for imported goods will drop by ~20-30%.
This brings us back to the questions about perceived risks. Do Bernanke’s recent testimonies, about creating and un-creating debt 4 or the fact that large amounts of the newly printed money is going to foreign banks to help their balance sheets, trouble you? What feels riskier- ignoring the financial realities or getting a handle on them?
Wouldn’t it feel safer to take your chances with the status quo, if you had examined it and had expert advice? Maybe your biggest job is simply researching who the best advisors are and then using their expertise to manage risk and new opportunity? Perhaps diversity and options will flow from this first step.
Some people only want to travel if they can stay in a known hotel chain they like. Offer them quieter, safer, nicer and less expensive accommodations and they will still choose their known comfort zone. Others seek expert travel guides that specialize.
Both systems may work and it certainly simplifies life to stick with life’s Comfort Inns, yet having multiple options greatly increases your odds of a good night’s sleep and a rewarding breakfast.
Look at your investment timelines and the economic health of your country. Building something solid might include BRICS and mortar from elsewhere. Maybe, your most important job is researching and learning who the best international advisors are.
Perhaps when you are armed with their input and advice on your situation and goals – the perceived risks will have changed completely.
Chase Carlton – DinarDate.com author of ‘The Dinar Date’
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