Peace in the Midst of the Storm

On May 22, 2011, the Gilbert family?s lives changed forever.

As residents of Joplin, Missouri, Eric and Amy and their two daughters lived through the string of tornados that ripped through the town. Their house was demolished, but that hasn?t dampened their spirit of hope.

Shortly afterward, the family was in Nashville and stopped by Dave?s office to personally tell him how the Financial Peace principles are changing their lives. They have bounced back from this horrible experience incredibly fast and are able to help their neighbors rebuild their lives and provide them life-changing tools.

Here are some things they wanted to share with fellow Financial Peace fans:

You prepared as much as you could for the unfortunate situation of a devastating tornado. How has doing so allowed you to help others during this difficult time?

When people would ask us what we needed, honestly, we were good. Because our family was okay and knowing that we had an emergency fund in place, our needs were not as severe as others. We used what we could and contacted other families that might be able to use what we couldn?t and passed it on. We have an amazing support system of family and friends and that has afforded us the ability to have them help others who might need more assistance.

We can?t emphasize enough to people we know or meet that three years ago, our lives changed. And on May 22, 2011, our lives changed forever again, but we were prepared and being prepared made this situation a lot easier.

What started you on this road to Financial Peace three years ago?

We were introduced to Dave Ramsey from some great friends who were taking Financial Peace University at their church. She loaned me The Total Money Makeover, I read the book and got excited. My husband was going on a business trip shortly thereafter, and I stuck the book in his carry-on, then texted him that he needed to read it on his flight. He isn?t a big book reader, but he said he couldn?t put it down. When he got back home, we immediately started our emergency fund and envelopes, and the rest is history!

What were some of the practical steps you?ve taken over the past three years that have eased your money concerns now?

First, creating a budget and sticking to it. Then having an emergency fund and asking ourselves if we could afford to replace it?and that led to getting plenty of insurance for our house, personal belongings and cars. Learning to live within our means and not spending every dollar we make. Learning that it was okay to save for something you wanted and not have the mentality that, ?Oh, I get paid next week. I?ll just put it on a credit card now and pay for it later,? because in reality, we were not disciplined enough to do that by the time that next week rolled around. Something else always came up that needed to be taken care of.

What have your daughters thought about the Baby Step lifestyle?

At first, they weren?t very keen on the subject. With such an age difference (daughters are 19 and 8), we had to break it down for them in their own ways. Their needs were different, but they both grasped the idea quickly. However, Lexi being so young, wasn?t a fan of Dave in the beginning. She got tired of listening to Dave every afternoon on the ride home from school and when she wanted something, always hearing, ?It is not in the budget!? Get tools for teaching your kids about money.

What are some of the biggest lessons you have learned so far?

Our faith and family are strong. We know firsthand the importance of being prepared. All of our sacrifices have paid off. It is so important to have an emergency fund in place and to be responsible not only for ourselves but for our girls. If something like this were to ever happen again, we will pick ourselves up with our faith and what we have learned from the past. We were a tight-knit family before, but this has brought us even closer and more in tune with what is important.

We were fortunate to have survived this F5 tornado, and we want to spread the word about Dave and his teachings, how it changed our lives and made us able to rebound so quickly after such a horrific experience. We believe there is hope?hope that something good is to come out of this tragic situation. We thank God every day for this opportunity! We are good, our community will rebuild, and we will all be better than we were before!

Take it from the Gilbert family?it?s worth all the sacrifices to have peace in the midst of the storm.

This can be you! Check out Dave's Seven Baby Steps to get started on your journey to freedom now!

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Source: http://www.daveramsey.com/article/peace-in-the-midst-of-the-storm/lifeandmoney_other

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The Debt Supercycle


It started when a friend gave Senator Dan Coats a copy of Endgame. He read it and underlined, highlighted, and scored it. The Senator Rob Portman took it off his hands and read it. They asked me to come to DC and meet a few Senators. You don?t say no to such a request?

I flew to Washington and met with nine of them for about 90 minutes and Senator Cornyn (from Texas) privately beforehand for an hour. I offered him a copy of the book, but he said he was already reading it on the iPad he was carrying. I gave him one anyway.

Evidently, Coats and Portman had worked the room, because nine guys showed up more or less on time. Two Democrats, six Republicans, and an independent (Lieberman). Jon Kyl was there, as well as Gang of Six member, Tom Coburn from Oklahoma. Also Corker, Lugar, Coats, Portman, and Mike Lee, the Tea Party senator from Utah, who took the most notes. But there were a lot of them taking notes. And asking questions, some rather pointed. Overall, I was very impressed with the level of knowledge in the room and the candor.

I started by explaining what I meant by the debt supercycle and how deleveraging recessions are fundamentally different from business-cycle recessions, which is why we are not seeing a normal recovery. And it is happening all over the developed world.

I think I surprised them by jumping to Europe first, noting that Europe appeared to be imploding even as we were meeting. I made the point that we could see a banking and credit crisis coming from Europe that might be worse than the subprime crisis. I noted that it was not just Greece, Ireland, and Portugal. Spain and Italy have their own share of problems, and the markets have taken their interest rates up by 1% in just the last month, just as a large rollover of debt is coming due.

Italy?s average debt duration is quite short, as illustrated in the chart below. (Thanks to London partner, Niels Jensen, for bringing this fact to my attention). Within Europe, only the UK has really long average debt duration (about 13 years). Most countries are averaging 5-7 years. Italy is no exception.

Then today I get this note from Bluemont Capital Advisors, written by Harald Malmgren, Global Economic Strategist, and Mark Stys, Chief Investment Officer. It is short but important, so I am going to quote it liberally:

Italian and Spanish interbank lending is freezing up. French Finance Ministry officials and banks have been in emergency meetings regarding Eurozone interbank market stress. IMF and EU officials are warning that France might also face downgrade if greater spending cuts are not made. Finance Ministry staff have been warned to be available 24/7 (irrespective of sacred August holidays!), as contagion may soon affect French banks and sovereign debt.

Italian and Spanish sovereign debt yields have resumed escalation this week. Moreover, the Italians had to cancel issuance of longer maturity debt, as demand was insufficient?

Meanwhile, US money market funds have been withdrawing from Eurozone bank commercial paper, leaving Eurozone banks with a big gap in availability of short-term funding and a severe shortage of dollars.

In the background, the Fed has quietly advised the ECB and some other central banks that Congress has warned the Fed not to repeat the huge liquidity support to Europe and Asia that it provided in 2008. European officials believe the Fed would be less able to come to the rescue again with increased swap lines and direct loans to Eurozone banks, as it did post-Lehman.

Thus, the Eurozone appears to be entering into renewed crisis of breakdown in interbank trust and escalating borrowing costs for Italy and Spain, and maybe even France?It is increasingly possible that the ECB may not be able to function as lender of last resort on the scale required to cope with an interbank lending breakdown.

Demand for dollars will likely escalate, while confidence in Eurozone financial institutions falls. This could force Eurozone banks to purchase dollars in the open market and drive the dollar higher.

I made some similar points to the Senators about why the euro is going to parity if it survives. Then I went into my ?Japan is a bug in search of a windshield? spiel, pointing out that the yen will fall in half.

All this to say is that the bond markets are going to get spooked sooner than we are prepared for. If the US does not show up with a credible deficit-reduction program by the end of 2013, we could see interest rates rising even in the face of a deflationary recession. If we do nothing, we become Greece.

We need $10-12 trillion in cuts over ten years, which I explained would put us into a slow-growth-at-best, muddle-through economy with high unemployment and tough tax policies. I pointedly showed Senator Mike Lee why we could not cut spending too fast (as the Tea Party wants) unless we want ?Depression 2.0? and 20% unemployment. It has to be my glide-path option.

It was a very sober group as we ended the meeting. They all politely thanked me for coming and talking frankly. But the Senators made it clear that cutting spending in a meaningful way was going to be very hard, and would take real commitment from them to get us through this. They all noted that their mail was running 100 to 1 against cutting Medicare. Every one of them.

They know that they cannot close the deficit gap just with the elimination of the Bush tax cuts. We are at an impasse. We need a massive restructuring of our entire tax code to be more encouraging of creating jobs. But that is another story for another week.

Well, just one brief commercial. If Senators are reading Endgame, maybe you should be! Get it at your local bookstore or from Laissez Faire Books, right here.

Regards,

John Mauldin,
for The Daily Reckoning

The Debt Supercycle originally appeared in the Daily Reckoning. The Daily Reckoning provides 400,000+ readers economic news, market analysis, and contrarian investment ideas. Follow the Daily Reckoning on Facebook.

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How Does a Voluntary Repo Affect My Credit?

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If someone chooses a voluntary repo or the bank repossesses your car, your credit will be negatively impacted either way. A voluntary repossession is when you fall behind on your car payments and arrange with the lender to give the car back to the bank.

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Benefits Of Credit Coaching Services

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No matter what your credit situation is, it is always advisable to avail a credit coaching service to have a good credit score. What Is Credit Coaching? When you opt for a credit coaching service, you are in fact opting to make wise credit related decisions.

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Charges Of Domestic Assault In Ontario, Canada

The criminal offence of domestic assault involves being charged with the offence of assault within the scope of a domestic relationship such as a marriage, common law, or romantic relationship .  The relationship may also be over.  They are taken very seriously by the Crown .  The fact that the parties were in a relationship [...]

Source: http://www.legaldebthelponline.com/2011/08/05/charges-of-domestic-assault-in-ontario-canada/

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WHAT A WEEK: Instant Comment On Jobs And Recent Macroeconomic Issues


Instead of instant comment on the jobs report alone, today we offer a compendium of observations on this tumultuous week.

The jobs picture:

  • Today’s report happily smoothed out the trailing three months to an average of 72,000 new jobs per month. It was welcome, albeit that we are tracking at less than half the 150,000 jobs/month necessary to keep pace with population growth.  Is the upward move for July meaningful?  Hard to tell in a month where the seasonally UNADJUSTED number of net new jobs FELL by 1.231 million (teachers and other employees that typically exit the number in the summer).  So when you have a statistic entirely reliant on seasonal adjustments, just hold on to your adjustment algorithms and hope they are right.
  • The decrease in the unemployment rate to 9.1% from 9.2% is not a happy number at all.  The size of the labor force fell by 193,000 (the denominator in the unemployment rate) and the number of people employed according to the Household Survey (the numerator) fell as well by 38,000.  The employment population ratio continues to fall – to 58.1%.  And when you remove the 8.4 million people working part time for economic reasons (as little as an hour a week according to the survey methodology) we are down to 54.6% of our civilian non-institutional population employed full time – 30 year lows (at least).  This is a much worse situation than we were in at the depth of the recession and reflects quite a sick economy.  U-6, the underemployment rate, was near unchanged at 16.1% - but, again, due to the reduction in the civilian labor force.
  • Wages recovered (both on an hourly and aggregate average basis) after declining in June.  This surprised us and we will continue to look at this carefully going forward.  The specter of rising wages, with hours flat (as they have been for months) and the historically low number of people working relative to the population, should not be sustainable.  We expect downward pressure on wages going forward as the number of under-/un-employed member of the civilian population continues to increase.

The domestic economy:

Now that jobs report and the kabuki theatre of the "debt crisis" is behind us - at least for the time being - it is time to refocus on the macro trends and what is going on in the real economy.  More about that in a bit......

...As to the debt ceiling issues we've just finished haggling over, one should take note of what the market has told us during the last 10 trading days (if not before):

  • The U.S. does NOT have a credit issue. Uncertainty has sent traders flocking for the SAFETY of U.S. treasuries (which remain in short supply, relative to global demand), as traders have done for decades; 
  • Inflation was just a QE2-induced, bad liquidity dream (despite Chairman Bernanke’s protestations to the contrary) – gone and forgotten; and
  • Amidst all of the bad data – domestic and international – the market is looking again towards “what your country can do for you” and has concluded that (a) monetary policy has no lasting effect in a secular downturn and (b) fiscal policy is – given the political environment – a non-starter.  So there is no

After the not-as-bad-as-it–could-have-been jobs report, the market has concluded that QE3 is not likely and that it wouldn’t work anyway, even if we got another Jackson Hole surprise.

In short, the U.S. economy is now “non-performing without a net.”

So where are we left, now that the unnecessary debt ceiling distraction is over? 

  • We are going to start hearing more from folks like Janet Yellen: Disinflation is the principal risk to the U.S. economy because of the toxic combination of (i) a mountain of unresolved household and other financial asset debt (Irving Fisher’s 1933 “debt deflation”); and (ii) external pressures resulting from the principal, secular challenges we face from emerging markets.
  • Too many associations have been made comparing the prevailing economic environment and past cyclical downturns.  This is not business cycle problem – it is a secular problem arising from the excess supply of global labor and productive capacity; together with attempts in the first 6 years of the last decade to attempt eradicate the business cycle (and ignore the global challenge) through extraordinary monetary, fiscal (tax) and regulatory policies.
  • The U.S. cannot rebalance through (i) currency devaluation or (ii) reflation given, respectively, the ability of our principal trading partner/creditor (China) to prevent the former, and domestic debt deflation preventing the latter. Protectionist measures are not conceivable. Thus, disinflationary pressures will dominate and eventually force the balancing of wages and prices relative to our global competition (not to parity, of course, but what is necessary to have us produce more of what we consume and reduce net imports).
  • The downward pressure on real wages (following an increase in real wages during the brief, first installment of recessionary deflation) is already baked in, But we still expect to see nominal wages begin to fall if we are going to meaningfully absorb domestic excess labor.  For July, hourly wages for production and non-supervisory workers actually rose 0.4% in comparison to the prior month.  Not only do we believe that to be unsustainable (and possibly a seasonal adjustment aberration) but we believe the fall in nominal wages must resume, as liquidity-induced inflationary pressures subside.  Prices and asset values will, of necessity, begin to respond accordingly – thus offsetting real wage declines.
  • It seems apparent, to economists and the markets alike, that the U.S. economy will not produce sufficient growth to prevent the foregoing adjustments, as a consequence of the aggregate impacts of (i) extraordinary levels of outstanding household and government debt, (ii) the likelihood that continued deficit spending is off the agenda and tax increases will eventually be required, and (iii) the continued drag of falling real asset values – on both households and creditors.
  • Even the doves on the Fed are coming to the conclusion that monetary intervention amounts to pushing on a string at this point.

The thing that ails us is really more secular (i.e. the unprecedented global competition that proceeded from the collapse of socialism and the entry into the competitive labor force of 3.5 billion aspiring capitalists, challenging the 600 million in the developed nations).

The excess of global supply, relative to global demand, is the ultimate “supply-side” nightmare….because you can’t further grow supply to get out of it.

A restoration of competitiveness will be required through a combination of:

(a)  infrastructure improvements,

(b)  rebalancing of wages and prices relative to global pressures, and

(c)   the enhancement of educational programs producing more of the engineering and research skills that the world will require as it gradually adds emerging market demand to offset the supply imbalance.

  • Rogoff and Reinhardt have correctly pointed out that we did not suffer a cyclical recession, but rather a financial debt crisis.  But they do not adequately take into account that it is a debt crisis occurring amidst a backdrop of supply shock – the result of a wholly extraordinary (an arguably economically – at least cyclically – exogenous) historical event in the form of the fall of the bamboo and iron curtains.

The global economy:

  • There is no “grand solution” that sufficiently ring-fences the problem of the PIIGS indebtedness. Ultimately this will be a political issue: Either preserve the Eurozone through additional wealth transfer and risk assumption by the core in favor of the periphery, or endure the unendurable and face up to the failure of the entire Euro enterprise.  I do not believe that the electorate in the core countries will support stable governments backing the former.
  • It appears that China may well be successful in sufficiently containing domestic inflation, and will avoid a hard landing. The slowing of excess liquidity creation by the U.S. will help as well.
  • We note that the banking system in China is not that of the west – the banks in China are subsidiaries of the state.  Those here are merely de facto so!  The state will recapitalize as necessary – and there is no currency issue offsetting its ability to do so, given hard reserves.  Having said that, we question whether Chinese growth won’t itself be sufficient to bail out loans that are currently out of the money.
  • China, and the other emerging markets, have enormous “bench strength” in tapping still-peasant-level populations to limit wage and price inflation (somewhat less so in terms of coastal asset inflation). China has dedicated its prodigious infrastructure spending to inward (inland) expansion – connecting dozens of cities/prefectures with coastal ports. The impact will be the tapping of cheaper labor and the redistribution of productive capacity to hold down prices until domestic demand (over the next decade) begins to replace more of offshore demand by the developed markets.
  • Developed market demand is likely to remain fairly static or depressed during this period – as discussed above. But just as the Asian Tigers displaced the Japanese in the ‘90s, the other emerging markets will continue to challenge China if prices get out of hand. Although they are developing infrastructure and capacity at a far slower pace, the other emerging markets constitute a cap on the export of price inflation from China to the developed world (which, again, should diminish with the ending of U.S. QE). The biggest threat to China does not appear to be her internal pressures, it is a renewed collapse of demand OR greater wage competitiveness, in the west (the two of which are not mutually exclusive).

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Source: http://feedproxy.google.com/~r/businessinsider/~3/47WqmeZuR3Q/what-a-week-instant-comment-on-jobs-and-recent-macroeconomic-issues-2011-8

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Is Marketing Dead?


I?m troubled. Some of the smartest, most successful people I know say marketing is dead. It doesn?t matter, they say. It?s a waste of time. Instead…

? just build great product. Disrupt a big market. The buzz will follow.

And it makes some sense. Did Facebook care about marketing, or product? What about Twitter? Amazon.com? You could say their product was their marketing.

Which, however, is something like saying higher education is useless because Bill Gates, Steve Jobs, and Mark Zuckerberg all dropped out of college.

No doubt marketing is all mixed up and turned inside out these days. It?s still a strong force in big businesses with multi-million-dollar advertising budgets, but there?s this new world in which thought, content, effort and authenticity make up for money. You don?t necessarily buy attention in this new world ? you can earn it instead.

But a lot of the core concepts — like understanding your target markets, and developing your main messages, and pricing as message, and managing channels ? are as important as ever.

Because there are the brilliant exceptions to the rule, and then there?s the rule.

(image: igoncepts/istockphoto.com)

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How To Get The Brand New Google Docs Right Now


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It seems that the Google team just can't sit still. Its latest work is an overhaul on the Google Docs interface, making it cleaner with an emphasis on white space. There's also some new keyboard shortcuts.

  • up and down arrows will highlight documents to open
  • shift + T creates a new text document
  • shift + S creates a new spreadsheet
  • shift + C creates a new collection
  • "?" opens the shortcut guide

These modifications haven't been officially activated yet, but you can turn them on right now by clicking the small gear icon next to your name in the navigation bar across the top of the Google Docs interface. Select "Try the new look" and see if it's to your liking.

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