Making billions in a few hours… how you can participate…

Think about this picture: September 18th, 2007, in mid afternoon, the Fed predictably cut the interest rates 50 basis points. Just in the matter of a few minutes the Dow Jones ran wild going over 300 points. Do you have any idea how many billions were created in the hands of a few people in those few hours? Wealth that was created within those few hours may have been the easiest money that is created in the society.

Contrast that with the situation of most salaried persons. Whatever the insignificant amount you made during those few hours will come to you only after paying both a regular tax and a social security tax to the government (who incidentally spends it religiously and in addition borrows to spend even more). But those billions of wealth that was created in the hands of those lucky few who are in the stock market would be allocated to them with no tax liability since they will be paying taxes only when those stocks they own are sold. Even then they pay taxes at favorable capital gain rates and, at any rate there is no social security tax deduction from such easy money. Social security taxes is specially a waste since the government really does not separate those and invests wisely for your old-age retirement benefit but mixes the collection with the rest of your taxes and spends it with very little accountability (at least that has been the trend in the last few decades).

In addition, this transfer of wealth, regardless of how you look at it is a zero sum game. There is a winner and a loser. Even though most money that is being created comes out of thin air, thanks to the fiat money system we practice, with the Federal Reserve Board in charge of such creation (making it to appear as such new wealth creation to be a win-win solution), still a huge supply of dollars put pressure on the value of currency.

Consequently on September 18, 2007 as the Dow Jones was creeping up at a ferocious speed creating immense wealth, and as the spokesman for the ownership society rallied in CNBC studios exchanging high-fives and laughter, the dollar crashed down precipitously against the major currencies. Oil prices climbed over $82.00 per barrel. That translates into most of the salaried persons paying high prices for gas with their depreciated dollars. So not only you did not make any money out of this deal, but lost. Also such low interest rates will lead the average person to continue to use his home as the ATM machine and borrow more for survival in the society where the working man’s salary has been stagnated for the last few decades without acknowledging that he will have to pay those loans back sooner or later.

Then the question is why would anyone with any sense work on a salaried job under the condition? Ignorance of the system as to how to make money or indifference as to what’s going around them could be the only logical answer. The right thing to do is for people to take a look at these issues seriously. I hope this article will open your eyes, for that matter. Even if you were one of those people who really do not care to make money, the fact is, in the current environment you cannot remain passive and expect the things to turn out okay. You either join the party or you won’t survive in this world.

Therefore, you have to pay attention, learn the system and make money through it or you will be caught up in a huge surprise. A hard working person may think that it is okay for people to make that sort of money in the market because they are gamblers and he or she would rather work hard and settle for a middle class life and not engage in gambling. But the trend is clear, when the whole nation becomes a nation of gamblers there wont’ be any space for the middle class. Runaway inflation will destroy their purchasing power. History has proven this again and again.

Then the answer is either to join the gamblers, or find a way to benefit from the action of the gamblers without gambling. There is one good example you can follow if you want to do the latter. And that is to follow the Warren Buffett way. Warren Buffett although he does not gamble, belongs in the ownership society because he has a company well situated in the stock market so when the gamblers run the markets wild he benefits from that craze along with the rest of the market participants. So even if the value of money goes down and inflation hurts the lifestyle of most people who do not benefit from such speculative bubbles, people like Buffett would not be hurt because his wealth appreciates along with everybody else’s wealth in the ownership society. This amounts to having your horse in the race when the whole nation makes money out of horseracing because some of them will bet on your horse and you will get your share of it.

In other words look for and own a piece of fundamentally sound company, run by good management that is listed in the stock market. This is something that most of the salaried persons should look into at the minimum. That way when the gamblers run the markets wild with the Federal Reserve giving the push needed by depreciating the value of money, you will still hold a strong hedge over inflation with your share of the ownership society. This is the only way I could explain how one could survive in a world that is too complicated for most hardworking and honest people to understand.