After several years working hard to get out of debt, I suddenly screamed through the light at the end of the tunnel and into the wide open spaces of freedom… only to find I wasn’t so free.
During those years, I spent a lot of time learning about the financial system (starting with a peaked interest from The Creature from Jekyll Island). The simple theme that seemed to re-occur is: in free markets, responsible people generally win; in controlled markets, responsible people generally lose.
The reason is simple. A controlled market provides incentives to misallocate resources (in the form of subsidies, government contracts, and mandatory monopolies) along with a safety net to protect some from failure (in the most notable form of bailouts). As the true costs versus benefits of resource allocation are increasingly blurred, it breeds an atmosphere of entitlement as the beneficiaries come to expect the results without understanding what caused them.
It is easy to see how attractive all these goodies become (if you need a picture just search for some videos on “Black Friday.”) The mob will no doubt vote to continue, and increase, the favors, and the cancer grows.
The responsible people keep working hard only to find that as they years go by it doesn’t return as much. Either more of their hard-earned dollars are taken directly in taxes, they don’t go as far they used to, or worse they get wiped out in what seemed to be a safe investment.
The deeper this cycle perpetuates, the greater odds all of these cases have of coming true. Taxation to keep low earners happy, inflation to keep well-connected high earners happy, and true wealth having the rug pulled from under it to plug the holes.
If you’re happy just skating by it doesn’t matter too much; there’s always work for those willing to work. But if you want improvement you can’t trust it to a system that is fundamentally backwards (unless of course you’re happy milking off it, which I’m not). Even worse is to trust that it isn’t backwards only to lose at a game you didn’t know you were playing.
This is the process that led me think long and hard about building wealth. About what it means to produce. About what it means to save. If I am to spend the greater part of my life earning a living, it behooves me to invest the fruits of that labor wisely—or I may as well drop it all and wander the world aimlessly (a path I see nothing wrong with though it is not my chosen one).
If I had a great deal of wealth, there are a few people I would trust with my money to keep it safe. But I don’t. Without the wealth to afford to a proper delegate, I am to either go with the crowd that I see leading us down an unsustainable path, or the only reasonable choice: take my wealth in my own hands.
Do you invest your own money? If not, why?