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Dr. Kalinda Rose Stevenson
How You Can Create Financial Freedom In A Time Of Financial Crisis
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The financial crisis fills the news. Each day, we hear about more billions for stimulus packages to banks “too big to fail.” We also hear dire warnings about the collapse of major corporations, such as the Big Three auto makers in the United States. The crisis is real, as is spreads throughout our entire economic system, both nationally and internationally.
In all of this, we hear talk of Main Street and Wall Street. To this point, the rescue packages, the stimulus packages, the bailout packages, have gone to Wall Street, with very little directed toward Main Street—the small businesses and ordinary people who are being dragged down with little hope of immediate rescue.
What I want to focus on is the contrast between two types of stories. One story teaches us to hope for rescue. The other story teaches us to be heroic and rescue ourselves.
Let’s start with the stories that teach us to wait for rescue. From earliest childhood, we have been taught to hope for a savior. The movies and TV shows have taught us that rescue will come, usually at the last minute, in the nick of time. The cavalry will ride over the hill. Reinforcements will arrive. The knight in shining armor will show up and we will be saved.
The hope of being rescued touches a deep psychological need for all of us. We hope that someone will help. Someone will care. Someone will do something to solve the problem.
Christian religion has made salvation a central promise of the gospel message. You are lost. You are hopeless. You are struggling. God sends a savior, to rescue you, because you cannot rescue yourself.
Twelve step programs teach that we are incapable of saving ourselves from our addictions. We need help. We need a higher power. We need to be rescued.
In other words, we hope for a hero to save us.
In all of this, I don’t mean to undermine, diminish, or challenge the idea that sometimes we really do need help. We really do need rescue. We really do need to be saved. If you fall off an ocean liner, you will need someone to throw you a lifeline, to haul you back in.
But that fact that we sometimes need to be rescued, does not mean that we always need to be rescued.
In heroic stories, the hero is the one who finds a way to solve the problem. Sometimes the hero rescues others. Often, the hero has to rescue herself or himself. No one saves the hero. The hero is the one who does the saving.
And this leads me to my point. Especially now, when the economic crises pile up day after day. When things seem to get worse and worse, this is the time to be heroic about your situation. Rather than wait for rescue, resolve to find a way to rescue yourself.
The unofficial entrepreneur’s motto is: “If it is to be, it is up to me.” This single belief is the real distinctive of true entrepreneurs. They don’t wait for permission, approval, or help. If they are in trouble, they act to save themselves.
The real danger right now is for everyone in financial trouble—which includes millions of people—is to wait for the savior to come. These are tough times and they require commitment, determination, and a plan of action.
I wrote a book with a man who faced a financial crisis and did exactly that. He made a commitment to get himself out of his financial crisis, with focus, passion, and motivated action. In the process, he created a formula for the essential elements of financial freedom. Find out the formula that saved him from financial ruin here.
Maybe the government will find a way to bail out Main Street, and solve your financial problems. But don’t wait for it. Most of us do not fall into the category of “too big to fail.” This means that the only real salvation will come from saving ourselves.
Dr. Kalinda Rose Stevenson
One of the primary reasons for the economic crisis is that banks have abused their ability to create money out of thin air. Find out how banks create money in No Money Limits For Real Estate Investors: Discover The Money-Making Secret In The Real Estate Game That Transforms Your Money Struggles Into Financial Abundance, Winner of 2007 National Best Books Award in Business: Real Estate Category.
Governments Are Buying Banks : Will They Ever Let Them Go?
In response to the global credit crisis, governments are buying ownership in banks. Often, we don’t recognize significant moments when they happen. We don’t see the events that change things forever. But the economic events of the last few days are a clear sign of enormous systemic changes that are underway around the world.
For weeks, we have heard about the proposed “$700 billion bailout” for banks passed by the United States Congress. On Monday, October 13, European governments topped that amount with a plan to invest $2.3 trillion into European banks.
European governments overcame their differences to put $2.3 trillion on the line Monday in guarantees and other emergency measures to save the banking system in their most unified response yet to the global financial crisis. “Europe puts $2.3 trillion on line for banks”
http://www.msnbc.msn.com/id/27137551/
Today, Tuesday, October 14, the United States government announced that it will buy shares in the largest banks.
The government put itself four-square into the country’s banking business Tuesday, resorting to what President Bush conceded was the unwelcome choice of massive government investments in the banking system in order to loosen paralyzed channels of credit.
The president said the decision to buy shares in the nation’s leading banks - a kind of federal intervention not seen since the Depression era - was “not intended to take over the free market but to preserve it.” “Administration unveils revamped bank bailout”
http://www.msnbc.msn.com/id/27161138/
From a long term perspective, these actions to nationalize banks, both in the United States and Europe, raise several issues.
First, is this a temporary response to a global crisis or are we witnessing a fundamental change in the relationship between governments and banks?
In both Europe and the United States, governments are stressing that the actions are temporary.
The government said its stake in each of the banks is strictly temporary, but the subsequent transformation of the sector is on the massive scale of the postwar bank nationalizations in the 1940s and the privatization of the industry in 1980s. “Europe puts $2.3 trillion on line for banks” http://www.msnbc.msn.com/id/27137551/
Under the new multifaceted stabilization program described Tuesday, the government will initially buy stocks in major banks. When financial markets stabilize and recover, the banks are expected to buy the stock back from the government, Bush said in brief remarks from the White House Rose Garden. “Administration unveils revamped bank bailout”
http://www.msnbc.msn.com/id/27161138/
However urgent the crisis, and however necessary this response, temporary solutions, made under crisis conditions, have a way of becoming permanent. Under crisis conditions, people and their leaders will agree to conditions that they would reject under non-crisis conditions.
Said Treasury Secretary Henry Paulson: “We regret having to take these actions. Today’s actions are not what we ever wanted to do - but today’s actions are what we must do to restore confidence to our financial system.” “Administration unveils revamped bank bailout”
http://www.msnbc.msn.com/id/27161138/
History shows all too often that when governments receive temporary powers under crisis conditions, they are often not willing to surrender those powers when the time of crisis has passed. This plan does not make clear how the government will get out of the banking business after the time of crisis has passed.
It’s far from clear what the government’s exit strategy will be. The history of financial panics shows that they are rarely resolved in a single moment by a single measure. The loss of confidence that underlies the current panic took years to develop; it will be months at least before some measure of confidence is restored. “Massive bailout won’t work overnight” http://www.msnbc.msn.com/id/27181364/
Another notable issue is that the United States government will buy these bank shares with part of the $700 billion bailout fund that was supposed to buy up bad mortgage debt. In other words, however urgent and however necessary this action to buy bank shares, the government is already veering away from the stated purpose of the $700 billion bailout. This means that the bill that was passed with enormous conflict and drama is already being modified by actions without the approval of Congress.
The administration plans to spend $250 billion this year on the stock purchases and the president certified Tuesday that another $100 billion would be needed in connection with covering bad assets. That would leave $350 billion of the $700 billion program, presumably to be spent by the next president.
The action represents a remarkable turnaround for a rescue program that was already the largest bailout in U.S. history. As the plan sped through Congress, the administration said the money was needed to purchase bad mortgage-related assets that are weighing on the books of financial institutions, never mentioning direct stock purchases. “Administration unveils revamped bank bailout”
http://www.msnbc.msn.com/id/27161138/
A final issue concerns Bob Hope’s observation:
“A bank is a place that will lend you money if you can prove that you don’t need it.”
The government is following a similar strategy. The banks that don’t need the money are the ones that will get the government’s money. The United States government is going to appropriate half of the money appropriated for the $700 billion bailout to buy shares in banks that are stable.
Nine major banks will participate initially, including all of the country’s largest institutions. The first bank to take advantage of the new program was Bank of New York Mellon which announced Tuesday that it would sell $3 billion in preferred shares to the Treasury.
Some of the nation’s largest banks had to be pressured by to participate by Paulson, who wanted healthy institutions that did not necessarily need capital from the government to go first as a way of removing any stigma that might be associated with banks getting bailouts. “Administration unveils revamped bank bailout”
http://www.msnbc.msn.com/id/27161138/
These are perilous times and government leaders around the world are in full crisis mode. Each day brings more proposals, more challenges, and more fear, as leaders around the world make decisions that are intended to prevent a global economic collapse.
There is an old proverb—reputed to be an ancient Chinese curse—that says:
”May you live in interesting times.”
We are certainly living in interesting times. No one knows what the remade economic system will be like when this current time of crisis is over. What is clear is that banking will never be the same, whether the banks are owned by governments, held privately, or some combination of the two. We are witnessing the end of an era of economic growth fueled by uncontrolled debt owed to banks.
Dr. Kalinda Rose Stevenson
For more on how economic growth is fueled by debt created by banks, see Chapter 9 of No Money Limits For Real Estate Investors
Do You Know How To Protect Your Money If Your Bank Fails?
By Kalinda Rose Stevenson
Banks some times fail, and when they do, depositors sometimes lose their money. However, there are failsafe ways to make sure that you do not lose any of your money if your bank fails.
The first step is to know that the Federal Deposit Insurance Corporation sets a $100,000 upper limit for any single insured account. (The upper limit is $250,000 for an IRA.) This is the federal agency that insures bank deposits. If the bank fails, the FDIC will reimburse your money.
The second step is to make sure that you keep your money in an insured account. Not all bank accounts are insured by the FDIC.
The third step is to spread your money into different accounts, preferably at different banks to keep your accounts below the $100,000 upper limit.
For more about how to protect your bank deposits, see “How Safe Are Banks?” By John W. Schoen
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