Headlines abound, the stock market is up 40% from its March lows!!! Let’s all celebrate. Those who spoke badly of Obama, Bernanke, and Geithner have their foots in their mouths, right?

Not even close. These types of misleading headlines are the very weaponry of a financial system that tricks you, lures you, spikes your drink, robs you blind while you’re partying, and then nurses you back to sobriety in the morning by giving you another spiked drink.

Imagine you have $100 in the stock market. You experience a 40% loss. You now have $60. And, abracadabra, the economic rescuers have juiced the market back up 40%. You now have $84. Wait a tick, how exactly do I get back to $100? Well to recover from a 40% loss, you would need a 67% gain. You see, 40% of $60 is much less than 40% of $100, so the initial 40% loss was much larger than the 40% gain that followed. For those whose livelihood involves serious math, this is very obvious. For the rest of us, it should be an “ah ha” moment that exposes the red arrow, green arrow game.

Watching and listening to the financial news networks report about the stock market is like watching a sports game. And it entertains just like a sports game. In the midst of entertaining, it lulls us into watching the red and green arrows. Oh, it’s down today a few points. Hey look, it came back up. It feels very much like watching a basketball team surrender and regain the lead in a basketball game. If they are down by 40 points, and then they score 41 uncontested points, they have the lead and they win the game!

But it doesn’t work the same in percentage points. But just wait, over the long term the losses will be recovered and there will be profit, say the “experts” whose payroll checks are signed by Wall Street. If you buy that line of baloney, you will be further tricked. Because over the long term those losses will be recovered and there will be profits… but only as measured in dollars. If you factor in how over the long term those dollars buy less stuff, you will not find a substantial long-term profit.

Today the Dow closed at $9,320. But the dollar has lost over 96% of its purchasing power since 1913. Take 96% out of today’s Dow price and you get $372. In 1913, the Dow was at about $62. So the Dow Jones Industrial Average grew from $62 to $372 (in constant 1913 dollars) over a period of 96 years. That’s an annualized rate of return of 1.88%.

This bears repeating…

The Dow Jones has returned 1.88% per year for the past 96 years

Can you still get excited about a stock market that’s up 40% since its March lows when it is still a stock market that hasn’t even been able to produce an actual 2.00% return over the long run?

Or even more important questions: Is it worth the risk of losing a big chunk of the money you worked for just to “get some action” in a market that produces less than a 2.00% return over the long run? When you are down, can you wait decades without touching your money just to get back to your break-even point?

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Jeff Nabers is author of 5 STEPS TO FREEDOM: How to Cut Your Dependence on Institutions and Escape Financial Slavery

If you’ve been following my blog, you know that I take great interest in understanding money. Why every single human who uses money on a regular basis doesn’t also share this interest is beyond me.

With trillions of dollars created by actions of Congress, the Federal Reserve, and the Treasury Department, the concern for coming inflation can only spread. This video explains why tax deferred investment vehicles are the best tool for battling inflation and can possibly even use currency debasement to magnify investment returns.

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CNN to Broadcast I.O.U.S.A. | Obama Foresees Trillion-Dollar
Deficits |
A Bipartisan Plea for Fiscal Responsibility | The Government We
Deserve

CNN to Broadcast I.O.U.S.A.

The public has spoken, and we’ve listened. In response to demand
for information about our country’s financial challenges, CNN/U.S.
will air the broadcast premiere of the acclaimed documentary
I.O.U.S.A. on on Saturday, January 10 at 2:00 p.m. EST and on
Sunday, January 11 at 3:00 p.m. EST. Accompanying the documentary
will be an unscripted panel discussion with policy leaders about
various economic solutions currently under consideration.

This exclusive televised event will air only on CNN, and will be
hosted by Ali Velshi and Christine Romans, co-anchors of CNN’s
Your $$$$$, the network’s weekend business roundtable program.
Throughout I.O.U.S.A.’s broadcast premiere, Velshi and Romans will
engage a distinguished group of panelists, including Pete
Peterson, Chairman of the Peter G. Peterson Foundation and former
U.S. Commerce Secretary; Dave Walker, President and CEO of the
Peter G. Peterson Foundation and former U.S. Comptroller General;
Alice Rivlin, noted economist and former Director of the Office of
Management and Budget; and Bill Bradley, a Managing Director of
Allen & Company and former U.S. Senator and Democratic
presidential candidate, in discussions about issues raised in the
film and their ties to current economic events.

Learn more about the film at www.IOUSAtheMovie.com. And be sure to
spread the word about the U.S. broadcast premiere!

Obama Foresees Trillion-Dollar Deficits

CNNMoney.com reported on Tuesday that when President-elect Barack
Obama takes office on January 20, he’ll inherit an economy deeper
in debt than ever.

Obama commented on the unprecedented deficit, saying, “At the
current course and speed, a trillion-dollar deficit will be here
before we even start the next budget.” In reference to his planned
economic recovery plan with an $800 billion price tag, Obama
added, “And potentially we’ve got trillion-dollar deficits for
years to come, even with the economic recovery that we are working
on at this point.”

Even with Obama’s promised budget reform, our economy will still
remain in the red — at least for the next few years. However,
incurring a trillion-dollar deficit in the short-term in order to
stimulate the economy is, according to organizations like the
Center on Budget and Policy Priorities, essential in order to
prevent “a deep and prolonged recession.”

Dave Walker, president and CEO of the Peter G. Peterson
Foundation, was also asked to comment on the deficit and Obama’s
proposed stimulus. A “timely, targeted and temporary” stimulus is,
according to Dave, the best way to shore up the economy while our
deficit continues to deepen.

To read the original article, visit CNNMoney.com.

A Bipartisan Plea for Fiscal Responsibility

On Monday, January 5, the two most prominent members of the Senate
Budget Committee – Sen. Kent Conrad (D-ND) and Sen. Judd Gregg
(R-NH) spoke out about the need for fiscal responsibility,
especially in the face of our current economic crisis.

In an impassioned editorial for the Washington Post, Conrad and
Gregg called for Democrats and Republicans to unite in support for
an economic recovery package, even with the short-term addition it
will make to our larger deficit. The senators also called for a
“bipartisan fiscal task force” to help create concrete solutions
for America’s long-term fiscal woes.

To read the full text of the editorial, visit the Washington
Post.

The Government We Deserve by Gene Steuerle

“Investment” and Obama’s First Budget

President-elect Obama’s chief in-house economic advisor Larry
Summers suggests in a recent Washington Post piece that the new
Administration will put a lot of effort into addressing long-term
growth challenges, not just short-term policies that generate
consumer spending. How? Through “investments.” To make sure we get
the point, Summers uses that word or some variation 12 times.

But the first Obama budget will not be oriented toward investment.
Just as with recent administrations, the words will stress
“investment” but the numbers will emphasize “consumption” – not
only in the short-term but, more dangerously, in the long-term. In
fairness, this is the budget the new administration inherits. They
gain control of the wheel of a battleship sailing full-steam ahead
toward the icebergs. But by using terms like “down payment” to
describe new proposals, Summers hints that no major course
correction will be sought.

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Over the last 7 years the stock market has dropped [as significantly] as it did during the Great Depression.

“WHAAAT?!!” you say. He explains that our perception of this strong bear market has been softened by the declining value of the dollar. In the spirit of comparing apples to apples, we must first consider that in the late 1920′s and early 1930′s the dollar was fixed to gold. So, in essence, the stock market’s decline was measured in gold. According to Rubino, you would see a depression-like chart if you were to measure the past few years of the stock market in gold.

The most convincing thing about his perspective is that he accurately predicted the burst of the housing bubble… in 2003. He forecasted that those who would suffer the most from the popping bubble would be homebuilders’ stocks, Fannie Mae & Freddie Mac, and real estate prices in “hot” (at the time) areas. He even went on to explain that the contributing factions would spill over into other parts of the economy including financial services companies, and banks themselves. At that time, the idea of one of the country’s largest investment banks (Bear Sterns) becoming insolvent sounds crazy, but Rubino warned us all with How to Profit from the Coming Housing Bust: Money-Making Strategies for the End of the Housing Bubble. In fact, if you would have followed his advice to the “T”, you would have profited immensely , provided that you timed it right. “My predictions were early,” admits Rubino, but the astounding accuracy of them sure does lend credibility to his perspective.

In light of the Liberty Dollar Raid, John says, “[When money becomes weak] the government becomes coercive. They start forcing people to use the government’s money and levying all kinds of penalties… The government cracks down on competing forms of money [that] are run more soundly…”

Also discussed was how the currency changes are affecting our mortgage debt and where the true opportunities lie. When asked how long this window of investment opportunity will last, John responded, “A lot of it has happened, but we’re still at the early stages of this process… I can’t stress this strongly enough, we haven’t fixed any of the problems that have caused this. In fact the problems are getting worse. Government spending is up, deficits are up, the government is creating more money than it ever created before. So the forces that are making fiat currencies go down are actually intensifying.” Since the book was written, gold has doubled and silver has quadrupled.

Also expected by the author, is the detrimental impact the general economy will have on financial service companies… especially credit card, mortgage and other finance companies. The full interview is to be released near the month’s end on UNLIMITED RETIREMENT ACCOUNT® Radio.