I’m happy to post this Q&A I had with Jason Kelly (via email).
Q: What led you to write Financially Stupid People Are Everywhere: Don’t Be One Of Them*?
A: I’d written a lot about personal finance in the past, and so had other authors, but the subprime mortgage crisis made it clear that none of our previous efforts had made an impact. Most people are still financial nitwits. In a moment of frustration, I slammed my fist down on the table one day and said, “there are so darned many financially stupid people!” I wrote an article about the mess called “The Whole Damn Sham,” which really resonated with readers, and they asked me to put some of the ideas into a new book. Those two moments made me think that another attempt at showing people the slimmest basics of managing their money in a manner more straightforward than past attempts, was needed.
I decided that the new book should not cover the whole spectrum of being financially smart, but just four ideas that would solve 80% of most people’s financial troubles, along with — and this is key — an explanation of WHY it’s so hard to get ahead in America. There’s a concerted effort at work to take people’s money, and I believe that when people see it clearly they’ll be more motivated to defend themselves against it.
Q: I followed the mortgage crisis pretty closely on AllFinancialMatters.com (my readers probably got tired of those posts). I came to the conclusion that there were lots of parties responsible for the crisis that occurred. However, you seem to hold one party most responsible. Which one and why?
A: Consumers, because the problem starts with their stupidity. There were plenty of shenanigans and shady practices in government and banking, but that will never go away. Anybody who thinks banks will stop paying off politicians and that politicians will stop doing favors for bankers, is living in a child’s fantasy world.
There’s always been a collusion between government, banks, and big business, and they’re always will be. No new rule or supposed reform will change that or truly protect citizens. The only real way to rein in the bad practices of government and banks is to get smarter with our money. Stop signing on to bad loans. Poof! Just like that, the subprime mortgage crisis would have been impossible. Yes, banks would have offered their poison, but if nobody drank then the damage would have been zero. Instead, dope after dope put the cup to his or her lips and the crisis was born.
There’s a reform effort underway right now. So what? If people still make all the same mistakes, we’ll get into a different kind of mess down the road. There’s no sign that the mistakes won’t be made again, so expect another mess.
Q: Do you think we have reached critical mass with regards to financially stupid people? Is there a way out? How do we get financially stupid people to take an interest in personal finance?
A: This is my last attempt. I won’t write any more personal finance books after this one. If seeing the latest disaster brought on by idiotic money management and reading four simple rules to avoid doing it again STILL doesn’t wake up the army of idiots, then I think nothing ever will, and I will write it off as a lost cause and move on.
That’s why my book doesn’t offer solutions to the corrupt backdrop that creates financial traps for people. That won’t go away. The book suggests to readers that they not be one of the financially stupid, but doesn’t suggest that we can get rid of the financially stupid. My lack of faith in humanity generally shows up in the structure of the book. Cynical? Some would call it that, but to me it’s just the logical conclusion at the end of all the evidence in front of us.
My hope is that financially smart people will put the book in front of financially stupid people, and that it will manage to make more progress with them than all past attempts due to its simplicity, blunt language, and complete picture showing the machinations at work against citizen wealth.
Q: You devote several chapters of your book to politics. Why?
A: To show how politicians work with moneyed interests to skew the landscape in a way that transfers wealth from citizens to government, banks, and big business. People who don’t understand that are not as motivated to defend themselves against it. This is a point that clearly separates this book from others on the personal finance shelf. It’s not enough to see how to manage and protect our money. We must also see why and against what.
It’s also necessary to understand that all politicians, regardless of party, are beholden to the same moneyed interests. I want a greater percentage of Americans to see the political sideshow for what it really is, and to peer through the fun rallies and emotional issues to what’s really going on: the creation of servitude for most voters. The book spends plenty of time showing how money, not voter opinions, determines the future. People need to stop expecting government to protect them, and grasp that government is part of the group trying to fleece them.
I think people who get this can enjoy their financial success more. They will know that the schemers at the top, the puppet-string-pullers if you will, don’t pluck a single dollar of wasted cash out of them. That feels good.
Q: You talk about how much influence corporations have in the political process. What, if anything, can be done to limit such influence?
A: Frankly, not much. There are admirable movements underway right now to limit the role of corporate money in politics, but there have been such movements for a long time. Despite a citizen interest in campaign finance reform, it never happens. Witness the Supreme Court decision in January, Citizens United v. Federal Election Commission, that gave corporations the same rights of free speech that our founding fathers created for people. Gradually, corporations achieve more control, not less.
For more on this, please see my recent article, “Is Democracy Dead In America?” [http://jasonkelly.com/2010/07/is-democracy-dead-in-america/]
I deliberately avoided proposing solutions in this book. Finding solutions is a worthy endeavor, but not in this book. This book assumes it’ll never get better, so people need to get smarter. It focuses on what individuals can do to protect themselves in the event that the backdrop remains as financially hazardous as it is today, which it probably will.
Q: I mentioned in my review of your book that I felt that unions and lawyers also play a significant part in politics. What are your thoughts on that?
A: I agree. This book’s focus on corporate moneyed interests wasn’t meant to imply that they’re the only moneyed interests. If anything, the existence of other reasons the tilted table won’t be righted in favor of citizens confirms the wisdom of focusing on how to defend ourselves instead of on how to fix what might be an unfixable machine.
Had I considered every reason that government can’t change, the book would have become encyclopedic and people would have lost sight of the ways to protect their wealth, and why. The book is intended to get families financially safe, not to right the listing American government.
Q: I gathered from your thoughts on health care that you would welcome a single payer system. What made you open to such a plan?
A: What I point out in the book is that I don’t really care whether the middle man in health care is a private insurance company or a government agency, as long as the ultimate cost to the consumer becomes affordable. I go to lengths to show that enough tax revenue exists to provide every citizen with health care right now, if we only reshuffled government spending priorities away from corporate interests to citizen interests.
For a specific look at how government always leans in favor of corporate profits, see the table on page 139. When government uses its tax revenue to fight pointless wars that profit defense contractors, it’s not called socialism. However, when government uses its tax revenue to provide health care to the people who provided the revenue, it’s called socialism and a government takeover.
A good solution would be to keep taxes the same, but re-prioritize spending so that current taxes provide more social goods. If that’s impossible, as it seems to be, then at least collect fewer taxes so citizens have more money in their pockets to pay for all the services that their taxes don’t provide. Instead, we end up with the worst possible outcome: high taxes without benefits coming back to those who paid them.
An excellent look at this is on page 148, your lifetime income battery. The picture shows a battery divided into thirds. The top third is drained out: “Taxes taken from you and spent on bank bailouts, wars, corporate welfare, etc.” The middle third is drained out: “Needs not provided by taxes taken from you, including health insurance, car insurance, higher education, etc.” Only the bottom third is not drained out. It’s the only part of your income under your control.
People need to think like a corporation to survive in America’s political landscape. What’s in your interest? To get as much return on the taxes you pay. What good have the wars in Afghanistan and Iraq done you? None. Wouldn’t you have rather received cheaper or free health care instead? Sure you would, because that’s in your financial interest.
This book is all about the money, not ideology, and the money it’s most concerned about is yours, and how you can protect it.
Q: What was the most startling thing you discovered when conducting research for your book?
A: How most of the key people in government don’t change from one president to the next.
My favorite example of this is that Larry Summers is the man most responsible for repealing the Glass-Steagall Act of 1933 that had separated speculative investment banking from ordinary commercial banking so that blow-ups on the investment side wouldn’t impact consumers on the commercial side. That worked like a charm until Summers and others in the Clinton administration nullified it. In less than a decade, we were hit by the biggest financial meltdown of our lives because the now combined banks blew themselves up with the investment side of their houses, and thereby took down the commercial side as well.
So, of course we should keep Summers and others of his ilk away from the levers in Washington, right? How better to do that than start with a fresh serving of hope, a candidate more ensconced in hope than any we’d ever seen before: Barack Obama. Mr. New, Mr. Future, Mr. Audacity of Hope. Whom did he appoint as his chief economic adviser? That same Larry Summers.
Elections don’t change as many faces as people think. That’s why we’re on a steady path toward more financial danger, not less.
Q: The bio on your website mentions that you have been living in Japan since 2002. How do the financial habits of the Japanese compare to those of Americans? Any plans to move back to the States?
A: Japan’s government is as troubled as America’s, so we can’t learn any lessons there. Where we can find useful habits are among the citizens, ordinary people managing household budgets.
The big difference is that Japan’s economy is cash based. People save, then buy. In America, too many people buy with debt, then spend the rest of their lives paying interest on that debt as it grows even bigger with more purchases. I’ve come to enjoy very much the handing over of real cash to buy even big-ticket items like a new car, a new computer, and an international plane ticket.
The joy of consuming that way is that it enhances the best part of consumption, which is anticipation. When people buy everything they want right now on credit, they don’t get to enjoy what they bought as much as they would if they thought about the object of their desire for months, saved steadily, and then walked in one fine day and slapped cash on the counter for it. That anticipation part of the process is free, and so much fun.
The use of debt for instant gratification is certainly not free, not fun, and robs people of the joy of looking forward to their purchases.
As for moving back to the states, I’ve always felt that I would one day but I just haven’t wanted to yet. I get back to see my family and friends in California and Colorado a few times per year, so I don’t feel far away. Emailing and phone calling is easy and inexpensive, so living abroad has never been simpler.
Which, by the way, is a great reason to achieve financial freedom. People in debt can’t as easily pick up and move overseas. People sitting on a pile of cash are unencumbered, and can throw a dart anywhere on the world map and take themselves to a place they never imagined. Trust me, life is very different when lived that way, and absolutely wonderful.
Q: So after researching and writing your book, are you generally optimistic or pessimistic regarding America’s future?
A: I’m pessimistic that the corrupt backdrop will change before America reaches a point of near collapse. For the reasons stated above, I think taxes will rise and get wasted on a scale we never thought possible until we reach systemic financial failure. I believe that such a failure could bring a major war, the same way that the Great Depression was followed by WWII.
However, I’m optimistic that more free flowing information will inform citizens of how we got here, and encourage them to change their habits to protect themselves and avoid contributing to future crises by failing to pay their mortgage or credit card debt, for example. In so shoring up their finances and wising up to the machinations of government and its cabal of financiers, people will help contain the damage caused by institutions in the future by refusing to get tricked by their schemes.
Frankly, Jeffrey, I doubt that enough people will wise up to make that scenario happen, but I would love it if they did. Even if my book and my efforts can’t save the nation, at least they can save a part of the nation smart enough to grasp its ideas and protect themselves.
For that, I’m very optimistic.
Thanks, Jason. I appreciate you taking the time to answer these questions.