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Article Has Gone Hot on LinkedIn: “Thoughts on Starting a Business”

 

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http://walshal.wordpress.com/2013/02/09/thoughts-on-starting-a-business/

Credit & Collections: The 500 LB Gorilla in the Room

By: Alan Walsh, Owner, Huntington Consultancy

www.huntingtonconsultancy.com

info@huntingtonconsultancy.com

(714) 465-2749

 

A Topic That Makes People Uncomfortable

Credit & Collections is a topic that makes business people grit their teeth. By human nature, they instinctively shrink away from it.

Denying credit runs counter to our sales-oriented business mantra.. and few people like to make collection calls.

Sales forces resent the whole function as an intrusion on their selling activities and customer relations. They want no part of helping in the collections effort for fear of damaging their sensitive customer relations.. they want unlimited credit extended to everyone.. and they fear & resent the Credit Department contacting their customers.

Collections people tend to be shunned, and feel unappreciated. Senior managers are forever trying to find ways to blunt the Credit Department’s “teeth” for fear of damaging customer relations; and often intercede inappropriately in collection efforts.. short-circuiting the process and damaging the credibility of the Collection Representatives in the eyes of the customer. General Managers are usually sales-oriented, so they give a much more sympathetic ear to the Sales Staff than to the “evil” Credit Department.

Small businesses are especially sensitive to Credit & Collections.. because they covet every sale.. their credit review/assignment resources are usually slim to none.. and the owner is often the one who has to pick up the phone & ask for money because there’s no one else to do it. They find it awkward & painful to shift from selling-mode one minute –to- collection-mode the next. Many businesses have failed because the owner just couldn’t bring him/herself to make the hard calls. Turnaround experts make big fees taking control of businesses and doing hard collections the owner can’t emotionally deal with.

Yet Credit & Collections is necessary in every business. Even internet companies face the prospect of having customers challenge credit card transactions; and then having to justify getting paid to the credit card company.

 

Uncollected Receivables Raise Havoc to Company Financials

The damage done by an uncollected receivable is wide-spread. Not only does the company lose all the revenue to cover the money spent buying/producing the products & services and putting them in the customer’s hands.. but also the revenue that would cover the proportionate portion of overhead expenses, and the profit piece, are lost. Plus, most companies still pay the salesman a commission despite the fact that the sale was never collected.

 

Improving the Credit & Collection Function

No business can stand to have any significant losses due to uncollected receivables for long and hope to survive, and yet Credit & Collections is usually a less-then-optimum function in most companies; relegated to some corporate back-water. That having been said, this article presents some practical suggestions based upon experience by which companies can improve their Credit & Collections efforts.

  

The Corporate Culture Must Change

From the President/CEO on down to the people making the collection calls, an attitude and culture change is essential. This is done by recognizing what a sale really constitutes.

A sale is a mini-contract. You agree to deliver goods or services to the customer within a certain timeframe, at a certain price.. and the customer agrees to pay a certain amount to you within a certain timeframe. Failure to pay constitutes breach of contract –and- theft.

All communications with the customer regarding the unpaid receivable should be made in an unemotional, fact-based, even-handed manner; stressing the contractual business obligation. All communications with the customer should convey a consistent message; without short-circuiting interference being introduced at any level of the company. If the company decides for whatever reason to “eat” –or- forgive the debt, it should be done in a manner that doesn’t undercut the credibility of the Collections personnel in the customer’s eyes.

 

Get Sales Into the Picture

The organization that needs to make the biggest cultural change is Sales. They need to be made aware that they’re part of a bigger organization.. that uncollected receivables are hugely damaging.. and that they have a role to play.

 

The Expanded Role of Sales

Sales is the front-line of the company. They’re the company’s eyes and ears in customer relations. There’s much they can and should contribute to protecting the company.

• Sales physically visits customers, and is in a position to make observations that can be used in making credit extension decisions; such as the condition of the business.
• Sales can sniff out customers who look likely to default and/or disappear.
• They can advise Credit promptly when the customer actually closes their doors and/or vanishes.
• Sales can go out and pick up checks. It’s much harder for a customer to dodge unpaid debts when there’s someone standing at their desk.
• Sales can intercede when the customer isn’t answering collection calls.
• Sales can convey Credit messages from the company to customers in a close and personal manner.
• If a customer disappears, Sales can make local inquiries to get clues for tracking the customer down.
• Sales usually knows how to navigate the customer’s internal organization better than Credit.

In severe cases, company management should be prepared to make customer visits too.

 

Giving Sales Their Wake-Up Call

So, given the reality that Sales is the natural enemy of Credit & Collections, how does management elicit their cooperation?

A very direct and effective method is to pay their commissions based upon on collected sales. No Collection.. No Commission. Suddenly, collections become an important factor in their lives. They still won’t like it, but it will force a fundamental change to their mind-set. There’s nothing like hitting someone in the pocketbook to get their attention. Besides, why should they get paid for a sale that was never fully consummated?

It would also help for someone from Finance & Accounting to make a brief presentation to Sales showing the ways in which uncollected receivables damage the company. Most sales people are not very sophisticated in such matters, and need to understand it. They need to comprehend that their prospects are tied to the overall health of the company.

 

Management’s Wake-Up Call

Many companies pay bonuses to managers based upon company performance. But bad debts never seem to figure into the formula. Time for a change. There should also be some clear and coherent rules as to when managers can intercede in the credit & collection process; and how.

Credit & Collections is a Whole-Company Concern

At the very least, Credit and Sales should be meeting periodically to discuss customer statuses. Problem-accounts can be discussed and strategies for joint action devised. Sales should also have the opportunity to discuss the possible increase of Credit Terms for good customers who represent increased sales opportunities. I would expect the President/CEO would be paying attention to these discussions, if not actually participating.

Why do most companies restrict Credit Personnel to working from their desks? A surprise strategic visit to a past-due customer by a Credit Rep. can be very effective in shaking loose money and/or achieving a payment plan. Face-to-face contact is much harder to dodge than a phone call; and psychologically powerful. The Credit Rep. can also visit a new customer to gather information on determining appropriate Credit Limits; or reviewing the limits on an existing one. Besides, face-to-face contact establishes relationships.

In sticky “big-bucks” situations, perhaps the Sales Manager, and/or the President/CEO should be paying the customer a visit. Ratcheting up the attention in this way can be extremely effective.

Know Thy Customers

Of course you need to understand your customers and adjust accordingly. For instance, if you sell materials to a customer who does contract work, he’s not likely to get paid for his work until his contract is complete. When he gets paid, you get paid. Your payment terms will mature, and then he’ll start stalling you. Unfortunately, most aren’t sophisticated enough to bring this situation to your attention up-front, so bad relations ensue. This is an opportunity to become proactive and work out realistic terms that enable your companies to work together on a long-term basis; building loyal customers.

Turning the Tables.. Why Should Sales Have All the Fun?

Credit also needs to take the big-picture view and look for opportunities to promote the company with the resources they have at hand. For instance, years ago I developed an inventory-financing program that enabled new customers to acquire inventory, and existing customers to acquire inventory for expansion, on extended terms. The customer would be required to sign a lien against all their inventory until the debt was paid. The program was hugely successful and enabled us to increase our business by about 1/3 over two years. Only two customers defaulted, and we were able to recoup enough inventory to keep our bad debt losses to a pittance. Customers could use the inventory to open new stores, and have time to get them self-sufficient before the debt came due. It was a win-win for everyone, and of course made Sales very happy..  as well as building loyal customers.

Conclusion

There are other things that can be done, but this article should get the main point across and provide some food for thought. Credit & Collections should be made a whole-company concern, because the whole company is impacted.

Thoughts on Starting a Business

Prepared by:  Alan Walsh, Owner, Huntington Consultancy

(714) 465-2749

http://www.huntingtonconsultancy.com

info@huntingtonconsultancy.com

There’s great interest these days in becoming an independent entrepreneur.  I get a lot of questions from people seeking advice or help. I’ve written on this topic before, but once in a while I like to update my thoughts and suggestions. Here are some I hope you’ll find useful and pertinent.

PLANNING:

Before you spend a penny:

• Slow Down
• Think
• Research

Unless you have the “hot new widget” that the world can’t live without for another second, you’ll have to work at building a business. No problem. Good businesses have been built on such mundane activities as plumbing or retail.  But you don’t want to go in half-cocked to any new venture.

There has to be a need.

An old saying goes: “Find a need and fill it”. In plain English, you must have demand for your products or services to be successful. Sometimes you can “create” that demand with clever marketing, but in most cases you must seek it out the old-fashioned way; and the clever marketing usually has a short shelf-life.

You won’t be operating in a vacuum.

In addition, you’ll probably have competitors for that demand; some of which have been in business a long time and who have honed their competitive skills. They may have skill and experience taking on and defeating other competitors. You don’t want to be their next victim.

Understand the environment you’re walking into.

Don’t go into a new venture without having some comprehension of the demand, your competitors, and what your strategy will be to win the market share you want. There’s a lot of info out there for the taking if you take the time to seek it out. For instance, the federal government tracks a great deal of data on products, industries, regions, demographics, prices, and other pertinent info. It’s free to the public. Go get it. A little internet surfing can uncover other useful data. All it takes is time. Much better to invest time doing things correctly up front than spending it, plus your money, trying to fix a mess later.

Learn before committing.

Understand your demand, your competitors, your operating regions, and any other data that will play significantly into your success or failure. In other words, grasp the business environment around you before jumping into it.

Let the research guide your thinking.

Something else to think about is how well suited you are to the enterprise you’re considering. You don’t want to be doing something you hate; especially if it takes a while for the business to get fired up. You’ll become your own worst enemy. Pick something you love, or can at least tolerate. The experience will be more meaningful. Don’t you want to have fun with your new business? No matter what you choose, there will be tasks you don’t like. For instance, there will be back office administration to be done. You may hate that kind of work. It has to be done, and done correctly. Who will do it? Consider this before committing. Don’t deliver nasty surprises to yourself for lack of foresight.

Don’t create a partnership you’ll regret later, or experience pain getting out of.

If you’re thinking about partnering with a friend or family member; think very carefully about it. I highly discourage it. Such partnerships have a nasty habit of going bad for a variety of reasons. If you just have to do it, draw up a partnership agreement that allows for a friendly (or at least minimally non-hostile) breakup without destroying the business. The bad breakup of a business partnership can be worse than divorce; and a lot more expensive. It can turn family against family, and kill friendships.

Draw on your expertise, or buy someone else’s.

What knowledge do you have that’s applicable to your business? Most people pick something they have some expertise in. If you have no particular specialty, you might want to consider a franchise where you will receive basic training. You’ll have to buy in, and you’ll have to surrender some profit & freedom, but you’ll get support and it works for many.

Knowledge is power.

These and many other thoughts should be considered and addressed before you spend a single dime on your new venture; otherwise you’ll probably just be throwing your time and money away. Starting a business is not a game. Treat it seriously out of respect for yourself and your immediate family.

FINANCING:

Now we get down to the part where most people hit a wall:  MONEY!

Most of the people who contact me need investment money for their business ideas. Many think I’m going to wave a magic wand and hand it to them. I always ask them three questions up front:

1. Do you have any money of your own to put in?
2. Do you have a business plan?
3. What will you live on until the business becomes profitable enough to support you?

Really? You want someone else to fund your entire venture? Good Luck with that!

If the answer to question 1. is “No”, you’ll have a hard time getting anyone else to invest. Investors like to see you taking risk right alongside them. Why should they take all the risk? Project yourself into their shoes. Would you give someone money for a venture that they won’t even invest in themselves? It always amazes me how many people don’t grasp this basic fact of human nature.

Your desperation is no motive for an investor to give you their money.

Let’s say you’ve started a venture and already invested all your money.  If you have no positive track record to show yet, it’s as if you’re starting from scratch with no money. In fact, questions will be raised about your failure to-date. Not a great situation in which to be asking for someone else’s money.  Again, put yourself in their shoes. Where’s the investor’s motivation?  They don’t care about how desperate you might be. They only care about protecting their own money; and making more money.

No Business Plan..  No Money.

If the answer to question 2. is “No”, you’ll have virtually no luck raising money; and in this economic climate, even if you have a business plan, it had better be really good. You’ll be competing with a lot of people for a very limited supply of investment money; and only the sharpest, who have done their homework and preparation, will succeed.

You’ve gotta’ eat!

If you have no answer to question 3., don’t even think of starting a business. You’re just dreaming. Most businesses take time to become profitable. Without an outside income source, you’ll just eat up your own business – literally –  and fail.

This stuff is important. Don’t try to half-ass it.

If you’re serious about starting a business, but your expertise in these matters is weak, seek professional help. The huge bone-pile of aborted and failed ventures is filled with people who tried to “muck it through”.

STARTUP:

Okay, so you’ve done your research, carefully thought out your business, written your business plan, raised your money, and lined up your temporary living income – and now you’re ready to actually get your business fired up & running:

• Start small
• Pace yourself

As a new business owner, you’re going to make mistakes. I virtually guarantee it. Do you want them to be small, inexpensive mistakes?.. or large, costly ones? Start small and give yourself a chance to grow with your business. Make your initial decisions & commitments deliberately and with thoughtfulness. If you rush in, you will likely rush to failure.

Operate mean & lean.

Don’t throw a lot of money at the business initially. Start with the absolute minimum investment required. Squeeze every penny and make your investment work as hard as possible for you. Grow the business from it’s own profits. If you build a decent track record, investors will seek you out. By then, you’ll probably be knowledgeable & seasoned enough to expand.

• Don’t buy where you can rent or lease
• Don’t acquire anything you don’t absolutely need
• Conserve cash for unexpected challenges, or new opportunities that arise
• Don’t succumb to frivolous temptations
• Make your money generate money

If you have an outside investor, they’ll be watching carefully to see what you do with their money. If you don’t have an outside investor, act as if you do.

Don’t let your business enslave you.

The next piece of advice is hard to follow when your business is new..  but try to avoid getting involved in something that makes you its slave. You’re going to become stale. You’re going to wear yourself out. Once in a while you need to walk away and let someone take charge for a short time. Besides, if you spend your whole life at the business, what was the point of starting it in the first place? What will your quality of life be like? Do you want to just work your life away and drop dead on the job?

AS THE BUSINESS GROWS:

Assuming you’ve got your business up & running, and have experienced some initial success, you’ll now face a new set of challenges.  You’ll hit new plateaus.  New problems & obstacles will present themselves.  Situations will develop requiring new knowledge & expertise.  This is where a lot of entrepreneurs get into trouble.

Ego is one of the biggest killers of new businesses.

It takes a certain amount of self-confidence, ego, and risk-taking tolerance to start a new business.  This is good.  But no one knows everything. I virtually guarantee you’ll run into challenges you’re not properly armed for. Don’t let your ego get in the way. Seek help. A small investment in professional help now can save you tons of money down the road, or help build profits exponentially. Likewise, keep an open mind to those around you.  Your employees, customers, vendors, and others will impact upon your business. They might offer you “better mousetraps” if you’re receptive enough to see them. In my opinion, ego is the biggest killer of young businesses. People will stick with their stubborn perceptions right up to the day they are forced to close their doors; and then wonder why they failed. Turnaround experts make tons of money by taking control of your business away from you to do what is required; then they hand it back to you to screw up all over again. Don’t get caught up in that self-destructive trap.

The day will come when you must let go and delegate.

Finally, the day will come when your business has grown to the point where you can’t micro-manage it alone anymore. This is another area where entrepreneurs often get into trouble. When you feel yourself getting pulled in too many directions, it’s time to let go and delegate some of it to others. Many just can’t bring themselves to do it. Hire wisely, delegate, let them do their job, and manage by results. If  a hire doesn’t work out, deal with it promptly. Don’t let the problem fester. Those businesses where the owner can’t make this transition usually fail.

Don’t take my word for any of this.  Lots of studies have been done on this topic, and there’s plenty of data out there to support my opinions. This is not “rocket science”, and my perspectives are not unique.

I can go into a lot more, but these are the key thoughts that come to mind. I have a great deal of respect for entrepreneurs, and wish you all well. If I can help, give me a call or send me an email. I’ve built four successful businesses myself, and have helped many others with theirs.

S&P on the Kill List: U.S. Government Seeking Vengeance for S&P Downgrade of U.S. Credit.

S&P On the Kill List By Douglas French Thanks to Douglas French and The Daily Reckoning

“Paybacks are a bitch,” as they say.What was Standard & Poor’s thinking back in August 2011, when the ratings agency took the Red, White, and Blue’s AAA rating away? A rating the most powerful government in the history of the world had held for 70 years. S&P downgraded long-term US debt to AA-plus. That score ranks lower than over a dozen governments, including Liechtenstein’s, and is level with Guernsey’s and France’s.McGraw-Hill Companies (S&P’s owner) may be a big corporation, but you don’t kick sand in Uncle Sam’s face like that and get away with it. Now the government, in the person of Attorney General Eric Holder, is kicking back. The US government is accusing the ratings agency of committing fraud by inflating the ratings of mortgage investments, which, of course, created the financial crisis.S&P, along with its competitors Fitch and Moody’s, famously rated the mortgage security goulash that Wall Street concocted AAA, thus allowing everyone everywhere to participate in America’s housing boom. And why not? According to computer models, housing prices never go down. Pension funds as far away as Reykjavik and Heerlan were gobbling up what Wall Street was serving because all three ratings agencies provided their stamp of approval. According to the government’s suit, S&P “knowingly and with the intent to defraud, devised, participated in, and executed a scheme to defraud investors.” Yep, in the minds of the government’s gumshoes, the clairvoyants at S&P knew these securities stunk to high heaven. They knew, or should have known, that the housing market was ready to crash any moment, but they were greedy capitalists who, while they were making a buck, created and carried out a diabolical plan to bring the financial world to its knees. Yeah sure, that’s what happened. S&P should be ashamed for maintaining that it ratings “were objective, independent, uninfluenced by any conflicts of interest,” the suit said. The suit centers around 40 collateralized debt obligations (CDOs) created from 2004-2007. The firm was paid $13 million for rating these securities. Giving these securities the highest rating must have been fraud, because everyone knew by that time that the market was toast. Right? After all, in 2004, the nation’s deposit insurer and bank regulator, the Federal Deposit Insurance Corporation (FDIC), published a paper on housing that concluded: “It is unlikely that home prices are poised to plunge nationwide, even when mortgage rates rise.” This is because “housing markets by nature are local, and significant price declines historically have been observed only in markets experiencing serious economic distress.” Plus, housing markets have “characteristics not inherent in other assets that temper speculative tendencies and generally mitigate against price collapse.” In conclusion, “it is highly unlikely that home prices would decline simultaneously and uniformly in different cities as a result of some shift, such as a rise in interest rates.” Whoops. Where’s the lawsuit against the FDIC?

Why the U.S. Government Hates -and Fears- Gold

By Alan Walsh

The U.S. Government hates Gold because it serves as a clear, unambiguous, and constant sign of their fiscal irresponsibility.

U.S. currency used to be issued by the U.S. Government, and was backed by Gold. You could literally trade-in your dollars for Gold. Then, the Federal Reserve system was created, the dollar was disconnected from Gold, and the U.S. government stopped issuing currency. To really “seal the deal”, the government even outlawed individual ownership of Gold for awhile and forced citizens to sell it to them at a fixed price they set; then they raised the “official” price of Gold, devaluing every dollar citizens held by about 40%.

The Federal Reserve (also referred to as the U.S. central banking system, or central bank) is not a government agency; it’s a private bank, owned by other big banks, and run by people from those banks. When the U.S. Government wants additional money to spend, it buys it at face value ($100 for a $100 bill, for instance) from the Federal Reserve; which creates the currency. That’s why your dollars say “Federal Reserve Note” on them. In order to buy the currency, the U.S. government goes into debt  via Treasury Notes & Bills, etc. The government then spends that money.

Why did the U.S. government do this? So politicians could avoid accountability, buy votes, get reelected, increase their power, and transfer the effect of their spending to the future. This is how the federal government got to be the monster it is today. Under the old system, the government could only spend as much as it held in gold-backed dollars. If they wanted to spend more, they had to tax citizens. Citizens don’t like higher taxes, and get upset. Politicians lose jobs. Government was held accountable. The new Federal Reserve system removes this nasty inconvenience by letting the politicians just go buy currency from the Federal Reserve, creating new debt in the process; and government debt is a claim on the productivity of the nation – therefore it is your debt. Government doesn’t produce; it only consumes – your wealth. The income tax was created at the same time as the Federal Reserve system to pay for this debt.

As government buys more dollars from the Federal Reserve (and creates more debt in the process), it increases the number of dollars in circulation; thus creating inflation – plus damaging boom & bust cycles in the economy – plus interest expense on the debt. This is where Gold becomes very annoying to them. Gold, like any other commodity, adjusts in price with inflation and glaringly points it out. As the number of dollars in circulation goes up, the price of Gold rises.  People see their purchasing power in dollars go down, so they trade them for Gold; which holds its purchasing power in times of inflation and serves as alternative money. Government doesn’t want you to notice their little shell game, and they don’t want you to stop using and holding their inflationary dollars, so they hate Gold.

Our government, and other governments who play the same shell game, try to control the price of Gold and hold it artificially down through surreptitious trading activity in league with major financial firms. They try to send you false signals about their inflationary borrow & spend activity by artificially holding the cost of Gold down. If the price of Gold is low, everything must be okay, right? Wrong! Very, very wrong!

We’ve now reached a point where government borrowing and spending is so extreme that they can’t artificially hold Gold down to the price level they would like anymore.  Thus, Gold is trading near $1,700.00 per ounce. Many experts argue that if the government wasn’t surreptitiously intervening in the market to hold the price of Gold down, it would be trading for $3,000 or more.  Regardless, the rise in the price of Gold is a clear and unambiguous signal that government spending is out of control. The effect of this is to undermine peoples’ faith in the dollar and our government.  That makes it hard for government to keep up their shell game. Their borrowing & spending has also created a debt that the income tax can’t begin to cover – plus those nasty and growing interest obligations.

Sober people have also questioned how much of the Gold the government holds it actually owns anymore. They suspect that the government’s secret Gold sales to flood the market and hold the market price of Gold down have been so extensive that very little of the Gold they hold is actually owned by them anymore. Large Gold sales usually don’t involve physical transfer. An electronic record is created to note the new ownership. Therefore the government may be sitting on a large cache of Gold that “we the people” don’t own anymore. Perhaps this is partly why the price of Gold has risen despite government’s best efforts to hold it down. Maybe they’ve run out of Gold to sell. We can’t know for sure, because the government hides this activity behind a thick wall of secrecy. But bits and pieces of info leak out now and then, and they paint a dismal picture. Investigators have even uncovered documents created by central bankers for central bankers on how to execute market intervention between each other to hold the Gold price down.

As the government shell game grows, people start paying attention, and realizing how they’re being hosed by the government’s inflationary, destructive borrow and spend policy. If more Americans understood how our monetary policy works, and what government’s doing to them, they’d be screaming. Government does everything it can to keep us in ignorance.

Faith in the U.S. Dollar has been so severely undermined that other nations, who are not so naive in these matters, are seriously talking about abandoning the dollar as the “world currency”, a beneficial status which the U.S. has enjoyed since the end of World War II. If that happens, investment coming into the U.S. will decline and government will find it increasingly difficult to sell or roll-over their debt; China being our largest current creditor. Then the U.S. will hit a “fiscal cliff” that makes the current one look like a ride in the park.

The U.S. national debt is now over $16 Trillion dollars; over $52,000 per person, and approx. 125% of gross domestic product (gross domestic product being our productivity as a nation – your productivity – the productivity our government taxes you on) – a new record by far. The current government’s policies alone added $8 Trillion to that debt in the last four years. Then there’s the interest on all that debt. Budget projections indicate that the national debt could hit $20 Trillion in the next couple years if we keep going the way we are. Other nations are starting to look at the U.S. like Greece; a bankrupt financial disaster. We’re mortgaging our nation to entities like China, who are not exactly our friends. The current administration’s indebted the nation to a greater extent than any other, but they’re not the only perpetrators. This has been going for decades since the new system was created. It’s not a Democrat or Republican problem – it’s a national tragedy.

Gold at $1,700 an ounce sends this signal clearly – which government fears and hates.

The government wants you to hold their inflationary dollars. The Federal Reserve does too; and bad-mouths Gold. The finance houses who surreptitiously work with the government to control the price of Gold tell you that Gold is an unproductive asset, and you should hold dollars instead; while they quietly buy it for their own accounts. They’re all propagandizing you to keep their shell game going. I remember one time a couple of years ago when one of the major financial houses (JP Morgan I believe) was publicly telling it’s clients to sell Gold, while privately buying it for their own account.

The national tragedy goes even deeper. The Federal Reserve holds secret meetings where it shares inside information with the finance houses who help it; information that they use to make millions and billions on the markets from you unknowing investors. If you think the equity & debt markets are free and open, think again. It’s all manipulated.

Let’s talk about one of the many ways in which your government shafts you with this shell game – Social Security. You are required to make tax payments into Social Security. These payments are made with post-income tax dollars (you’re first income-taxed on the income you pay the social security tax with). The government spends the social security revenues (money) and replaces them in the social security trust fund with government debt instruments; thus, the government spends your social security contributions as it sees fit, and replaces them with new government debt. Of course, government debt is a claim on the productivity of the country – your productivity – and therefore represents a new debt you as citizens take on. This is important to note, because government spends your social security contributions, and creates a new debt owed by you as a citizen (another tax) for payment of benefits to you. Then, when you receive your benefits, up to 85% of them are subject to income tax depending on your filing status and how much income from other sources you have coming in.

To recap, the government first taxes the income you pay social security taxes with (income tax), then taxes you for social security (social security tax), then spends the money and replaces it with new debt (a new claim on your productivity, or tax), and then taxes you on your benefits (income tax). That’s three taxes on the money you put into social security, plus the social security tax itself. Of course, the government must pay interest on the new debt they created (another claim on your productivity, or tax), so really you pay five taxes; and your contributions are spent now for anything the government wants. Most citizens think the government is taking their money and putting it into a social security trust fund (savings account) to pay your benefits. Nope! That money’s gone. They spent it and replaced it with debt – debt that you owe as citizens.

The government says that your benefits money is safe because it’s invested in instruments guaranteed by the U.S. government. What they really mean is that your benefit claims are backed by their ability to tax you; or create new debt that you owe as a citizen; and that’s the only way those benefits are going to be paid. They just keep spending the tax money as it comes in, and pass the buck for social security obligations to future generations. Neat trick huh?

Additionally, “people retiring today are part of the first generation of workers who have paid more in Social Security taxes during their careers than they will receive in benefits after they retire. It’s a historic shift that will only get worse for future retirees, according to an analysis by The Associated Press.”  The government absorbed all the money you put in, plus the employer contributions, and you won’t even get back what you alone put in; let alone all the interest you could have earned on that money over the years. This is what your government has done for you. Isn’t it great? What a deal!

Your wealth, purchasing power, and financial stability are being undermined every day by the government’s borrow & spend shell game, the underhanded dealings of the Federal Reserve and it’s finance house cronies, and very likely the sale of our nation’s Gold reserves (your Gold reserves) to manipulate the markets and fool you. Even your most basic “protections” are being undermined by government subterfuge. Gold serves as a clear warning, and an alternative.

That’s why the U.S. government hates -and fears- Gold.

Be informed.

Learn More About the U.S. Government Monetary Policy:

http://walshal.wordpress.com/2009/04/11/monetary-policy-a-primer/

Other Suggested Reading:

America Has Become a Pinata

http://walshal.wordpress.com/2012/12/28/america-has-become-a-pinata/

America Has Become a Pinata

“America’s national government has moved way beyond a political spoils system,” wrote Charles Goyette in his book The Dollar Meltdown. “A spoils system leaves the host alive so that a politician’s occasional ne’er-do-well brother-in-law can be put on the payroll.”

In contrast, Goyette suggested, “America has become a piñata: Everybody gets a crack at it. Presidents and other elected officials pass the big stick around as a reward to those who help keep them in charge of the piñata party.”

Goyette’s book came out in 2009. Since then, we have learned that the party is even more debauched, nay demented, than he ever imagined. And you, dear reader, were not invited…

Link to Full Article:

“America Has Become a Piñata…” http://dailyreckoning.com/america-has-become-a-pinata/#ixzz2GMmf3bfQ

Other Reading:

Monetary Policy – A Primer

http://walshal.wordpress.com/2009/04/11/monetary-policy-a-primer/

Why the U.S. Government Hates -and Fears- Gold

http://walshal.wordpress.com/2013/01/03/why-the-u-s-government-hates-gold/

Cashflow is King

New article from Alan Walsh: Cashflow is King.

Click to go to article on Slideshare

Free Articles on Business, Economy, and Career – Primarily Targeted to Entrepreneurs and Small Business Owners

For some time now I’ve been posting articles on Slideshare primarily targeted to Entrepreneurs and Small Business Owners. There have been many views, but the real indicator of value has been the 1,000+ downloads readers have done.  Feel free to browse and find articles of value to you.

Credit and Credibility: by Greg Canavan

Is it laughable, or lamentable? The market, that is. In the past few years, it has become a joke…a tool of manipulation, an unreliable source of information. Despite the outperformance of the US equity markets this year, ordinary investors (presumably people with savings they would like to invest in productive and attractive businesses) are not interested.

Reuters columnist Felix Salmon recently posted a few charts to highlight this trend. This one, originally appearing at ZeroHedge, shows the decline in trading volumes since the credit bubble bust in 2007/08.

Using the Monday after Thanksgiving as the comparison date (the first day of trade after the 2-day Thanksgiving holiday) trade volumes in 2012 are back to 1997 levels. So while you’re being told a recovery is underway, it’s clearly not a recovery in investor confidence or involvement in the stock market.

Read more: Credit and Credibility http://dailyreckoning.com/credit-and-credibility/#ixzz2DkEOKUxw