Fruitfulista » Addiction

Fear and Greed Economics

Cassie — Wed, 16 Jun 2010 16:53:20 +0000

Is money at the individual level and economics at the larger level based on rational or emotional thought? Most economists claim that the market and people’s money decisions are based on rational calculations that will help their financial situation. The larger market is guided by this “invisible hand” as Adam Smith called it whereby the forces of supply and demand are all that matter.

The balance between fear and greed is like yin and yang

This may be the case in a vacuum where there are no humans present. However, what we really see in action is a dynamic play between fear and greed. More than supply and demand, fear and greed determine the market actions and the financial decisions of individuals (which make up the larger market). Money is intimately tied to our emotional sectors of the brain because it is what we use to survive in this day and age (you can buy all your needs and desires with it : food, shelter, water, even sex).

This tug-of-war between fear and greed is exactly what happens at a casino when gambling. When you make a bet, you are doing so because of your greed -you want to walk out of there rich! You are dreaming of what you could do with millions of dollars. When you are “up” and winning you want to continue whatever it is you have been doing even if you KNOW deep down (rationally calculated) that the odds are stacked against you. (Having said that, most people have no idea what the true odds are of various games they are playing -including outside of the casino.) When you start losing, your fear kicks in. You want to make more than you started with -which is your greed, but you also don’t want to lose everything -your fear. Fear is what makes it so that you don’t lose ALL of your money and start betting your house or all the credit on your credit cards.

Sound familiar? This same type of thing happens all the time in the market, especially in ones that are designed just like a casino -the stock market for example! But really, any item can be pushed into a bubble because of the greed side of emotions and just as quickly can pop when someone calls the bluff and refuses to pay anymore.

If economics were a simple system of supply and demand, we would never have had more houses or cars or whatever than we needed. The demand was fabricated out of a desire for money-greed. And so the supply met that false demand. When the false demand finally came to be noticed, everything crashed and there was far too much supply.

So while supply and demand play a large role in economics, it’s not always driven by a rational desire for the products or services (demand). Generally speaking greed leads people to make, sell and broker more and more for as long as possible. When it becomes obvious that they will not be able to anymore for whatever reason (making a dangerous product that will be recalled, selling products during a bubble, legal issues, the trends change and demand is not there anymore) fear then leads people to want to get out quick, to save and to hoard.

And so this is the way the cycles of our economy play out. During the greedy bull times, people are buying and selling. People are spending. Times look great. But during the fearful bear times, people are saving. People want security. From the market’s point of view, nothing is happening. So the Federal Reserve and government in all its esteemed glory (??!) decide they need to kick start people out of the fear emotion by pouring in more money, bailing out failing and corrupt companies and otherwise encouraging spending.

But it’s not spending that people need to do when that is what caused the problem in the first place. Overconsumption and greed is not cured with more overconsumption and greed (no more than gambling loses are cured by more gambling). People spend money when times are good, but it isn’t the spending that makes the economy good; the economy is sound, so people feel safe and secure and are willing to let go of their money more freely.

The economy is NOT safe and secure right now, so we should be encouraging saving, frugality and thrift! Saving is exactly what we need to do in order to get out of this mess in the first place. Not add another zero to our national deficit!

The opposing actions of greed and fear are necessary to regulate the market just as supply and demand are. The current policies are trying to take fear out of the equation, and that not only WON’T work, but it SHOULDN’T. When people go into a casino with no fear of losing their money, they are much more likely to lose all of it. There is no mechanism to put the brakes on spending/gambling.

We need to allow and actually encourage people to save. Once we have enough savings and the economy is indeed “safe” with “savings” people will spend money again. And in the mean time spending won’t stop completely; people still need to buy things to live, they are just being careful.

So how does savings lead to a strong economy? Well, when people have a large savings, they are more likely to take a risk, make an investment and so on because they feel more secure and less fearful. They see the chance to make their savings worth more (greed kicks in). And they have the reserves to cover any problems. They will still be able to eat and live if the gamble doesn’t pay off. And as more people do this, the economy will slowly come back to life. The savings will be tied to the saved or “reserved” productivity of our people, like a silo of grain would be.

Savings are not only a key component to individual personal finance, but should be a key component to any nation. It seems outrageous to me to think about an individual just living on credit card debt without ever paying it down. But even more outrageous would be to go on shopping sprees when you are in massive debt! But that is exactly what the U.S. is doing right now. We need to pay it down, cut back and save! We need to stop the spending. We need to save so that we feel secure and safe when we do spend. We have plenty of greed, we need to learn to get our fear back.

The shopoholic, bankrupt gambler, alcoholic, drug addict and other people who have lost the ability for moderation also lost their fear of the repercussions of their actions. If the U.S. is known for anything, it is not our moderation, but rather to the contrary. It is only until we allow and encourage the moderating forces to balance themselves out that we will be on more stable footing.

On Dieting and Budgeting

Cassie — Wed, 09 Jun 2010 22:20:40 +0000

Dieting and Budgeting. Two words no one wants to hear. And yet, interestingly enough, the end results of both are almost always praised: a thin, healthy body and a hearty savings of money. What’s the saying? There’s no such thing as too thin or too rich.

But it is no surprise really that these two things are so related. They both require discipline, it is much easier and more fun to not think about what you are doing (eating or spending) and you pay the consequences later rather than now if you continue with the bad habits.

Here are some more similarities: With dieting you have to conserve how many calories you consume. With budgeting you need to conserve the dollars you use consuming stuff (including food!).

And what is the best way to have a healthy savings and weight? To not think of it as dieting or budgeting! When people believe they are being starved or denied what they want, they are more likely to binge later (or sooner). But people who make healthy food choices and money choices a way of life do not really have to think about these things. Splurges are truly splurges and are not a constant way of life. And sometimes you have to compensate for overindulgances in either one. This might be accomplished by exercising more than usual or maybe looking for another income stream.

In fact, there is another similarity here: to lose weight you can either exercise more and/or eat less. To save money you can either earn more or spend less! The most effective and easier choice is to eat less when dieting and to spend less when budgeting. Why are these easier?

Both of them require you to do nothing, basically. With food DON’T eat so much. With money DON’T spend so much. Unlike starting an exercise routine or starting a part time job (the compensation for overindulgances), with basic healthy, light eating and budgeting and frugal living, you just don’t buy as much. You don’t eat as much and you don’t spend as much. Easier said than done though right?

Another similarity is that the base words -diet and budget- are in and of themselves completely neutral. Your diet is simply what you eat. Your budget is simply what money you bring in and money that goes out. However because most people need some work on both of these, they have become bad words when turned into verbs (action). Most people need to work on their diet by eating less and their budget by spending less.

However, doing less of these things does not seem to be the norm in our culture. Most people still have pathetic savings (sometimes less than $1000 in cash!) and many have stored up plenty of extra pounds. Two out of every three Americans are overweight or obese! And Americans’ personal savings rate is still less than 4% (of net income after taxes)!

So there is certainly work to do!

However, just like anything, even these good habits of dieting and budgeting can go too far and veer far away from healthy. It might be good to obsess over numbers (pounds, calories, bank statements and receipts) in the beginning to get you on track, but you need to make sure that you have not gone so far that you are truly starving or living without basic things (turning off the heat completley in the winter instead of just turning it down to save money would be an obvious example).

Overall though, I think the message is that we need to think of budgeting and dieting -or saving and living healthier if the words diet and budget scare you off- less in the terms of deprivation and more along the lines of our health and wealth. And maybe we’ll be a little more wise for it, too.

The Oil Addicts’ Shot at Redemption

Cassie — Mon, 07 Jun 2010 16:05:30 +0000

There is really no getting around it anymore. We (in all industrialized countries and now many, many developing nations) are addicts. Oil addicts. And like most addicts, we try and deny and lie and say there is no problem. It feels too good. It is too easy. We don’t want to work hard to do the right thing.

Well if there is one good thing that has come out of the BP Disaster, it’s that we can no longer play ostrich and pretend there is not a problem. In the Stages of Change model, it says people go through various stages before finally making a permanent change (or relapsing).

These are the stages of change.

The Stages of Change

Precontemplation (Not yet acknowledging that there is a problem behavior that needs to be changed)
Contemplation (Acknowledging that there is a problem but not yet ready or sure of wanting to make a change)
Preparation/Determination (Getting ready to change)
Action/Willpower (Changing behavior)
Maintenance (Maintaining the behavior change) and
Relapse (Returning to older behaviors and abandoning the new changes)

Before the British Petroleum disaster I think the majority of people were in precontemplation. Not even thinking about it. Not even aware, or wanting to be aware. I would say, at the very least after this disaster we have moved to comtemplation, but hopefully further into preparing to change.

And what would it take to fully change and break our addiction to oil? A lot. It is not just in our vehicles which are slowly moving away from awful gas mileage. It is about everything that is made out of oil. And I don’t think we will ever be 100% off oil, but we could at least use it for things that we don’t automatically throw away 2 minutes after we buy it. The big idea? Get off plastics.

If we did just these two things (limit vehicular oil/gas and stop using disposable plastics), we could break our addiction to oil, or at least manage it.

The oil industry has done a great job of throwing doubt on global warming/climate change and BP is trying to manage public perception of this whole debacle. They’ve tried to greenwash and confuse, but I think finally, like tobacco, there is going to be a tipping point where enough is enough and we see through all the blood money.

It is much easier said than done, but the answer really lies in NOT BUYING SO MUCH STUFF. Especially junk you just throw away. And we need to hold policy makers and businesses accountable for making reusable things again. This is both an individual’s responsibility (in voting with what they buy) as well as the industry’s responsibility to stop making all this crap. And it’s the policy-maker’s job to make the better choices easier than the worst ones.

To limit oil consumption, we should:
Give incentives to people who walk or bicycle to work, or telecommute
Give cash-back incentives/deposit returns for reusable items like glass bottles
Increase the price of gas dramatically to fully capture the true extranalities, decrease shipping things in and out, and create local economies and encourage new, clean technologies
Institute policies that discourage driving in general and go back to mass transit, bicycling, walking, and better-planned communities -”active community environments”
Stop using plastic bags and plastic water bottles! -Stores should charge for (cloth) bags that they provide and then give a larger discount for people who bring their own. Disposable plastic water bottles should not be sold. Period.

There are probably many, many more, but this is a start. We need to look to what we can do individually, how industry needs to adapt, and what policy makers can influence. It will not take any one answer, but the biggest help would be to STOP BUYING SO MUCH! When you do buy, buy with care. Think about what you are buying, where it comes from, who you support by buying it, what it is made from (anything with plastic is oil) and what you will do with it -or the packaging- when you are done.

I just hope our contemplation of these things leads to some serious changes on the part of individuals, but more importantly society in general. Addiction doesn’t seem so bad until you see the consequences of it – in this case on the environment, on our health, on our bank accounts, on our future - on us all.

Fruitful Grocery Shopping for Health and Wealth

admin — Fri, 05 Mar 2010 01:08:31 +0000

Going grocery shopping has become more difficult in this day and age, but it is becoming more and more important to get this part of our lives right. Diet related diseases are surpassing tobacco related diseases as the number one killer of Americans with 2/3 of Americans now overweight or obese. Without some major policy changes, these numbers are likely to only get worse. In fact, Type 2 diabetes in children was basically unheard of a generation ago and now is becoming a serious problem. Because of the childhood obesity epidemic, projections estimate that children born after the year 2000 are likely to live a shorter life than their parents! This needs to stop.

But because of the system we have built from the minds of food scientists and food industry execs interested simply in making food last longer on the shelves and to get people to eat more (spend more), it is getting harder and harder to eat right. I have just started reading the Food Rules book by Michael Pollan. It is a quick short summary of how to maneuver this crazed food system. It is actually quite sad that we have to have rules like this to avoid the land mines that are in our field of food. And more and more land mines keep getting set by the food industry. It’s amazing that even 1/3 of Americans are not overweight with the maze we have to juggle just to eat healthfully.

First of all, avoid fast food altogether. If you need a steadfast rule, this should be one of them. This should be even less frequent than a “treat”. Do not even think of fast food as food. Think of it as a stimulant. It has been so hyper processed to stimulate receptors in your brain and stomach that it is more akin to an addiction once you are hooked. For some people this is all they eat, they are called “heavy users” by the food industry. Is that a joke? Heavy users (if they aren’t heavy yet, they will be eating there at every meal). Avoid “convenience” foods. As mentioned in the liabilities and assets section, the price of convenience if awfully high. These include prepackaged snacks and especially soda. Think of fast “food”, junk foods and convenience snacks as you would cigarettes, that is, not good at all!

The grocery store is a little better place to find real “food” instead of just empty stimulants. However, before you truck off to the grocery store, think about where else you might get your food. Farmers’ markets are great! So is your own backyard, or a community garden. And if you have the world’s best pet, you will have your own fresh eggs! The less you need to go into any store, the less you will be tempted to buy non-essentials.

But maybe you haven’t gotten completely self-sufficient or it is winter and you need a few extras for your delicious home-cooked meal in addition to your fresh home-canned or garden foods. So you go to the grocery store. But even before you leave, think about which stores you are supporting with your dollar. Ask yourself whether you want Wal-Mart to grow bigger and more powerful with your help? If so, are you ok with all grocery competition in the area to dry up because Wal-Mart or some other big box had lower prices? Remember that they will only be lower so long as there are other stores to get lower than. Once the competition is gone, so are the low prices. Or do you want to support a local (and probably struggling) independent store? (I do!) You should think about these things before even leaving your house.

Once you are in your favorite store, you still need to watch out for those food industry land mines! The best advice I heard and give is to avoid the center aisles as much as possible. The heavily processed foods more than likely are in much higher quantities there. And why are heavily processed foods not good?

Well besides the awful nutrient deficient ingredients and preservatives, they cost a LOT more than the raw materials it would take to make them, even though they are heavily subsidized (especially the corn ingredients). They are what the industry calls “value added” foods which is opposite land speak for “nutrient subtracted” that adds a LOT of value to their stockholders. Take potato chips. A 20 oz bag of potato chips costs maybe $3. How many potatoes could you grow in your garden or even buy in the produce section for $3? A lot! And even if you added in a little olive oil to fry them up at home, you would still be saving yourself a great deal both in terms of health and money.

So stick to the periphery of the store to avoid these traps as much as possible. Get your produce (stock up on fruits, veggies, nuts, beans and mushrooms), milk products (without added sugars and preservatives), whole breads, and unprocessed meats and fish. Then if a few stimulant foods happen to creep in at the check stand, at least you made it out of the store relatively unscathed.

Also watch out for coupons. Coupons are a great way to save money at the grocery store, and many offer doubling or tripling of coupons, but there is a hidden catch. Most of the coupons are basically advertising campaigns for the largest food corporations out there, and what that means is that they are generally not going to be very good for you. Rarely do you see a coupon for a whole watermelon or a bunch of broccoli!

Another grocery tip I use is to bring reusable bags with me on the grocery trips. I have even started to use reusable produce bags. Not only does this cut down on waste, but many stores offer .05 cents off per bag. That’s not a lot, but it’s better than nothing! This is definitely a win-win type Fruitfulista situation (less waste and make a little money!).

While it may be a mine field in the grocery shopping arena, there are things you can do to eat healthfully as well as save money when getting your food.

From Liabilities to Assets -Fruitfulista Road to Freedom

Cassie — Fri, 26 Feb 2010 17:30:04 +0000

As requested, I thought I would talk a little about what I mean by liabilities and assets especially when it comes to consumer items and other daily purchases. These are key concepts in the Fruitfulista philosophy, so I hope to explain them clearly. When I refer to liabilities and assets, it may be different from what most financial advisors may say. Usually, this is what you might hear when people talk about liabilities and assets (taken from this site):

Assets
An asset is anything of value that your company owns — including cash. Assets get recorded on the balance sheet in terms of their dollar values. Even if you used credit to purchase an asset, you still own it. Its full dollar value gets recorded on one side of the balance sheet as an asset, and the amount you owe gets recorded on the other side of the balance sheet as a liability.

Liabilities
Anything a company owes to people or businesses other than its owners is considered a liability.

Break through the Chains

While these are useful starting places, they usually don’t do the average person looking for financial freedom any good. So, I’ve made a chart that is basically a continuum from liabilities to assets in our daily lives. I tried to think of most categories that people spend money and time in (food, housing, clothing, education, transportation, etc) but it could be for nearly anything.

Most people have some of each of these, but I would bet that the majority of folks don’t have very many items in the far right column (Fruitful Living and Innovation) and probably have way too many in the far left column (Subscriptions and Modern Conveniences -that actually aren’t too convenient). The two categories in the middle, what I call One Time Purchases or Neutral and Frugal Living or Saving, basically are net-zero type activities or purchases. They don’t really harm you and they don’t really change your life too much. Certainly, however, on a continuum, if you spend more time in the Neutral land and not much in Frugal Living, you will never move up to becoming Fruitful or Innovative. So that is why Frugal Living is an asset instead of liability.

Click this link for full chart: Liabilities and Assets revised

But it should be said that it is easy to get stagnant in Frugal Living. So many people who have managed to get out of the liability section remain stuck in Frugal Living. This is not necessarily a bad thing, and for some people, such as those who are retired and ready to put their creativity to rest, this is a comfortable, safe place to stay. However, for those who are ready to move forward and live a fruitful life, it will entail some risks, adventures and innovation. You must be careful to not turn ruthless in this last step. Basically, on the left side, you are a slave, on the right side you are the master. You must be careful to rule as “master” in a way that helps to set others free as well, rather than enslaving a whole new group.

When you move from just buying things after falling for slick marketing -especially unneccessary subscriptions- you start to look at buying things just once instead of over and over again. This is when you move from the worst liabilities (Subscriptions and Modern Conveniences) to the minor liabilities (One Time, Neutral Purchases). Then you start to think about whether you even want to buy it in the first place! And you look for ways to save or not spend money. You might start clipping coupons, going to the library, gardening and canning and other ways of saving. This is exiliharting because you have found a way to live without giving up all of your money for what is sometimes the exact same thing for very little or nothing. You have moved from the One-time Purchases to Frugal Living. You are free in more than one way. But this is not where you should stop!

That is the mistake so many of the tightwad, budget, frugal advice gurus. This is great that you got there, but you need to take it one step further if you really want to reap the benefits. You were in a casino, playing in their game of money. Turn it around! Open your own casino. As a master rather than slave, you control the world. Make it a better place. Help others get off the merry-go-round. Start cooperative projects. Not all ideas from the current ”masters” are bad. Use them to your benefit until enough people have reached that level that you can all work together. You, together with others who use and apply this information, will change the world for the better. But it starts with you!

Figure out where you spend most of your time on this chart. The vast majority of people will spend a little bit in each section, and that’s ok. Work to gradually spend more of your time on the right side of the chart rather than the left. If you are just starting out, you might be spending a lot of your time getting set up, finding a place to live, furniture, a job maybe. As you get settled in, you will be able to move to becoming more free and fruitful. Try to spend as little time in the “subscriptions” section as possible, even if you are just starting out. You can become frugal at any age and that will give you the platform of savings to jump into exciting opportunities to multiply your money.

Think of your money as “freedom fighters”, each time you spend one does it die right there? Or does it go out and recruit more freedom fighters for your cause (your freedom)? If you are ok with being a slave to the system, being in debt, worrying about money, then don’t change a thing and enjoy your “modern conveniences”, but if you want those freedom fighters to bring you freedom, put them to work in the places where they will grow and thrive, or at least stay safe (saved).