Town Hall for Hope?


dave-ramsey

My favorite personal finance guru is Dave Ramsey.  He has a popular radio talk show and is even broadcast on television.  He’s entertaining while still being knowledgeable and straightforward.  He certainly doesn’t mince words with callers and will tell them they did something stupid if they indeed have.

On April 23rd at 8:00 PM, Ramsey will be broadcasting “Town Hall for Hope”, a live, nationwide broadcast where Ramsey will speak on the state of the economy and where he believes we are headed while taking calls, emails, etc., from listeners.

I’ll begin by saying this…Ramsey’s advice is almost always spot-on.  He is honest and certainly bucks the trend amongst many personal finance experts.  I agree with his statements about making smart financial decisions based on sound principles and not making fear-based decisions.  That’s solid reasoning.

However and unless I’m mistaken, Ramsey is not necessarily an expert on the economy in general.  For instance, he has not been a promoter of investing in gold.  In his book “The Total Money Makeover” he said:

The truth is that gold is a lousy investment with a long track record of mediocrity. The average rates of return tracked as far back as Napoleon are around 2 percent gain per year. In recent history, gold has a fifty-year track record of around 4.4 percent, about the same as inflation and just above savings accounts.

My reservation then is, if the U.S. dollar does indeed continue to experience decline (and it is as of now) or a downright freefall, Ramsey’s investment advice in this respect will fail.  Gold would then be a much more solid investment.  The Gold Standard is thought to restrict the creation of credit and helps to keep government spending under control to some degree.  This makes it more stable than your standard investment options, which are typically rooted in the stock market.  As we know from the last year, the stock market is not exactly stable.

Ramsey seems to be saying that doomsday prophets who are predicting dire things from our economy are pushing fear.  While I agree with Ramsey’s message of hope and believe that there are certainly things that people can do to protect themselves from economic problems, it is certainly also not wrong with pointing out bad things that may happen or are likely to happen.  Do we really think that bad things won’t happen if our government continues to spend money like it’s going out of style or if we continue to print additional currency at the risk of hyper-inflation?  These things cannot continue to go on without serious risks and consequences to our economy.

Yes, we should have hope and, no, we shouldn’t make decisions based on far.  However, it does no one any good if we aren’t prepared for some really bad things that may happen and, I would argue, that probably will happen if we continue down the course that we’re already on.

Please don’t hestitate to comment on this post.  I’m certainly no financial expert but just sharing some points of disagreement I have with Dave Ramsey.  Overall, I believe him to be a brilliant personal finance expert but I just think he could be very wrong on some of his views pertaining to the economy in general.

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5 Responses

  1. I think Ramsey is quite good at what he does best, and that’s training and counseling individuals to live within their means … and that means, “free of debt.” Indeed, we are 10 weeks into his 13-week Financial Peace University at our church. In the past, we had only worked Dave’s approach to home finances about 70% of the way — but now we’re trying to seal the deal and take it all the way: no credit cards, month budgets on paper, saving like fiends, etc.

    Unfortunately, Dave he falls flat when he bad-mouths precious metals as “stupid.” His mantra that “metals are never used in the barter economies that follow disasters” is a straw man argument (though somewhat understandable, given that some metal and coin dealers seem to imply that metals will be money when the feces hits the fan).

    Precious metals shouldn’t be bought/held primarily for a “social meltdown” scenario, but as an historically-reliable store of value.

    A couple of ignorant things I’ve heard Dave say recently about precious metals:

    • “They have no more intrinsic value than a shoelace.” (IOW, precious metals only have value because man assigns it value and does so arbitrarily — we could just as easily assign similar value to dirt!) I’m utterly amazed that Dave doesn’t grasp fundamental principles of value found in precious metals such as world-wide recognizability and desirability, ease of divisibility and transportability, and high value in relation to volume and weight.

    • “Precious metals haven’t been a medium of exchange since the Roman empire.” This is simple ignorance of history. What does Dave think the value of US currency was pegged to by law until only 1971? (Not to mention the fact that US quarters, dimes, and dollar and half-dollar coins were 90% silver until 1964!)

    It is a paradox that, while preaching so faithfully against personal indebtedness, Dave won’t/can’t preach against our government’s indebtedness and the central-bank-issued fiat currency that aids and abets it. I know Dave is a Bible-believing Christian — well, the Bible vehemently condemns theft by the use of unjust weights and measures, which is precisely what fiat currency is: “faith-based” money that is backed up by absolutely nothing and which results in that most insidious a invisible of taxes, a.k.a. inflation. (Oh, incidentally, Dave has defined “inflation” as price increases due to variables of supply and demand. Yes, prices do fluctuate as a result of supply and demand, but inflation is an increase in the amount of money in circulation at the hands of central banks and government-owned printing presses. When more money is pumped into the system via the printing press or electronic credits, it serves to devalue the money already in circulation, and prices rise in response to that. IOW, long-term price increases are not inflation, but rather they are a symptom of inflation — more money chasing after a fixed amount of goods. The best example I can point to is the artificial boom in home values earlier this decade, which were the direct result of the ease with which more and more people were able to get loans. I.e., more money — in the form of credit — chasing after a fixed supply of houses.)

    For a different — and reliable — take on our current economic mess, I would urge you to spend some time reading the articles and watching the videos of Peter Schiff. Just Google him … you’ll find him. Peter is also “death on debt” — but he called the current financial mess a few years ago, based on the fact that Americans and their government borrow endlessly to buy things they simply cannot afford. I.e., rampant consumerism and endless lines of credit.

    I love Dave for what he does well, but he has a ways to go to understand the government-monetary-policy basis for the dire straits in which our nation currently finds itself.

    • Thanks…You said that better than my article said it. I’ve seen Peter Schiff on Glenn Beck’s program before, so I am familiar with him. Thanks for the tips!

  2. Thanks, Dave.

    May I recommend a piece Barry Broome did last year at his blog, DebtPrison.net? It is called “Dave Ramsey, Peter Schiff, and decline of U.S. Economy.” Broome also likes Dave a lot, but also fairly (and graciously) critiques of some of Dave’s economic presuppositions:

    http://debtprison.net/wordpress/66/dave-ramsey-peter-schiff-and-decline-of-us-economy/

    And be sure not to miss the comments that follow Broome’s post — lots of valuable give and take there, as well.

  3. OHH Some very interesting and insightful thoughts. I like this.

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