Inflation – the Stealth Tax

December 4, 2011

Inflation will be devastating in the next decade. Part of the problem is that inflation is hard to explain and it is difficult to measure the damage it can cause to Americans’ purchasing power. Many analysts are already predicting six or seven percent inflation as early as 2013 and low double-digit inflation by the middle of the decade.

Inflation’s two requirements

First, with all the money our government has printed, why has our inflation rate only risen to its current 3.9%? Inflation has two requirements: first, you have to print the money. Second, and this is important, inflation requires velocity. The money has to circulate in the economy to increase inflation. What did the banks do? They held the money. When that money is finally circulated into our economy we will have serious inflation.

Rules of 72 and 115

How can we easily explain the damage inflation causes? Use the Rules of 72 or 115. The Rule of 72 is an accounting rule where you divide the inflation rate into 72 and it tells you how long before you need twice as much money to live on. The Rule of 115 is how long before you need three times as much money to live on.

Two examples:

  • For ease of illustration I will round the current 3.9% inflation rate to 4%. Now divide 4 into 72 and it tells you that in 18 years you will need twice as much money to live on as you do right now. So in 9 years you will require 50% more income to live at the same standard of living. Two thirds of America lives on $50,000 or less. They will need $75,000 per year by 2020 to be able to buy and pay for all the things they do now. How will they get to that higher income if average incomes are decreasing?
  • If inflation increases to 7% (and it is likely that it will), by 2021 you would need $100,000 per year of income to maintain your current standard of living. It will be almost impossible for most Americans to achieve this increase. Our standard of living will drop dramatically; that is why inflation is so destructive.

To help families be successful we must first help them understand the serious challenges of inflation. Next, we must develop strategies to not be hurt by inflation. Only then can you actually take advantage of the opportunities inflation provides. Do it NOW!

Don’t just take our word for it:

Inflation logs biggest increase since ’08 (Chicago Tribune, October 20,2011: section 2, page 3)

The Atomic Bomb that is about to explode at the Federal Reserve (Economic Policy Journal, October 11, 2011)

Millions hit by inflation (Financial Times, October 21, 2011)

Kelly O’Connor –


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Would you invest in this company?

April 4, 2011

Would you invest in a company that lost $2 trillion last year and has a net worth of negative $44 trillion? Bloomberg compared the U.S. to a corporation and that sentence was on their front cover.  Ben Bernanke testifying to congress about our debt stated, “We are much closer to total destruction than you think.”

Ezra Klein from the Washington Post describes the U.S. Government as “an insurance conglomerate protected by a large standing army.”  WOW!

The CBO (Congressional Budget Office) describes the debt as “Calamitous, worse than anybody said.”  Here are the facts: Politicians are the best sales people on the planet.  While they distract you with talk about earmarks, waste and the like, they refuse to discuss the only four things that can provide debt relief:

  1. Social Security
  2. Medicare
  3. Medicaid
  4. Interest on the debt.

These are the only four things that can reduce the deficit.  As spending on those four things increase, all other spending will decrease.

Finally, the debt is currently $14 trillion.  By 2015 the debt will rise to $20 trillion and by 2021 the debt for this country will exceed $27 trillion.  The interest required to service that debt will take up to 50 percent of all federal tax revenue.  This is only one decade away!  So you need to ask yourself two questions:

What do you think this will do to your benefits?  When do you want to get started taking control of your family’s financial future?

Here are some recent articles that you may find interesting.

USA Inc.: Red, White, and Very Blue (Bloomberg Businessweek, February 28-March 6, 2011)

U.S. debt situation is calamitous, worst than anybody said (The Citizen, February 15, 2011)

Gov’t Adds Another $63.7 Billion in Debt (The New American, March 3, 2011)

If we could show you the most effective, efficient ways possible to save money for the future would you like to know them?  If we could show you creative ways to decrease taxes and increase benefits would you want to know about them?

Kelly O’Connor –


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I’m astounded by the news that our economy is improving

February 21, 2011

Recently I saw a national newspaper headline an article about how our economy is improving and recovering.  I began to notice this in many other news sources and I have been just astounded at the inaccuracies of these claims.  Truly, this issue today is one of the most misleading ever to be imposed on the American people.  We are still in the midst of one of the most dangerous financial times in our country’s history.  Behind every dollar printed, behind every unemployed citizen, behind every person who retires or requires health care, is danger lying in wait.  “Oh come on!  You don’t really believe that?”

Taxes at 100%

I do.  We continuingly find information that just seems so unbelievable to us yet the math clearly indicates that our statement above is true.  Not only that, but the Congressional Budget Office maintains the same conclusions.  Consider this question: What if every American paid 100 percent taxes? What if our tax laws were changed from the 47,000 pages of tax code to the following two lines:

  1. What was your income?
  2. The amount in line one is the amount of tax you owed – SEND IT IN!

If this was the case, we would still have to borrow money to maintain our current standard of living.  Can you imagine?  Seriously, is that not just insane?

That water is about to boil

In the same manner that a frog will stay in the water if the heat is turned up slowly, we have slowly put our country and ourselves in this very challenging position.  Virtually anything could knock us down like a house of cards.

The list of financial challenges that we face could take up this whole page and most people are not paying attention.  Let’s list a few: our government spending, a declining workforce, an aging population, unsustainable government debt, unemployment, declining value of the dollar, declining housing values, increase in number of government employees, underfunded government pensions, underfunded union pensions, state government deficits, individual bankruptcies, credit tightening, currency fluctuation (world-wide), private sector’s inefficiency to save, government dependency at an all time high, hidden inflation (stealth tax), illegal immigration, health care costs, declining incomes (inflation adjusted), war-security-terror, the cost of going “green”, and foreclosures…just to name a few.

LEVERAGE will win!

So what does this mean for us?  Well, very simply, leverage is absolutely a must if we are to get through these issues.  It’s critical you learn how to leverage your money.  At Mountain Financial our job is not to make anyone rich (unlike the sales pitch by traditional financial planning), you can accomplish this goal with your own unique abilities.  Our job is to make sure that you will never be poor because the above issues will certainly work against our ability to create wealth.

It’s important for us to lay out the various benefits that we provide:

  1. A haven for your safe money.  We ask our client or prospect: where do you put your “safe” money?  How do you keep it safe?  Do you get a fair return on your “safe” money?  Would you like to know about “safe” money investments that provide better returns?
  2. Guarantees. Not only can we guarantee the return on their money, we can guarantee the return of their money.  This is a big issue and needs to be told to everyone…I don’t care how successful you are!
  3. Even if our client runs out of money, we can guarantee that he/she will never run out of income. We have products that provide a guaranteed paycheck for life under any financial circumstance. No one else can do that.
  4. Three miracles of investing:
  • First, we share the miracle of compound interest.  That is how the silent generation became wealthy.  They allowed compound interest to work on savings that they saved and kept saved.  Even at 3 percent, money would double twice from age 18 to age 66.
  • Second, we also provide the miracle of tax deferred compound interest.  This is known as the miracle of triple compounding: interest on principal, interest on interest, and interest on the taxes you would have paid in an investment taxed on an accrual basis. We can double a client’s pension just by teaching them the miracle of tax deferral.  We can do this without requiring any additional risk.  That is a miracle!
  • Finally, we provide the miracle of leveraging.  We can use pennies to buy dollars or we can have one dollar do the work of many dollars.  If the plan is arranged properly, all of this can be done without income tax liability. That is a financial miracle!  Now you may begin to understand why the wealthy have used it to maintain and pass on their wealth for generations.

The young, old, rich, middle‐class, employed, and unemployed can all benefit from these miracles and all of them need to learn the truth.

Kelly O’Connor –


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Scary Solutions, Scary Consequences

February 21, 2011

States have only four choices when it comes to their budgets:  raise taxes, lower services and benefits, borrow money, or some combination of the three.

67% Increase in Taxes!?

Big states like New York, New Jersey and California are contemplating large tax increases.  Illinois just proposed and passed a 67 percent income tax increase!  Most states don’t have the courage to do that. They pass sin taxes instead.  These are taxes on soda, sweets and snacks.  Taxes are being proposed on beer and wine.  Cigarettes are an obvious one.  Not so obvious options include taxing plastic shopping bags, fees on casinos and fees for tanning.  Even marijuana is being considered for legalization to harness more revenue for the states.

Bankruptcy for States?

Another option being considered by the federal government in lieu of a bailout is allowing the states to file for bankruptcy.  This would have a huge impact.  It would create leverage for the states in their negotiations with public employees unions and the huge holes in public retirement systems.  There will be dramatic shifts in public policy.  Who will have more power: taxpayers or bondholders? Have you ever truly thought of that question?  If not, you need to.

What happens to the promises made to public employees?  Nassau County in New York and Vallejo in California have already begun dramatic changes in their budgets with pension and health care reductions.  Employee reductions, tax increases, and finally borrowing, borrowing, borrowing.

This will have huge implications for our country.  Coupled with the federal government’s budget problems, in the short term calamity awaits the American people with higher taxes, lower benefits, serious inflation and ever-increasing volatility.  Ask yourself if you have a strategy for these issues.

We’re not the only one’s talking

Please, don’t just take our word for it.  We’d highly recommend you read some of these articles:

Title: Raise Taxes? Some States See the Value (Higher Taxes Wouldn’t End Some Deficits) (The New York Times, January 20, 2011; front page)

Title: Illinois Lawmakers Pass Massive Income Tax Increase (, January 12, 2011)

Title: States eye ‘sin’ taxation as salvation for budgets (The Washington Times, January 24, 2011; page 12)

Title: Will Congress Create “State” Bankruptcy Law? (New American, January 21, 2011)

Title: A Path Is Sought for States To Escape Debt Burdens (The New York Times, January 20, 2011)

Title: Mayors See No End to Hard Choices for Cities, Including Bankruptcy (The New York Times, January 22, 2011; section A, page 10)

Title: Defaults by Cities Looming as U.S. Mayors Say Deficits Hinder Debt Payment (Bloomberg, January 19, 2011)

Title: Strained States Turning To Laws To Curb Unions (The New York Times, January 4, 2011; front page)

Title: City Drafts Bankruptcy Exit (The Wall Street Journal, January 18, 2011; section A, page 6)

Title: New York State Seizes Finances of Nassau County (The New York Times, January 26, 2011)

Kelly O’Connor –


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Two Year Gift Tax Window

February 21, 2011

For 2011 and 2012 the estate tax and gift tax lifetime exclusion is $5 million and the tax rate above the exemption is 35 percent.  After 2012, the exclusion is $1 million and the tax rate above the exclusion is 55 percent.  The government will need more revenue.  You have a two-year, one time only window of opportunity in 2011 and 2012.

Estates can be reduced by up to $5 million per person.  A husband and wife could transfer up to $10 million to their families without the federal government getting ANY TAXES!  Any amount transferred over one million in the next two years is a gift…Ha! Ha!  You deserve to know about this time sensitive, limited offer!  You will be amazed to discover that you can leverage that gift into tens of millions of dollars transferred using life insurance and an irrevocable life insurance trust.

Here’s an example on a grand scale.  You have $30 million in assets.  Let’s say sixty or seventy percent of that value is in a business.  By gifting up to $10 million (husband and wife) to a trust and buying life insurance with it, you could preserve your estate for your family.  You could then spend or invest or save the rest of your estate without any concern for the preservation of it.

It is an amazing one time only opportunity.  If you read the article I am sharing below, the client in the article said this, “Why should a guy who worked long hours and took a lot of risk have to pay tax on what he wants to pass to his children?”  Why indeed!

Title: The $5 Million Tax Break (The Wall Street Journal, January 29‐30, 2011; section B, page 7)

Kelly O’Connor –


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"Obama at the plate"

November 1, 2008

I heard something today on the radio that sunk in a bit.  Each election we are bombarded with “talking points.”  How health care will be fixed, what needs to happen to the economy to get it back and running, the stance on taxation, security, etc.  Over and over again we basically hear the same stuff.  But then something happens that no one-person nor one party can control…the future.  The future slowly makes its course and no matter which candidate is sitting in the Oval Office things change.

The World Series recently ended so baseball analogies are in my head. Let’s say the world was the pitcher and our president-to-be was the batter.  No matter how confident Obama or McCain are in the dugout, no matter what they say about just how they’re going to perform at the plate, no matter how many teammates get behind them and support their efforts, no matter how confident they are in “negotiating”, or anticipating the pitcher’s reactions, they still don’t know just exactly what the pitcher is going to throw at them and when.  The world has a similar way of unrehearsed actions.  Far too often the political campaign “talking points” that make up the majority of the campaign become irrelevant compared to what the president has to face.  Let’s look back at a few in our history.

Jefferson during his campaign in 1800, probably the earliest example, campaigned for a reduction of federal, particularly executive, power. He also called for strict fiscal responsibility in order to reduce the national debt and he pushed for strict adherence to the interpretation of the constitution. However, he had no way to foresee that Napoleon would offer to sell the Louisiana Territory in 1803 for such a meager amount.  This threw his campaign “talking points” a curve ball.  This would cost just over $11,000,000 plus a cancellation of French debt to the US worth $3,750,000. When all was said and done it cost the US over $23,000,000.  And, there was great debate on whether or not it was even constitutional.  Now it’s Woodrow Wilson’s turn at the bat.  He campaigned both in 1912 and in 1916 that the US would not enter into World War I.  Yet again, the pitcher had a different game plan and Wilson had no idea that the Germans would continue their submarine warfare against US shipping. Roosevelt did the same – campaigned that we would not be involved in WWII but how was he to know that Japan decided to show the world that they were the world’s power and attack the US at Pearl Harbor (boy was that a mistake). And of course we have George W. Bush. His entire presidency changed on 9/11. Just typing “9/11” makes me stop and recall that day.  Nothing prepared us for that early morning but we certainly had to prepare ourselves afterwards and take action…none of which was involved in the campaign against Al Gore.

So history teaches us a great lesson.  We can expect a curve ball from the pitcher.  Joe Biden has already said that Obama will be tested.  My concern, and what I heard on the radio is this, after the “talking points”, after the “dugout” speech, when the curve is thrown when a fastball was expected, what is the “vision” of this country for each of these candidates?  Forget the campaign.  How do these two presidential candidates “see” our country?  Where do they envision us going?  How do they get us there?

To me, this one is easy.  All we have to do is look at what they’ve said, what they’ve written, who they’ve associated with, who they learned from, what they’ve taught, who they’ve fought, what they’ve fought for, who they’ve received contributions from, how they’ve reacted to allegations, who they’ve attempted to discredit for simply having an opposing view, who has spoken out in support of them, and finally, what my gut says.

One candidate is absolutely up to his eyeballs in questionable character when the above litmus test is applied. One is not.  One has a vision that absolutely defies everything the country was founded upon (read this article about the opinions the founding fathers had on redistribution of wealth One does not. I believe one of these candidates will strike out miserably and one will overcome and adapt and hit the ball.  Keep in mind that as citizens, we are collectively the Team Manager.  WE decide who goes to the plate.  If you vote for the candidate who has absolutely no idea how to hit a curve ball it will be on your conscience not mine.  I will continue to fight for the right cause and the right team and I’ll do everything I can as a Manager to cut that player.

Kelly O’Connor –


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The neighborhood dogs understand the economy better than Obama

October 29, 2008

I tell you what, I now have a different take on the neighborhood dogs and their barking.  It’s typically rather annoying…until today.  People will walk by, maybe jog by, kids will ride their bikes past, or be walking to and from school, the National Guard jets (which fly overheard where I live) will dart past making a huge thunderous noise, a fire-engine or ambulance will head off to some emergency with sirens blazing, or maybe some other dog barks somewhere else in the neighborhood, all these things occur on a daily basis and cause one reaction…barking!  At times it can drive you crazy.  Until today.

I began to think about why the dog is barking. What’s its purpose?  Of course Disney wants us to believe they’re just talking to each other…”The Barking Chain.”  But, I believe if we really think about it, they have a God given foundational understanding of property rights.  They understand on a doggy level that you don’t mess with what’s theirs.  They mark their territory and then when they’re out of their defined territory, i.e. a walk with the boss, they attempt to claim someone else’s by marking that too…some serious competition.  We even put signs up: Caution Dog.  Wait a second, competition, property rights, stay off the property cuz it’s mine?  I began to think that the dogs were on to something.

Capitalism is all about competition, property rights, and the ability to protect what’s yours. While socialism, by defition, is a system marked by the “common ownership of the means of production.”  Now wait a minute, I’m curious just how many socialist in this country would allow my dog to continuingly go into his (the socialists) yard to relieve himself?  I mean, afterall, it’s not really HIS it’s all of ours right?  Okay, back to the dogs. So the dog knows what’s his. He knows that you don’t mess with it. If he senses a threat he reminds you he’s there (his bark).  If you step over the property line, all bets are off and it’s him against you.  This began to make me laugh. Nature, dogs and just about every other creature, are hard core capitalist.  So let’s take a look at what would happen if they were offered a socialistic opportunity.

Okay, so let’s imagine that all the fences were down (no boundries, no true ownership, “what’s mine is yours and vice versa”) and the dogs joined forces. Now the dog with the big yard would have a lot to offer the other dogs. Unfortunately, the small-yard dog really wouldn’t bring much to the table but would greatly enjoy his new and much larger play place. For a short period of time it would probably seem like a pretty good idea for them all.  They become one big group, they play where they want to, they “go” where they want to.  Us owners would continue to pick up the remains for a while but eventually stop because we’d get sick of being the only one doing it. Until one day, the few dogs that still get up and track down the rabbits for food – since none of us are feeding them anymore since we can’t afford to feed them all – begin to get a little frustrated with those that just sat around and “groomed” themselves all day.  What happens now? They begin to protect their goods again.  How many lions dens do we know that have a whole group of “kings”?  NONE. There is one king. He’s the boss. He’s the alpha male. He’s the capitalist. And the result? They all flourish…in great strength and leadership.  Just like my dog. He is the boss in the back yard. What’s in it is his. If you want it, you better get ready for a fight; but, for now he’ll let you know he’s there with his bark.  So keep barking dogs…keep barking.

Socialism ALWAYS fails. It’s not human nature (it’s not even nature’s nature); therefore, it can never win. Capitalism may not be perfect, but it is the best…even our dogs know that.

I think if I lived in Obama’s neighborhood I’d let my dogs relieve themselves in his yard and when he gets mad I’d say “what? you mean to tell me that I don’t have access to what’s yours? aren’t you making over $250,000 a year? I don’t make that much and I can’t afford to have someone clean up my yard for me and I can’t afford the plastic bags to pick it up but YOU can so YOU do it.”

Kelly O’Connor –


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