It seems like our government and Federal Reserve are doing as much as possible to send our economy downward.  Week after week we are seeing acts of desperation that are attempts to jump-start an economy and prevent a recession that are only making matters worse.  Here's a list of some of the quickest ways to ruin our economy:

1. Bail out any major corporation that is near bankruptcy due to poor management, over leverage or excessive risk.  Don't let the free markets weed out the weak players, rather let them continue to pay multi-million dollar salaries to executives by using taxpayer dollars for the bailouts.




2. Drop the interest rates down so low that corporations are encouraged to over-leverage their business, so when the downturn finally arrives, we can bail them out with tax dollars.  Don't forget that leverage is good when the market is good, but it is very dangerous when the market is bad.
   
   




3. Swing interest rates up and down sharply to try to get the stock market to return 10% annually, making sure the stock market dictates monetary policy. 
   
   
   
   


4. Allow corruption in public corporations by allowing salaries of top executives to be set by directors, ignoring any conflict of interest.




5. Hold minimum wage down low enough to just barely pay for rent and utilities. 
   
   
   
   


6. Allow usury and call it the credit card industry
   
   
   
   


7. Make sure this country's workforce cannot grow by restricting immigration




8. Spend billions in a stimulus package that hands out small amounts to many people to spend, but has no provisions for true economic growth. 
   
   
   
   


9. Create tax policy that allows the wealthiest taxpayers to pay a lower percentage than most middle class taxpayers.

The common thought of investing is to put your money in an index fund and let the compounding make you rich.  Talk to any investment advisor and they will tell you that the stock market over the long run will return 10%, so invest $X today, add Y% of your paycheck and in 40 years when you retire you will be a multimillionaire.  The problem is that this data is taken from less than a century of data from a country that experienced growth in population and technology that has never been seen in the history of mankind. 

The 20th century in the US was one that saw a number of advancements and demographic changes that boosted the economy in ways that will be difficult to repeat.  We saw a baby boom, women entering the workforce (almost doubling the workforce), huge immigration waves, the invention of the computer, explosion of the auto industry, aviation, medical breakthroughs, financial innovations, etc.  This created an expectation of the ability to continue and repeat these same advancements.  This created the expectation of an ability to sustain a growth rate of 6% in the GDP and 10% in the stock market.

Unfortunately, everything has a limit in the amount it can grow.  Every market passes through multiple phases of growth, including startup, hyper-growth, maturity, and decline.  Nearly every company goes through these phases, and countries and civilizations do as well.  The only difference is that the time frame is much different for companies than it is for civilizations.  I see the US entering its maturity phase, where the days of high growth are ending.  I don't see any drivers that will allow the country to continue its expansion phase like it has in the past few decades.  This country has squeezed as much productivity as possible out of its population with both men and women working.  The only remaining resource for manpower is immigrants who typically are not as highly skilled as American workers, and who as of now have not been very welcome in this country.  Our well-educated baby boomers are leaving the workforce, while lower-skilled immigrants are entering the workforce.  This is not a good demographic change for this country. 

The only other way to increase productivity is by technological advancements that allow the people to work more productively.  I am still waiting for the next breakthrough that will allow that to happen. 

Still, the country is lacking in untapped resources to grow productivity...we are reaching the saturation point of productivity.  At this point, we must rely on immigration and technological advancements to increase productivity, both of which at this point seem to be at a standstill.

What does this all mean for your money?  I no longer agree with the idea that you should put your money in an index fund, let it sit, and hope it grows 10% per year.  I see very little that will allow this growth to continue.  At a time when index funds are most popular, the investor that makes money will go against this trend and be a stock picker and a trader.  Put your money in new technologies and smaller companies that will emerge in the future as the leaders of the economy.  Put your money in other countries that have yet to experience significant growth, but are on the verge.  Take your profits while you can if you own mature companies and take advantage of volatility by trading.