State of the Union

State of the Union

Tonight, to much pageantry and pomp, President Obama will stand before the nation and deliver his annual State of the Union address. In his address, Mr. Obama is expected to push for new government spending on infrastructure projects, education, and scientific research while calling for deep cuts in other parts of the nation's budget.

I wouldn't be surprised to also hear him talk heavily about the economy—more specifically about how we are in a recovery.

Mr. Obama has had a roll lately. With a new Republican congress in place, he's moved to the center, even showing signs of being a business friendly president. This, coupled with eight straight weeks of gains in the stock markets and encouraging economic reports, has sent his polls soaring to over 50 percent — numbers he hasn't seen since August of 2009.

The thrust of Mr. Obama's speech will be one of "competitiveness." Despite the record $1.3 trillion budget deficit, he will make the case for increased spending to address fears that we are losing ground to China.

Tonight will be an interesting battle to watch in the spending war going on between Republicans and Democrats—a war that will be decided this spring when the Congress must vote on whether to increase the Federal debt ceiling or not, something I wrote about on this blog last week ("The Boiling Point").

Despite the hoopla, there is much about our state of the union that won't be talked about tonight.

Unemployment

Unemployment in the US is officially at 9.1 percent. While a nod to unemployment will be given, I don't think that Mr. Obama will mention that 44.3 percent of the 14.5 million unemployed Americans are now considered long-term unemployed—and that 1.4 million Americans have been unemployed for over 99 weeks, what is called very long-term unemployment. Even more frightening, nearly half of the long-term unemployed are over 45 years of age, at a significant disadvantage to finding new employment, and have depleted their savings.

Unfunded liabilities

I do not think Mr. Obama will mention the significant financial time bombs of Social Security and Medicare. As over 70 million baby boomers get ready to retire, our country will face a significant retirement crisis. The unfunded liabilities of Social Security and Medicare are estimated to be around $50 trillion. The only way to pay for these future costs will be either through printing money or raising taxes—or both.

Inflation

Food, oil, and raw material prices are soaring globally, raising fears of inflation across the world. These fears have prompted the European Central Bank to signal that it plans to raise interest rates—this despite the fact that many countries in the Eurozone are still severely weakened by the European debt crisis. This means that as the US continues to print money, the rest of the world is realizing the need to stomp on the brakes. Life is about to get more expensive, again.

Financial Education

Finally, despite his calls for competitiveness and the need to invest in education, I doubt we'll hear Mr. Obama call for the need for comprehensive financial education. The state of our union is one that will lead to life becoming more expensive. The underlying fundamentals are not good, and they will lead to higher taxes and inflation — wealth-stealing forces that devastate the financially illiterate but can benefit the financially intelligent.

For instance, a financially intelligent person understands that taxes and inflation will grow in the coming years and will begin to invest in areas that hedge against inflation and have significant tax advantages. A financially unintelligent person will try to find a good job that pays well and save money in a bank. The problem with that strategy is that employees pay the most in taxes. The more money they make, the more they pay in taxes. And inflation is higher than the interest rate on savings. So, you actually lose money if you save. As I've said for a long time now, savers are losers.

It's my belief that the countries that prosper in the future will be those that properly educate their people about money and investing. If the US desires to be competitive, it must teach its children how to be financially intelligent and to stop living by the old rules of money.

I doubt this will happen any time soon. So, it's up to you to educate yourself and your family. By doing so, you will ensure that you and your family will prosper no matter the state of the union.

Good economic news or bad, it is always the financially intelligent who do well, because the financially intelligent understand that news is neither good or bad, it is simply information to be acted on—and to profit from.

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