Everyone remembers the movie “Indecent proposal”. The movie where Robert Redford offered Woody Harrelson's character 1 Million dollars for one night with his wife, who was played by Demi Moore. The movie gave a complex view of how people value themselves in relation to money and it probably made a lot of people play the “what if” game because of it. I remember being a teenager playing the “what if” game myself. More often than not, it was centered on money as well. For example:
How much would it take for you, to let Michael Jackson fondle you?
If reincarnation allowed you to come back as someone, who would it be?
If you won a million dollars, what would you do with it?
The first scenario was when MJ was in his heyday of molestation, so it was relevant then – not proud of it, but true nonetheless. That last scenario was the one I would think about often to myself. Being that i was young, the answers were predictable for a kid who just wanted to play sports and nothing else. Those fantasy dollars were chasing imaginary possessions like: cars, houses and basketball court's in my backyard(s). You get the idea. As I got older, the view became more conservative, one built on investing and preserving that wealth. I’ll get back to that later.
Up until recently I haven’t given the “what if” game much thought. That is until I seen this story of a woman in Michigan, who won a lottery worth: 1 million dollars.
Amanda Clayton, a 24 year old unemployed female, won the "Make Me Rich!" lottery earlier this month as reported on by everyone in the national media. The overview is simple. Mrs Clayton took a lump-sum payment of 500K after taxes and bought two houses and a car. Or exactly what I would have done…20 years ago.
The rub is that Mrs Clayton
also collected $200 in food stamps monthly even after she had won. Now any reasonable
person would understand or sense an obligation to end his or her case and stop receiving
the foodstamps but Mrs Clayton does have a point. She went on record stating
that:
“I thought, maybe, it was OK because I'm not working. It's hard. I am struggling."
You see
she is struggling, she doesn’t have a job and if that wasn’t hard enough, maybe
you will tear up when you know that she quote:
“I have no income and I have bills to pay. I have two houses."
How is someone able to hit the
lottery for seven figures and still legally be eligible for food stamps? Because,
according to federal guidelines; gambling and lottery winnings are considered
liquid assets and don't count as gross income. Therefore, one could hit the Mega-Millions 350 Million dollar Jackpot and still collect their foodstamps. So technically speaking, she wasn’t
breaking any laws. Technically is one thing, morally or ethically is another.
Now, you are probably asking
yourself… what does that have to do with you and the “what if” game and Mrs
Clayton striking it rich then still collecting foodstamps? It’s obvious that what
Mrs Clayton did was unethical and really a microcosm for many in society, who
feel they are entitled to benefits. Many times, those benefits are goodwill or
tax dollars from others used to give the less fortunate a hand; to only be
stolen and pillaged by people that could otherwise do for themselves but would
rather go this route because it easier.
Now, when I played the “what if” game as I got older I would always say I would invest the money in a CD or save it in a Money Market or just conventional savings account. Back when I was doing my dreaming (in the mid-90’s) a Jumbo CD yield was anywhere from 4-6%. Obviously I would have taken out multiple CD’s because of the limitations of the FDIC, but that is really all you would have to do to live off the interest. Pretty simple, no money manager needed. Sure it’s not exotic but its conservative and simplistic. What about now?
Graph from: Bankrate.com
In the 90’s
we could live off of 35-40K a year, the yield we could expect from a million
dollar investment. I assume that would be sufficient for Mrs Clayton (she may
only be able to own one house thou) and I know it would be for me. Now with
that said, let’s play the “what if” game in today’s environment.
For anyone of us that frequent a bank and see the rates on the wall, we know the return isn’t worth them holding our cash. As you can see from the link below, a jumbo today would yield you at the most 1.15% with most of the interest rates being below 1%. Using today’s interest rates, it would have us collecting anywhere from $7,500-$13,000 off of 1 Million dollars in Jumbo CD’s. That is not livable by most standards.
For anyone of us that frequent a bank and see the rates on the wall, we know the return isn’t worth them holding our cash. As you can see from the link below, a jumbo today would yield you at the most 1.15% with most of the interest rates being below 1%. Using today’s interest rates, it would have us collecting anywhere from $7,500-$13,000 off of 1 Million dollars in Jumbo CD’s. That is not livable by most standards.
What this
says is what we already know: fiat money, fractional reserve banking and our
entire monetary policy/system is starting to eat itself. The debt driven - black hole
gathers strength. It’s hurting the poor and those people who rely on cash of
course but like we see here, it hurts the savers (where true capital comes from)
and instead, favors the wealthiest and credit whores. As I pointed out with pending interest rate tsunami that is coming when/if the FED raises interest
rates and the fact that the American consumer is tapped out and saturated in
debt, our demise is only a mater of time. Today, the “what if” game for me and
hopefully anyone else (including you too Amanda) only consists of silver and gold… and some guns.
