• May 2002: “the market is extremely overvalued, don’t believe the propaganda”
• April 2005: “we cannot head off the coming disaster . . . some disasters have to happen”
• August 2005: “our bubble economy rests on the bubble of the housing market . . . the housing market is similar to the internet market of the late 1990′s”
• August 2006: “the recession is going to be pretty bad and it is not going to last for quarters  – it will last for years”
• August 2006: “too much consuming and not enough producing”
• “The disease is all this debt-financed consumption, the cure is a recession.”
• You really need to see how foolish Art Laffer looks around 3:35 in the video.
• December 2006: “sky high real estate prices will come crashing back to earth”
• Watch as Schiff is openly mocked at about 4:25
• January 2007: “the market is going up because of the depreciating dollar . . . I see a very severe recession”
• August 2007: “foreign investors are now finding out that we can’t repay, we cannot continue borrowing to live beyond our means”
• “subprime is not a tiny blip and it’s not just subprime”
• November 2007: “we are going to wipe out all the gains from 1999 to the peak”
• September 2008: “the bailout is going to make the problem worse”
• September 2008: “the government caused this crisis, it was the worst monetary policy in history, together with the moral hazard of Freddie and Fannie that allowed American citizens to borrow trillions of dollars and spend every penny”
• “if the government tries to prop of these companies, we will have a much great problem down the line – we will destroy our currency”
• December 2008: “I’ve been running from the dollar for years”
• “The government is creating inflation to pay for the bailouts.”
• “I don’t like government spending. . . government should be cutting back . . . the real cost of government is in not in taxes, but in spending and what it does not take from us honestly in taxes, it will take dishonestly by creating inflation”

David at My Two Dollars posted a fascinating article the other day. He asked the question: Is your life fiction or non-fiction when it comes to your finances? How many of us live beyond our financial means? How many of us do not simply accept the reality of our financial situation and be content? David cites two causes for this behavior: the keep-up-with-the-Jones mentality and television. I would like to elaborate on this idea further and give the Rocket Finance spin on the idea of living a false life.

Many people in our culture live far beyond their ability to pay and I agree with the causes that David lists, but I want to expand the list to include popular culture, easy credit and weak consequences for poor fiscal decisions. Of course, as usual on this blog, I want to point out the government contribution to this financial fantasy land.

The reality is that the United States was founded on the idea of individual responsibility. We have all benefited greatly from the free market, but in order for the system to work, individuals must also be allowed to suffer the consequences of failure.

The fact is that the capitalist system is characterized by “busts” and “booms”. Corrections in the market and even recessions are a natural part of life. If downturns in the market are allowed to run their course, the market always recovers. However, our government has sought to shield American citizens from consequences of bad decisions. The government has sought to eliminate the bust part of the cycle. As a result, downturns in the cycle are delayed and worsened. The best that government can do is to spread out the misery over the entire population. When government gets involved, those who made bad decisions tend to be propped up and those who made good decisions are hurt.

Stimulus packages, rate increases and decreases, bailouts, farm subsidies, and the rest are all efforts by the federal government to shield the populace from failure and lean times. In essence, the government is enabling individuals and corporations to live a life of fiction. This tinkering on the part of the government has only served to delay the inevitable collapse. Former Fed chairman, Alan Greenspan, famously used a term “irrational exuberance” during the stock market boom of the 1990′s. He was right about the irrational exuberance, but Greenspan’s problem was that he was always trying to use monetary policy to “soften the landing”. He tried to protect investors from that exuberance by using government controls. The truth is that government cannot keep bad things from happening. It is a fiction.

Everyone knows that our federal government just took on huge amounts of debt in order to protect the American people from an economic downturn: $700 billion for failing banks and auto-makers, $785 billion for pet project stimulus, and $410 billion to prop up our national budget. Almost $2 trillion dollars of pure debt simply to shield businesses and individuals from the consequences of bad decisions – and it is all a fairytale.

At some point, this bit of fantasy must rocketing back to earth.

Picture Credit.

This last month, I paid off the three largest balance transfers that we made during our bank bonus, credit card bonus and stoozing spree. We had borrowed between $11,000 to $13,000 from each card and the May payment represents approximately two thirds of our entire balance transfer cash. We still have about one third of the money that we borrowed at the 0% APR introductory offer and stashed in a savings account. Unfortunately, the interest rates on savings accounts have come down a lot over the last year. In 2007, it was easy to find online savings accounts at over 6.00% APR, now our money is only earning 3.25% APR at FNBO Direct.

While we enjoyed and needed the extra interest that we earned every month, I was surprised at the sense of euphoria that came with paying off the balances. There is a relief that comes with being out from under the debt even though it was kind of a “fake” debt in the first place since always had the cash on hand and could pay it off at any time. My stress level has eased and even though our balance transfer arbitrage was successful, I don’t plan to do it again any time soon.

Hopefully we don’t have to.

Our credit score has also fully recovered – I checked two weeks ago and it was at 758. Last night I discovered it had zoomed to an incredible 800! It is important to note that the only score I can check for free is a TransUnion score through Credit Karma. TU is generally considered to be 30 to 50 points on the high side. Even if you make an adjustment for a TransUnion number, it is still the highest credit score that I have ever had. We will be paying off the rest of our credit balance as the introductory APR’s expire, so our score will continue to rise – and if we could sell our house in Wisconsin right now, we will be in great shape to buy a home here in Colorado.

Here’s hoping. . .

One of the experts on the subject, Patrick from Cash Money Life, has done a series of posts. The first one explains, the who and how much regarding the checks. Another interesting post is a poll on how people plan to use the money. Stop by his blog and vote for yourself. Then check out the results of the poll. Given that the poll demographic was taken by personal finance readers, the answer will not surprise you. Patrick also has several more articles on the subject, but the most comprehensive is Economic stimulus rebate: Frequently Asked Questions.

Randall from Credit Withdrawal points out the the big retail chains have plans for your stimulus check. But I guess that is the point. Please ignore Randall’s panning of Reaganomics . . . Rocket Finance is a big believer in trickle-down theory, but if everyone agreed with me, the world wouldn’t have any problems the world would be a pretty boring place.

Glbl guy asks for advice on how to spend his check. I wonder if he will tell us his decision after it arrives? Glbl guy also has a useful article that emphasizes the fact that you will not have to repay the stimulus check, it is not a loan.

Pinyo from Moolanomy emphasizes the fact that you must have filed 2007 taxes in order to get a check. This makes me wonder how many people might be assuming that a check is on the way, but for some reason, they don’t qualify? I wonder how much government resources will be tied up in trying to sort out the claims of people who believe they were wrongly left out?

Lynnae from Being Frugal tells us that the rebate check is the cause of a big debate in her household – not over politics, but over what to do with the money. Read her article and decide who is correct.

Many people were excited to learn that the direct deposits might be coming earlier than expected. Prime Time Money emphasizes this news and tells how he will spend his check. Mrs. Micah also posted an article about how she and her husband plan to spend the money. I must warn you, that MM used restraint in writing the piece and while course language is not used, it may be implied. . .

Ryan from Millionaire Money Habits teaches us what a future millionaire does with an unexpected windfall. Are you using millionaire money habits?

And finally, two bloggers from opposite ends of the political spectrum agree that the stimulus package has some problems. With whom do you agree?

On the left, David from My Two Dollars: My thoughts on the $100 billion dollar fiscal stimulus package.

OR

On the right, Rocketc from Rocket Finance: The stimulus package is a crock.

Enjoy your check, if you get one!

Mvelope’s family budget software utilizes the envelope budgeting system recommended by gurus like Dave Ramsey.

Beginning Monday, the effects of the stimulus will begin to reach households. This money is going to help Americans offset the high prices we’re seeing at the gas pump and at the grocery store.

 It looks like a lot of people are going to start getting their checks four days earlier than was originally announced. Originally, the stimulus checks were going to start being sent near the first or second of May, but now at least 800,000 tax filers will begin to have their checks direct deposited as early as the 28, 29 and 30th of April. I was scheduled to get mine around the 9th of May, hopefully this will move things up for me.

So, will the stimulus package make a difference?

Well, it will make a difference for my family . . . and that’s all I really care about at the moment.