Hardly a week goes by without my receiving an inquiry from younger friends about how to cope with various problems in our society. Most of the inquiries have to do with money: How do we get out of debt? How can we save for future needs and for retirement? We can't afford health insurance! How can we afford to homeschool our children or send them to a Christian school?
A recent enquirer raised this question: "I'm planning to buy life insurance. Wouldn't it be better to 'buy term and invest the difference' instead of a more expensive cash-value policy?"
This is a good question because it closely relates to many of the economic and financial pressures that weigh on families today. But because making sound financial choices requires first some background understanding about monetary policy, it behooves us to focus on the broader economic/political environment that has been developing during the last 50 or so years.
Since World War II our federal government has been engaged in deficit spending as it has steadily concentrated political power in Washington, D.C., and it has induced state and local governments as well as private citizens to become economically dependent on the federal bureaucracy. One result is that the rate of family savings has declined even though mothers have rushed into the work force to help make ends meet. But instead of saving more, families have increased spending, and personal debt has soared.
During the last two or three generations the civil power has, in effect, grown to become Americans' "secular god." And, since the civil authority of a country truly reflects the heart and mind of a people, the growth of centralized government in America accurately reflects the weakening of Biblical Christianity in our country. In short, political and economic trends indicate an underlying spiritual problem which can only be solved by faithfully preaching God's Word and edifying the saints once they come into His church (Pr. 29:18). Two specific economic problems have resulted.
First, since World War II, continued deficit spending by the federal government and the resulting inflation of the money supply have caused the purchasing power of the dollar to drop to less than 10 % of what it was in 1945. This planned debauchment of our monetary unit has secretly stolen people's savings and, as indicated above, stimulated them to go into debt as well as to look to the federal government as the people's caretaker from the cradle to the grave. Lest readers misunderstand, let me point out that spiritual undermining of the populace occurs first, and then economic and political enslavement follows.
Second, before 1973 the real wages of workers generally rose year by year, but since that date the expected year-to-year rise in pay has not materialized. This explains why mothers have had to go to work, and it helps explain the widespread breakdown in family discipline of children. The godly influence of a loving mother has been praised by many successful men as the spiritual force that spurred them on to greatness, but this beneficent force is often missing in many homes today because mother is working outside the home.
How Can Families Save More?
So, in the face of declining real wages and steady debauchment of the dollar by our monetary authorities, what can families do to save more money to educate their children, to accumulate funds for emergencies, to achieve long-term goals, and to accumulate a retirement fund as well?
One obvious answer is to review family expenditures and make up a budget that eliminates unnecessary spending, thus "creating" a flow of savings to work with. Doing this takes discipline, but it is a necessary first step. Another answer is to create wealth by holding after-work jobs. Still another is to start a business, such as a family garden. This can generate hundreds of dollars of real savings while contributing to better health from home-grown vegetables and fruits. Additional real income can be earned for the family by children selling garden produce to neighbors. Our children, when youngsters, did this; and our neighbors looked forward to their visits because the produce from our garden was better and less expensive than they could purchase at the supermarket. Today this opportunity for child productivity cries out to be filled because the food chain has become much more polluted with lifeless, highly processed food. Also, it teaches children the useful disciplines of work, saving, investing, and even entrepreneurship.
"Buy Term and Invest the Difference?"
The question, then, is this: What is the best avenue to take when embarking on a long-term savings plan, given the inflationary scenario since WW II? There are a number of avenues open: Savings bank accounts, tax-deferred IRAs, money market funds, Whole Life cash-value policies, variable annuities, mutual funds, the accumulation of gold and silver bullion, etc. In my younger years, I was active as a stockbroker and later as a life insurance salesman. As I grew in experience I came more and more to value permanent cash-building life insurance as an ideal way of creating an immediate estate in the event of early death, coupled with its ability to compound interest on a tax-deferred basis. True, the depreciating value of the dollar robbed me of purchasing value of the early premiums paid, but rising dividends used to purchase additional paid-up insurance helped somewhat to offset that loss; but the big reason I still recommend Whole Life insurance for the average person is this: Monthly premium notices (or automatic monthly bank drafts) serve as an excellent savings discipline on the policyholder. Without this built-in discipline most individuals will eventually falter in their plan to "buy term and invest the difference."
As I grew older and my financial responsibility to my wife and children grew, I would periodically add to my life insurance coverage. Truly, the motivating force behind the purchase of life insurance is love for others. But my investment in life insurance was never a "dead investment." As cash values increased, I would, during times of necessity or opportunity, borrow accumulated values at 5% interest. Some uses for borrowing accumulating cash values were to buy an automobile for cash, to invest in the marketplace at higher rates of interest (for example, during the late 1970s interest rates paid by money-market mutual funds soared to 14% and finally to 20% in 1979), to pay for college tuition, and to take advantage of business opportunities that would otherwise have been missed. The important point is this: The accumulating cash values were not simply left to depreciate while untrustworthy civil rulers at the federal level and Federal Reserve monetary officials systematically colluded to debauch the purchasing value of the dollar. I developed a plan for counteracting the nasty effects of planned monetary inflation. I used the cash values in my life insurance as a readily available "opportunity fund" to build wealth, and I then repaid policy loans with depreciated dollars. In this way I was partially able to protect my family from what economists call "the hidden tax of inflation." Let us not forget that building family wealth is certainly a Biblical goal (Gen. 13:2). My point in sharing my own experience is twofold: First, to encourage younger heads of family to embark upon a systematic, disciplined, long-term savings program. Second, to follow a plan that is flexible so that it can be used to protect family units from being insidiously robbed of their accumulated savings by civil rulers — the period of WW II to the present provides a perfect example of what we can expect in the future.
A New Era?
What about the future? Can we expect more or less monetary inflation and subsequent depreciation of the purchasing value of the dollar? We can almost certainly expect more of both! Why? Because since WW II, with each new presidential administration and new batch of congressmen elected to office, our political leaders have turned increasingly to have our nation serve as "policeman for the world" (imperialism is the correct term to use), and with hundreds of thousands of American military personnel currently stationed in over 140 foreign countries, the trend of government deficit spending and continued monetary inflation is certain to grow worse if citizens continue to fail in their duty to rein in such unconstitutional activities of our civil rulers. This calls for careful consideration of other possible alternatives to protect the economic viability of the family and family wealth so that Christian families "can occupy" and continue their duty to build Christ's Kingdom until He returns. If I were a young man with a young family today, I would strongly consider creating an immediate financial estate through the purchase of a good life insurance program. I would look for a life insurance company that pays healthy dividends and where cash values can accumulate in the form of additional paid-up insurance.
Another available option is to purchase an insurance-based Swiss annuity, because the Swiss franc has, over the years, not depreciated in purchasing power as rapidly as the U.S. dollar.
Some families might have excess funds to invest right now. If so, now is an opportune time to purchase gold and silver bullion because gold and silver, as commodity-based money, are the only kinds of money that cannot be insidiously stolen by deceitful government and monetary authorities. The gold bezant of ancient Byzantium retained its value for some 700 years. It wasn't until the last 200 years of the Byzantine Empire that its rulers turned to debauching its currency, something our own civil rulers have now been doing for almost 90 years.
Wise observers will learn how to apply the lessons of history by "observing the times" and taking constructive action to protect their loved ones.
It is not the intentof the author, nor of Chalcedon,to provide specific advice regarding investment or savings vehicles; but rather to inform readers about choices that might confront them. Each reader is advised to seek competent adviceconcerning his or her own individual needs.
- Tom Rose
Tom is a retired professor of economics, Grove City College, Pennsylvania. He is author of seven books and hundreds of articles dealing with economic and political issues. His articles have regularly appeared in The Christian Statesman, published by the National Reform Association, Pittsburgh, PA, and in many other publications. He and his wife, Ruth, raise registered Barzona cattle on a farm near Mercer, PA, where they also write and publish economic textbooks for use by Christian colleges, high schools, and home educators. Rose’s latest books are: Free Enterprise Economics in America and God, Gold and Civil Government.