Truth is beauty, and beauty truth, so says John Keats. Why is this important in your daily life and your financial life? Because the secret to success in this world is really no secret, nor is it very difficult. You merely need to be able to perceive the world as it is, not as you would like it to appear to be.
So, if you see the housing market shooting up 20-30% a year, you might think one of two things. People who want to believe sweet lies will say to themselves, "Gee, the price of homes is shooting up! This must be a great investment! Let's buy a home and flip it and make money!"
But if you really examine reality - on a granular level - and are not afraid of mean old reality (who is really actually value-neutral) you might come to the rational conclusion that housing was overpriced. And if you are willing to use logic rather than emotions to analyze something as simple as housing prices, you might readily come to the conclusion that rapid increases in the price of houses is just not sustainable, for the long haul - as eventually no one can afford to live in them.
But a lot of people thought the former. They were willing to believe bizarre stuff that had no basis in reality. And this happens a lot in our Country - and in our world. Human beings, it seems, are willing to suspend disbelief for periods of time. Go to any timeshare sales seminar, and you will see what I mean. Go to a car dealer and see some 20-something sign the lease papers on a new Scion. People will believe anything - at least for a time.
And throughout history, entire countries - or at least large populations - have been snookered in by people willing to say anything or do anything, to get into power. These are people who are compulisive liars - willing to spin any kind of yarn that people will listen to. And folks believe these lies, without thinking much about them.
And we look back in retrospect and think, "Gee, those people were idiots! They were so primitive back then! I'm so glad we are so much more sophisticated and modern today! We would never fall for that malarkey! We have iPhones!"
And we say this to comfort ourselves and delude ourselves that we would "never again" fall for such obvious lies. I mean, yea, our founding Fathers had slaves and all. But let's face it, they also shat in a bucket and never bathed, right? Stupid founding Fathers! We would never do that! We have iPhones!
And those stupid Germans! Following a charismatic leader and believing in a governmental system than a two-year-old could see was fatally flawed! And scapegoating the Jews - as if all their problems were caused by this one small minority group! How could they be so dumb as to believe such lies? Thank God, the world has learned its lesson! Thank God we are smarter than that! That could never happen here, of course. We have iPhones!
Alas, the sad reality is, people believe a bundle of lies all the time - particularly when those lies tell them what they want to hear. How do you know if someone is lying to you? It ain't really hard to tell. You just need to look for these few simple signs:
1. They tell you that your problems are not your fault, but rather the fault of others. They want you to externalize your problems onto unseen bogeymen.
2. They tell you that you can have riches without work, that you have expensive things for free, or leisure without end. They tell you what you want to hear - that you can get something-for-nothing.
3. They usually want something from you. Usually money.
Let's take a look at some classic whopper lies, and see how these Rules can be applied to alert you to the liar.
1. The Perpetual Motion Machine: Every so often, someone comes along with a free-energy machine, or a 100-mpg carburetor, or a compressed-air car. And they get a lot of people to believe in these things, and usually rip off a few of them for lots of money - or rip off a lot of them for a little money. Either way, they make money.
And if you apply the three rules above, you can easily spot the lies. First, they tell you that the big oil companies are suppressing the invention - or the government. Either way, the high cost of gas isn't your fault. You could drive that Hummer to work every day for pennies, if only the free-energy machine wasn't "suppressed".
And that leads right to indicia number two: All this free energy (and wealth) could be yours, "but for" someone getting in the way. With your new free energy machine, you'll never pay a utility bill again! You'll just go out the garage and feed the "Mr. Fusion" a rotted banana peel or two, and watch it hum and click and just make electricity all day long! What a sweet life!
But that morphs right into indicia number three: They need you to believe in the invention, buy the book, or send them money, so they can "get the word out" and stop the "government suppression" of this great idea! So, buy shares in the company, or buy our book on Amazon!
And people buy into this, because people are idiots, look around you.
2. Car Leasing Deals: This scheme falls along the same lines as all other lies. You want a shiny new car, but can't afford one. Those mean old banks won't loan you the money - and they make the payments so high! Never fear! You can have that nice car after all! Just sign these papers, and within a few hours, you will be driving that fine ride - all for a low, low price. It is the classic something-for-nothing deal, and that right there should tip you off that it is a raw deal.
And of course, they want something from you. They want your existing car as a "trade-in" to cover the "initial fees" and then they want your money for 36 months, at which point they take your car away and tell you that you owe them $3000 in "excess wear" charges.
But hey, that can all be folded into a new lease of course! And yes, a lot of people were willing to suspend disbelief about car leases - and still do so today.
3. The Housing Meltdown: We are told (by the far right wing) that the reason the housing market tanked was that all those poor people (code word for Blacks) were buying houses they could not afford through something called the "Community Reinvestment Act" which was passed in the 1990's. How this affected the mini-mansion market is anyone's guess. Blaming minorities, as we have seen, is always a good move for liars.
But of course, they tell us, we could have mini-mansions of our own - and not even have to pay for them! Just sign this funny-money mortgage, which has an "optional payment" provision. You can buy and "flip" the house in a few years, because the Real Estate Market always goes up, up, up! and there is no way you can ever lose money in Real Estate! You will be rich without work, a Millionaire without labor - just sign these loan docs, please!
And yea, that is what they wanted all along - for you to spend your money and for them to make a commission, or to make money selling or building a house, or to make money "originating" a loan, closing on the house, doing the inspection, the appraisal, or whatever. A whole industry of people were willing to persuade you and get you to say "Yes" to granite counter-tops.
And even today, people are unwilling to give up on this dream of Free Ponies. They are convinced that "but for" all those Black folks buying houses under the CRA, their mini-mansion would be worth millions.
They think that nothing they do is their fault. How could it be? After all, they are clean-living Christian folks, and they are not culpable for any of the bad things that happen in their lives.
4. Credit Card Offers: Those mean old banks have turned you down! Well, never fear, the Credit Card company has a great offer! Not only will you have a huge line of credit, but you will get free frequent flyer miles to boot!
Yes, something-for-nothing! A free trip to Spain! For the whole family! All you need to do is just sign this Credit Card application. Never mind about the 25% interest - you pay off the balance every month, right? And those late fees, you don't have to worry about them, either. And a $79 a year service charge is nothing compared to those free airline tickets, right?
Of course, what they want from you is your money - and they will get it, often a LOT of it. You run up a credit card bill, can't pay it off, and that huge interest charge kicks in. Miss one payment and penalties apply, as well as the "punishment" interest rate.
Before long, you end up paying TWICE for everything you charged on that credit card. That $5 Big Mac costs $10 and takes a decade to pay off.
5. Cutting Taxes for the Wealthy: This is another whopper that about half the country believes in, at the present time. The proponents of this scheme tell you what you want to hear. They tell you that all of your problems are not your fault, but rather the fault of "those other people" who are sucking the treasury dry and taking all of "your" tax money, and spending it all on crack. It's not your fault you have $10,000 in credit card debt! It is the fault of those welfare queens!
And of course, they promise they can cut your taxes, and it won't affect government spending on the programs than benefit you and it won't create any deficits or add to the national debt. You can take one minus two and make it equal three. We can change how basic math works, when it comes to the budget!
So people think, "Gee, this sounds swell! All my problems will be fixed if we cut the taxes of wealthy people a few percentage points, and it won't cost me a thing!" But of course, the people selling you this idea want something. They want to get elected, and yea, they want your money.
You see, as a middle-class American, a lot of that money that the government spends is spent on you in the form of Social Security, Medicare, and other programs, as well as for various government programs, from the National Weather Service, to the Highway Administration. So when we cut these programs, they cut services to you.
And the other thing is, they really aren't promising to cut your taxes much, if at all. If you are in the 15% bracket ($70,700 a year or less, combined income) you ain't getting bubkis. But guess who are the greatest believers in this "tax cut" stuff? Yup. The very poor.
The list goes on and on, of course. Periodically, we all fall victim to some sort of mass hysteria, where we all believe things that, just a few years later, seem ridiculous. And in most cases, rather than learn from our mistakes we basically put them out of our minds.
For example, in 1989, there was a housing bubble. Funny-money mortgages were proffered by unregulated "Savings and Loans" and the price of houses, in some markets, skyrockets - and then crashed. The S&L's went bankrupt, and wiped out the savings of a lot of people (including my Sister). We all wondered what we were thinking. Just a few years earlier, we were all saying "gee, housing prices will keep going up! Up! UP!"
20 years later, almost to the day, the exact same thing happens, and people act all shocked. "Who could have seen this coming?" Well, anyone with a memory.
In the late 1990's and early 2000's, a lot of people made a lot of money (including Bain Capital) by taking companies public. The initials "IPO" were bandied about by ordinary folks. Some of these were the "dot com" startup companies with a few wild ideas, no assets, and huge drains of capital. Others were old rust-belt industries, taken private and then re-bundled for resale as an IPO (the latter being Bain Capital's trademark).
The stock market was going up! Up! UP! and everyone was making money, it seemed. But of course, it all became unraveled when people realized that a lot of these IPOs and hyped stocks were not making any money and never would. People - little people - lost their shirts.
20 years later - again - the "dot com" people are offering IPOs in Facebook, Zynega, ZipCar, Groupon, and a host of others. Some are profitable, some not. But the IPO prices are easily 5-10 times their real market value. And some folks bought in - with everything.
People never learn, it seems. Why is this? Because LIES SOUND SO DAMN GOOD! They tell us what we want to hear.
Did you lose weight? Damn, you're looking good! Sexy! Is that a new hairstyle? I like it! Chances are, you just believed half the statements I just made, even though I cannot possibly "see" you through the computer and they are flat-out lies as a result.
Walk away from the compulsive liars. Believing what you want to hear is a sure recipe for disaster.