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Renowned author George Gilder recently told an audience at The Heritage Foundation that conservatives have a fundamental problem in their economic ideology when it comes to money. They’re all for free markets in other areas of the economy, but when it comes to this one topic, they want not just rules but rules that don’t make sense.

Gilder said too many conservatives seem to have accepted that “centralized control of money is crucial to economic growth and expansion.” And who does he blame for this? In part, Gilder said, it was Milton Friedman, the iconic free-market economist, who set us on this course.

It is largely because of Friedman, said Gilder, that other conservatives accept centralized control of money and “join in believing that the money supply has to expand regularly to accommodate economic growth.”

Gilder is probably right in that Friedman’s “constant money growth rule” has helped keep conservatives focused on constraining the Fed with “rules-based” monetary policies. But Friedman’s original idea took off in the 1960s, and even though many conservative economists seem to have missed it, Friedman suggested a very different approach to monetary reform in the 1980s.

The fall issue of the Cato Journal includes an excellent reminder of the elder Friedman’s ideas. This article, Monetary Policy Structures, originally appeared in a 1984 book titled Candid Conversations on Monetary Policy.

It’s well worth reading the entire article, but here are a few Friedman quotes from Monetary Policy Structures that may surprise some people.

Page 632: I now realize in my later years that our approach has been misconceived. It was our view that the way to improve monetary policy was (a) to learn more about how money operated, (b) to construct appropriate rules for the conduct of monetary policy, and (c) to persuade the people who run monetary policy that they were the right rules.

Page 634: My ultimate ideal at the moment…is to eliminate every element of discretion. At the moment, my ultimate proposal is that we freeze what is called high-powered money–that is to say, current Federal Reserve notes and deposits at the Federal Reserve. To put it more simply… never print another one except to replace those that wear out. Just freeze it, and you don’t need a Federal Reserve System.

Page 634: Under those circumstances, what would happen would be that the markets would determine and would adjust the total quantity of money in the sense of the money we use including deposits plus currency.

Page 636: As you can see, I am not in favor of the independence of the Federal Reserve. This is a democracy. And I believe that money is too important to leave to [a] central bank, that it is intolerable that a group of non-elected people should have the power to create a major inflation or a major recession.

Page 636: The best change of all would be to abolish the Fed completely and simply have zero creation of high-powered money and no discretionary powers anywhere.

Page 636: My preference is to have a constitutional amendment to enforce a zero growth in high-powered money.

Page 644: People who say they’re for a gold standard vary from people at one extreme, like Ron Paul, who is for an honest-to-God gold standard in the sense that gold would be the medium of exchange and nothing else would have legal tender status. That’s an honest-to-God gold standard, and I may say I would not be against such a standard. That would work very well, but there isn’t a chance of a snow ball in hell of … getting it.

Page 645: The other notion that you’re raising is not to have a gold standard, but rather competitive money. I’m all in favor of competitive money, but that has nothing to do with a monetary standard. It has to do with banking regulations.

Page 645: I would be strongly in favor of eliminating any such barrier [capital gains taxes] to using gold or anything else as an alternative. I am strongly in favor of changing the laws in such a way as to permit competitive banking.

Page 645: As an economist and student of money, I would predict that none of those competitive monies will displace the official government money unless there is really extreme mismanagement by the government. That doesn’t mean I’m not in favor of it; I’m in favor of it. Maybe I’m wrong. And if I’m wrong, I’d like to see it operate. I’d like to see it have the opportunity.

Page 648: Now, I may be wrong. But you know the world would exist very well, it would be a very fine world, if prices were going down on the average of 1 percent a year or 2 percent a year.

Page 648: I believe that the Federal Reserve does a large part of its harm by its continuous fine-tuning in the market. It’s in and out, in and out. It’s introducing an additional uncertainty in the market that need not be there. The Federal Reserve itself can do a lot better than that and cut out this fine-tuning it’s engaged in. But if it did, it would lose its influence and importance, so it isn’t going to do it.

Page 650: What you ought to move to is to dismantle the Federal Deposit Insurance Corporation and establish private insurance companies that will provide private insurance to banks and other institutions.

Page 651: I’ve always been in favor of immediate disclosure of Fed action. There is absolutely no justification whatsoever for the Fed waiting a month before they disclose what they said and what they have decided at these meetings.

Page 651: In fact, I would be in favor of publishing transcripts of the discussion at open market investment committee meetings. So I’m all in favor of immediate disclosure.

Friedman’s work on monetary policy rules has influenced generations of economists. It’s virtually impossible to get a PhD in economics without studying his research, as well as the work of those who followed in his footsteps.

But this focus is almost always on rules-based monetary policies. Few graduate school seminars even mention that Friedman was in favor of competitive banking.

It’s all but certain this state of affairs has contributed to what Gilder calls the “division [that] has paralyzed conservatives in addressing the issue of money.” But Friedman clearly wanted to move past that point.

Author: Mike Paterson

Mike Paterson has more than 30 years of experience trading FX including as a senior trader with UBS and Credit Suisse. He was also head of FX at the State Bank of Victoria. With sizeable daily trading volumes Mike carved out a name in the market combining professional integrity with a cynical grasp of seizing market opportunity. Since leaving the City, Mike has been working as an independent consultant and trading along with presenting seminars and writing for a number of publications. Mike lives in Kent and supports Southend United FC.

LONDON (Reuters) – European Central Bank policymakers will be able to use the information they gain from their new banking supervisory powers in the traditional monetary policy side of their jobs, ECB Vice President Vitor Constancio said on Monday.

The ECB will take over the supervision of around 120 the euro zones most important banks next month. It is one of the blocs flagship responses to the financial crisis but marks a huge broadening of the central banks primary role of keeping inflation in check.

Up until now policymakers have stressed how the responsibilities will be clearly separated to avoid a blurring of the lines between the two, but Constancio said in reality that would be impossible, and anyway should be seen as a plus.

The separation of the two policy functions (monetary policy and supervisory) does not preclude benefiting from combining them, he said at the London think-tank, Chatham House.

If policymakers are members of the same institution, they can decide independently, but in a pragmatic way, taking spontaneously into account the spillovers between policy areas.

It could apply in both directions, he added. The interlinkage between monetary policy and financial stability for decisions on banking supervision matters could be just as useful as the other way around.

Combining and using the experience is one aspect of the synergies that emerge from having all these functions under one roof.

Germany in particular has been wary about combining the roles of monetary policy and interest rate setting with that of supervising banks.

The concern is the ECB will become overburdened and that worries about the potential negative impact of higher interest rates or other policy moves on a countrys, or set of countries banks, could end up delaying monetary policy decisions.

Despite stressing that combining all new information should be seen as a benefit, Constancio did say however that neither banking nor monetary policy considerations should have too much influence on decisions about the other.

Obviously supervisory decisions have to be taken not considering their affects on monetary policy and vice versa, he said.

(Reporting by Marc Jones; Editing by Crispian Balmer)

The US Federal Reserve has been stimulating the US economy with extraordinarily easy monetary policy. But it is preparing to tighten.

The European Central Bank and Bank of Japan, however, appear to be on the verge of easing further.

Meanwhile, central bankers in Russia and Ukraine are all about tighter monetary policy.

To help everyone keep track, Morgan Stanley offers this guide to the monetary policy stance and bias of every major economys central bank around the world.

Morgan Stanley

Heres Morgan Stanleys outlook for the five most important central banks:

US – Expect First Rate Hike In Q1 2016
Dollar strength and overseas economic weakness could feed disinflation bck to the US, lowering need for imminent rate hike from the Fed.

Euro Area – Lower For Longer, But No QE
The chances of QE has increased (up to 40% probability in our view), but not our base-case; the need for full-blown QE will be reduced, if the ABSPP was sizeable and successful.

Japan – Further Easing Expected
Policy response to poor data likely to be further easing of monetary policy as soon as end-October and more aggressive action on the raft of structural reforms.

UK – Rate Rise Expected in Q1 2015
A first rate rise in 1Q would give a few more months for the recover to settle in. We expect three 25bp rate rises in each of 2015 and 2016. However, this wont happen without higher pay growth.

China – Targeted Easing
In view of strong growth headwinds, the PBOC is likely to maintain the loosening bias in monetary policy; targeted easing measures such as pledged supplementary lending (PSL) and selective RRR cuts will likely remain as the main tools to keep financial conditions loose.

The stock markets plunge over concerns about the eurozone; there’s a flight from lower quality sovereign bonds; Greek, Spanish and other periphery bond yields spike. It looks like the eurozone debt crisis is back. But this time around we really should get to grips with the fact that what we’ve got here is really not a debt crisis. Sure, that’s the proximate problem, the one that is most obvious and in our faces. But the root problem, the ultimate cause, has nothing at all to do with either debt or fiscal policy: It’s monetary policy that is at error here. And yes, it is indeed all the fault of the ECB and the fools that designed Europe’s current monetary structure.

Here’s the sort of thing that is happening in the markets:

Greece’s benchmark cost of borrowing for 10 years has soared from 5.6 per cent last month to 8.71 per cent, while the nation’s main stock market sank 2.5 per cent yesterday and is down a mammoth 12 per cent in two days.

Spain – which failed to cover a EUR3.5bn (pound;2.8bn) debt auction – was also hit by a sell-off alongside Italy, France and Portugal. Even UK and German debt markets were not spared the sell-off as traders sought the ultimate safe haven of US Treasury bonds.

Growth in the eurozone stagnated between April and June, and dire economic data since then – including Germany’s worst plunge in exports for five years – has left the bloc on the brink of outright economic contraction in the current quarter. Investors are also questioning how far the ECB is willing to go to support the region after Mr Draghi evaded questions on the scale of the central bank’s private sector asset purchases.

To put the basic economic problem in simplistic terms: The entire eurozone is close to recession, again, and deflation, a general deflation, is a real possibility. Interest rates are near zero, we’re at that zero monetary bound. So we can’t slash interest rates to get the economy moving again. We can’t use fiscal policy either. Partly because everyone’s deficits are at or above what the euro system allows them to be, partly because those who most need to borrow to expand simply cannot borrow at present. Greece, even after the private sector creditors took a 70% haircut, still has debt well north of 100% of GDP and, as above, would pay near 9% to raise more.

It’s simply not possible to use the two standard policies to get the continent up out of what is, by now, getting on to be as bad as the Great Depression (and in some periphery countries is already worse than that).

That means that we’ve only got unconventional monetary policy left to us. The usual bleats about everyone needing structural reform are entirely correct: but that takes years if not decades and there’s absolutely no point at all in condemning an entire generation to waiting for that.

A decade ago no one would really have believed in such unconventional monetary policy. But both the UK and the US show that quantitative easing, the deliberate flooding of the market with newly minted money, does in fact work. Both economies sufferred in the crash, of course they did, but they’ve both recovered. Perhaps not as well as we would have liked but that QE has worked. And the one thing the ECB hasn’t done is QE and that is the policy difference. And thus, given that QE has worked, the ECB hasn’t done QE therefore the ECB should do QE.

There are problems with this, of course. We’ve still got Germans at the Bundesbank insisting that we’ve already got loose money: which is a ridiculous statement. Low interest rates do not mean a loose monetary policy: expanding money supply does and that’s something that we’ve not in fact got. The answer to this trick question is that near zero nominal interest rates can still be tight monetary policy in a deflationary world. Which is where we are.

It’s entirely true that we see the symptoms of the problem as high and rising national debts. To the point where it wouldn’t surprise at all to see further haircuts on some issuers’ debt. But that is a symptom: the solution is full blown QE in the eurozone.

This really isn’t a difficult diagnosis: Doesn’t anyone understand what Scott Sumner has been saying all these years?

My latest book is “23 Things We Are Telling You About Capitalism” At Amazon or Amazon UK. A critical (highly critical) re-appraisal of Ha Joon Chang’s “23 Things They Don’t Tell You About Capitalism”.

[BusinessWire] Discover Financial Services (NYSE:DFS) is ringing in the holiday season with new cash back rewards. Discover it and Discover More card members can sign up to earn 5% Cashback Bonus on up to $1,500 in online shopping and department store purchases made between Oct. 1 and Dec. 31, 2014. “This holiday season, Discover is upping the ante with a popular Cashback Bonus category to help our cardmembers see savings, not dollar signs,” said Heather L. Roche, vice president of rewards at Discover.

Stock Performance

Taking a look at the company’s recent performance, Discover Financial Services (DFS) reported second quarter earnings for fiscal 2014 on July 22nd. The company reported actual earnings per share of $1.35 against the consensus Street estimate of $1.30. This represents year over year growth of 15%. Discover Financial Services posted revenue of $2.17 billion against estimates of $2.16 billion.

Discover Financial Services (DFS) is currently valued at $28.89 billion and closed the last trading session at $62.45. The stock has a 50-day moving average of $63.63 and a 200-day moving average of $60.58.

Is this a Buying Opportunity?

There are currently sixteen analysts that we track that cover the stock. Of those sixteen, one has a Buy rating, three have a hold rating and twelve have a Sell rating. On a consensus basis this yields a score of 2.88 and a Buy. The combined price objective of these covering analysts is $68.89, which represents a -6.27% difference to the last closing price.

The most recent analyst activity consisted of Oppenheimer reiterating their Outperform stance on the company. Oppenheimer has a price target of $73 which represents an upside of 12.6% from the last closing price. On the date of the report, the stock closed at $63.48.

Another research firm weighing in recently was Zacks who also reiterated their rating on the stock. On Sept 26thZacks reiterated their price target on the stock $67, or a 3.3% upside to the current price. On the day of the report, DFS shares closed at $64.97.

Company Profile

Discover Financial Services (DFS), a bank holding company, provides a range of financial products and services in the United States. The company operates in two segments, Direct Banking and Payment Services. The Direct Banking segment offers Discover card-branded credit cards to individuals and small businesses on the Discover Network. This segment also provides other consumer banking products and services, including private student loans, personal loans, home loans, home equity loans, and prepaid cards; and other consumer lending and deposit products, such as certificates of deposit, money market accounts, savings accounts, checking accounts, and individual retirement account certificates of deposit. The Payment Services segment operates the Discover Network, a payment card transaction processing network for Discover-branded credit cards, as well as for credit, debit, and prepaid cards issued by third parties.

* Dollar gains traction after Wednesday selloff

* Monetary policy divergence between Fed, ECB supports
dollar

* Weak Spanish debt auction, euro zone inflation data
underpin dollar

(Updates prices, adds comments; changes byline, dateline,
previous LONDON)

By Sam Forgione

NEW YORK, Oct 16 (Reuters) – The US dollar recovered
against a basket of major currencies on Thursday on the view
that Wednesdays selloff was overdone given the relative
strength of the US economy and the Federal Reserves
commitment to tightening US monetary policy.

A disappointing auction of Spanish debt and data showing
deflation hit five peripheral euro zone countries in September
underscored the relative health of the US economy and the
divergence between the Feds path toward hiking interest rates
and the European Central Banks potential to further loosen
monetary policy.

The market is unwinding some of the moves that we saw
yesterday as we come to the conclusion that, even if a Fed
liftoff comes a bit later, that still means the US dollar
continues to have an advantage relative to most measures,
said Martin Schwerdtfeger, currency strategist at TD Securities
in Toronto.

The dollar gained traction after hitting a three-week low
against the euro and the Swiss franc Wednesday and a more than
one-month low against the safe-haven yen.

Analysts said the dollar had upside against the euro since
the latest inflation data in the euro zone bolstered the view
that the ECB could boost stimulus measures.

While consumer inflation at 0.3 percent was unchanged from
Eurostats Sept. 30 estimate and met market expectations,
Greece, Italy, Slovakia, Slovenia and Spain showed deflation in
September on persistently depressed household demand.

US Labor Department data showing the number of Americans
filing new claims for jobless benefits fell to a 14-year low
last week, meanwhile, drove home the view that the outlook for
the United States remained positive compared to Europe.

I still remain pretty confident that the US economy will
hold up, said Win Thin, head of emerging markets currency
strategy with Brown Brothers Harriman in New York.

Analysts said the dollars rebound was limited as traders
awaited comments from Fed officials Thursday. Philadelphia Fed
President Charles Plosser said the market selloff was not yet
significant enough to throw off the US economy or to garner a
response from the Federal Reserve.

The euro was last down 0.72 percent against the
dollar at $1.2745 after hitting a high of $1.2885 Wednesday. The
euro hit an 11-month low against the yen of 134.16 yen.

The dollar was last up 0.06 percent against the yen
at 105.96 yen after hitting a low of 105.21 Wednesday.

The dollar was last up 0.68 percent against the Swiss franc
at 0.9463 franc after hitting a three-week low of 0.9361
on Wednesday. The dollar index, which measures the greenback
against a basket of six major currencies, was last down 0.07
percent at 85.085.

US stocks fell again, with the SP 500 stock index
last down 0.61 percent, while Treasuries yields rose.

(Reporting by Sam Forgione; Editing by James Dalgleish)

SEOUL, Oct. 15 (Yonhap) — The following are translations of key parts of remarks made by Bank of Korea Gov. Lee Ju-yeol at a news conference after the monetary policy committee voted to cut the base rate to a record-low of 2 percent. They do not cover remarks from separately released statements.

– The monetary policy committees decision to lower the base rate to 2 percent was not unanimous. One board member voted for a rate freeze.

– The two rate cuts are likely to increase household debt. But the pace of household debt growth will not be steep compared with the past.

– Going forward, core inflation is expected to linger in the 2-percent range.

– The South Korean economy is not in a stage of entering deflation.

– The current 2-percent base rate is not insufficient to support an economic recovery.

(END)

The Inequality Trifecta

October 20th, 2014

LAGUNA BEACH – There were quite a few disconnects at the recently concluded Annual Meetings of the International Monetary Fund and World Bank. Among the most striking was the disparity between participants’ interest in discussions of inequality and the ongoing lack of a formal action plan for governments to address it. This represents a profound failure of policy imagination – one that must urgently be addressed.

There is good reason for the spike in interest. While inequality has decreased across countries, it has increased within them, in the advanced and developing worlds alike. The process has been driven by a combination of secular and structural issues – including the changing nature of technological advancement, the rise of “winner-take-all” investment characteristics, and political systems favoring the wealthy – and has been turbocharged by cyclical forces.

In the developed world, the problem is rooted in unprecedented political polarization, which has impeded comprehensive responses and placed an excessive policy burden on central banks. Though monetary authorities enjoy more political autonomy than other policymaking bodies, they lack the needed tools to address effectively the challenges that their countries face.

In normal times, fiscal policy would support monetary policy, including by playing a redistributive role. But these are not normal times. With political gridlock blocking an appropriate fiscal response – after 2008, the United States Congress did not pass an annual budget, a basic component of responsible economic governance, for five years – central banks have been forced to bolster economies artificially. To do so, they have relied on near-zero interest rates and unconventional measures like quantitative easing to stimulate growth and job creation.

Beyond being incomplete, this approach implicitly favors the wealthy, who hold a disproportionately large share of financial assets. Meanwhile, companies have become increasingly aggressive in their efforts to reduce their tax bills, including through so-called inversions, by which they move their headquarters to lower-tax jurisdictions.

As a result, most countries face a trio of inequalities – of income, wealth, and opportunity – which, left unchecked, reinforce one another, with far-reaching consequences. Indeed, beyond this trio’s moral, social, and political implications lies a serious economic concern: instead of creating incentives for hard work and innovation, inequality begins to undermine economic dynamism, investment, employment, and prosperity.

Given that affluent households spend a smaller share of their incomes and wealth, greater inequality translates into lower overall consumption, thereby hindering the recovery of economies already burdened by inadequate aggregate demand. Today’s high levels of inequality also impede the structural reforms needed to boost productivity, while undermining efforts to address residual pockets of excessive indebtedness.

This is a dangerous combination that erodes social cohesion, political effectiveness, current GDP growth, and future economic potential. That is why it is so disappointing that, despite heightened awareness of inequality, the IMF/World Bank meetings – a gathering of thousands of policymakers, private-sector participants, and journalists, which included seminars on inequality in advanced countries and developing regions alike – failed to make a consequential impact on the policy agenda.

Policymakers seem convinced that the time is not right for a meaningful initiative to address inequality of income, wealth, and opportunity. But waiting will only make the problem more difficult to resolve.

In fact, a number of steps can and should be taken to stem the rise in inequality. In the US, for example, sustained political determination would help to close massive loopholes in estate planning and inheritance, as well as in household and corporate taxation, that disproportionately benefit the wealthy.

Likewise, there is scope for removing the antiquated practice of taxing hedge and private-equity funds’ “carried interest” at a preferential rate. The way home ownership is taxed and subsidized could be reformed more significantly, especially at the top price levels. And a strong case has been made for raising the minimum wage.

To be sure, such measures will make only a dent in inequality, albeit an important and visible one. In order to deepen their impact, a more comprehensive macroeconomic policy stance is needed, with the explicit goal of reinvigorating and redesigning structural-reform efforts, boosting aggregate demand, and eliminating debt overhangs. Such an approach would reduce the enormous policy burden currently borne by central banks.

It is time for heightened global attention to inequality to translate into concerted action. Some initiatives would tackle inequality directly; others would defuse some of the forces that drive it. Together, they would go a long way toward mitigating a serious impediment to the economic and social wellbeing of current and future generations.

How to Retire Rich

October 20th, 2014

In theory there is no difference between theory and practice. In practice there is.Yogi Berra

Its October, AKA the major league baseball postseason. As a lifelong baseball fan, I take the wisdom of Yogi Berra seriously. And when it comes to planning for the autumn of life, Yogi is spot on.

It seems as though every day an article titled 5 Tips for Retirement Saving or something similar hits my inbox. I scan for the authors name, and Im amazed by how often its distinctly contemporaryJennifer, Brandon, or another name of that vintage. Jennifers title is something like staff writer, and I immediately picture a fresh-faced young person with a newly minted journalism degree. After work, maybe she jumps in her starter BMW and heads to a local watering hole with her friends to gripe about student loan repayments.

Jennifer means well. After all, shes just doing her job. She recommends setting financial goals, getting out of debt, living within your means, and saving from a young age. I wont argue with those recommendations. Jennifers grandparents probably did just that. If you can pull off following that advice to a T, chances are youll accumulate a good deal of wealth.

However, once Jennifer has tried to put her advice to practice for a couple of decades, she might understand that its neither simple nor easy, despite how it might sound. Most people know what they should do, but its often tough and painful to execute in real life.

During my 74 years Ive met a lot of successful and rich retired friends who sure didnt go about it Jennifers way. How many baby boomers do you know who married young, raised a family, put their children through school, and consistently saved in their 20s, 30s or even 40s? There are a few, but manyif not mostyoung families lived through a decade or more of Why is there is so much month left at the end of the money?

Several times a month a 50- or 60-year-old Millers Money subscriber writes in asking for help with how to accomplish a last-ditch push to save. Truth be told, most of my friends never got serious about retirement until after theyd raised children. It doesnt mean they were right; its just the way it was. Should they have started earlier? Of course. But they didnt. Some didnt know how, some were overwhelmed by day-to-day expenses, and some overspent on stuff, stuff, and more stuff. Many got serious in the nick of time, but they did it.

Retiring Rich When Youre Under the Wire

Whatever your age, fretting about what you didnt do is futile. Start making the needed changes today.

The best place to begin is to define rich. For our team, rich means having enough money to choose whether or not to work and enough money that you control your time. Rich means you live comfortably according to your personal standards. If youve lived a middle-class lifestyle, a rich retirement means you can maintain that same lifestyle without worry.

Ten days out of high school, I was on a train to Parris Island, South Carolina. One of the best teachers I ever had was SSgt. Thomas R. Phebus. He was an archetypethe ideal combination of common sense and straight talk. Im going to take a page out of his book and share some straight talk on how to make a rich retirement your reality.

The 9-Step Program

#1Saving money is a pain!

When I entered the work force, every major company and most government agencies offered some sort of pension plan. The bottom line: come work for us at age 25, stay for 40 years, retire at 65, and well continue to pay you until you die, normally another 20 years or so.

Pension plans are no longer the norm. Corporate America just couldnt do it. Some filed for bankruptcy and broke their promises. Either way, in the private sector, 401(k)s are the new norm. Theyre optionalno one makes you contribute.

Now local governments are filing for bankruptcy, many unable to fulfill their pension promises. No matter whom you work fora big or small corporation, a government agency, or yourselfif you want to retire, be damn sure youre savinghellip; no matter what youve been promised.

#2Plan to work your tail off.

I dont know anyone whos accumulated even modest wealth working 40 hours a week. If you want to work for 40 years and pay for 60-plus years of life, chances are youll have to do more than that.

When you work, you trade your time, talent, and expertise for money. When you retire, you trade your money for time. In theory, you can work 60 hours a week, live off two-thirds of your income (40 hours worth), and invest the remaining one-third (20 hours worth). However, if you start saving early, perhaps saving income equal to 10 hours of work will be enough. Your savings will have more time to accumulate and compound, and youve bought yourself extra leisure time along the way.

If both spouses are working hard outside the home, which is the norm today, work toward living off of one paycheck and investing the other (or using it to pay off debts and then start investing). Many of our retired friends did just that.

#3Dont complain when others have more.

Someone always will.

This one saddens me. We have a few friends who chose to work 40 hours a week for most of their working lives. They felt it was important to spend more time at home with their families, and theres nothing wrong with that choice. Still, its a trade-off.

I look at it as though they enjoyed mini slices of retirement time when they were young. If thats your choice, dont begrudge others who chose a different path and worked and/or saved more. They dont owe you anything.

#4Get out of debt and stay that way.

Virtually every wealthy friend I have only started to build wealth after eliminating debt, including home mortgages. Some theory-loving pundits suggest taking out a low-interest mortgage and investing the money with the hope of earning more than the mortgage interest. Oh really? Most peoples investments dont perform that well.

The chart below highlights how poorly the average investor stacks up:

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