The Cost of Financial Illiteracy - Top 3 Takeaways – November 29th, 2023
- Ok, he really is economically illiterate. I have a natural predisposition to provide benefit of the doubt that policy makers, especially those rising to the level of the presidency, understand the most basic of economic concepts. Which is to say that most often when politicians, especially the current President of the United States, says stuff that sounds as though they’re economically illiterate, I’m inclined to think they’re playing a political game in which they’re relying on their voters being economically illiterate (in order for their espoused nonsense to sound as though it actually makes sense). Overtime this tactic has proved effective for many Democrats who have had success in suggesting that there really are freebies from Uncle Sam. From Obamacare and Obama phones to Biden Bucks there has seemingly been a large contingent of voters who think that the government has the ability to give things away for free. Of course, the multiyear inflation crisis that most Americans are far from having recovered from began to paint the picture about how expensive it really is when the government gives away a bunch of “free” stuff. Still, the average American remains financially illiterate. In this year’s TIAA Insititute’s financial literally exam, the average score was a 48. What this means is that most adults still don’t know most things when it comes to financial literacy. While the statistic is a broad indictment of our education system, illustrating the abject failure of the education establishment to provide the most basic education necessary for one to successfully navigate the real world financially, it does at least help explain how and why Americans could have listened to Joe Biden and thought...yeah, I’m voting for that guy. Anyway, yesterday was the day that my perspective on the issue, at least at it pertains to President Biden, changed.
- I no longer think that Joe Biden knows what he’s saying is stupid and is simply counting on his voters being even dumber. No, I think he’s every bit as ignorant as his voters – which by way of his policy would explain a few things. My reason for this revelation was what President Biden just said pertaining to inflation. At the onset of his White House supply chain initiative he told companies... Any corporation that has not brought their prices back down, even as inflation has come down, even as the supply chains have been rebuilt, it’s time to stop the price gouging. Give the American consumer a break. Now it would be one thing to say something so hilariously stupid in a public address, one meant for the average economically illiterate boob who might vote for him. It's another thing when it's in an isolated address for corporate leaders. Biden’s commentary was so absurd it prompted CNBC to address the comment by saying: While it’s true that the annual rate of inflation has cooled from its high last summer, this doesn’t translate directly into falling consumer prices. It only means that prices are rising at a lower rate. Well bingo. The most recent inflation rate, at 3.2%, means prices are 3.2% higher today than they were when they were at over 40-year highs last year! And Biden’s talking about prices coming down? He’s talking about price gauging? The fact of the matter is that the average US corporate margin, their rate of profit, is nearly 3% lower than it was a year ago. In other words, the average company selling the average thing has effectively eaten half of the increase in the inflation rate over the past year. Biden should be thanking businesses for doing this...just imagine if they hadn’t? Anyway, here’s the thing, the Biden Administration is well aware that the average American is unhappy with the economy. In an average of current polling President Biden has 38% approval on the economy compared with 59% disapproval. On that note White House press secretary Karine Jean-Pierre said: We understand that people are still not feeling it, we get that. So, in other words, President Biden’s supply chain initiative that he provided in the economically illiterate address would appear to be his earnest effort to attempt to move the needle on the economy as opposed to the typical public platitudes. This is why I’m now of the belief that it’s not just for show – that President Biden really might be just that economically illiterate. Which, going back to the TIAA Institute’s annual study, makes him normal. That just tends to be a bigger issue when the person who leads the world’s largest economy doesn’t understand that a lower increase in the rate of inflation doesn’t equal lower prices. There have often been jokes about the best and brightest not usually getting into politics. That’s been taken to spectacular new lows with ‘ole Joe running the show. Speaking of financial literacy and our money...
- A lot of it’s being wasted. No this isn’t a continuation of what the federal government does with our money – though that would most certainly apply to my third takeaway today. It’s about the hard cost of financial illiteracy to us. There are a myriad of different ways that a lack of financial literacy can come back to literally cost us big time. But a study from the National Financial Educators Council shows that the average annual cost of to the average American who isn’t financially literate has grown to $1,819 per year. And for 15% of Americans, a lack of financial literacy is costing them over $10,000 per year. To put that in perspective, in today’s dollars, over the course of a 40-year career, the average person is working the equivalent of a year and a half simply to pay for the added cost of not being financially literate. We’re all familiar with the saying that it’s wise to work smarter, not harder. Improving financial literacy would be the epitome of that expression. It’ll likely come as no surprise that literally every aspect of one’s financial situation, regardless of age or income, improves as financial literacy improves. It’s perhaps the greatest lesson that most Americans still need to learn. And I have a hunch that if the lesson is learned...far fewer people would look at Joe Biden and think...yeah...that guy makes a lot of sense. In other words, improved financial literacy wouldn’t just benefit our own personal situations, there’s a good chance it’d help to make our country great again...