Serving Bread

My buddy Tyler published a post with his reflections on capitalism. In his post, he links to a Speaking of Faith interview with Jonathan Greenblatt, co-founder of Ethos Water. (It’s an excellent interview and I recommend you download the podcast) I appreciate Greenblatt’s motivation to eradicate poverty and how to use some of the good of capitalism to do that. One of the creative ideas that Greenblatt mentioned in the interview is the development of an X PRIZE Foundation prize that addresses poverty issues. The idea is that you can focus the spirit of competition toward eradicating a social ill. I’d be interested to see how this prize is put forward.

Bill Gates has also written (and spoken) about using capitalism in a way that would address poverty in the world. He calls it “Creative Capitalism.” The idea is simply that you can fight AIDS and increase your bottom line at the same time. Gates writes, “Creative capitalism is a way to answer a vital question: How can we most effectively spread the benefits of capitalism and the huge improvements in quality of life it can provide to peopel who have been left out?”

Of course, Gates did not think too much of creative capitalism when he was building Microsoft. It is easier to modify a business plan when you have exhausted a previous plan and are ready to look for a new market for your product. My critique is similar to that of developing nations of the developed world when it comes to better environmental standards: “You can afford to ask for stricter emissions after you have already industrialized.” It is easier for Microsoft to modify its business model now that they are a successful company. I doubt Gates would have thought too much about creative capitalism when he was crushing the competition in the 1980s and 90s. Creative capitalism may be a step forward, but as Tyler muses in his post,

How is the Christian to look at the data before us? In Philippians 2.4, Paul writes, “Let each of you look not to your own interests, but to the interests of others.” Friedman likely describes our natural instinct, that is, it does not take training to be selfish. Paul, on the other hand, gives us a vision of the world how God wants it and that vision demands character formation. Are Christianity and capitalism diametrically opposed to each other? I do not think so, but I may not say the same of Christianity and Friedmanism. Capitalism, if rightly focused on God and God’s purposes, can likely be a force of community, or social capital.

The jury is still out on creative capitalism and whether it is the force that is focused on God and God’s purposes.

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Here are some highlights from the annual World Wealth Report by Merrill Lynch and Capgemini:

• 9.5 million people worldwide were millionaires in 2006 (an increase of 8.3% over 2005).
• The world’s millionaires are worth a combined $37.2 trillion (that’s almost $4 million per person).
• Their total charitable giving was $258 billion, which is a 0.69% “tithe”.
• Latin America and Africa have the largest percentage of the super-rich (those who are worth more than $30 million). In other words, the gap between the rich and the super-rich is the widest in those regions.
• But these folks also spent 1.8% of their net worth last year to “investments of passion” (i.e. material things that make them happy).

(HT: “Time Magazine”, July 16, 2007, page 14-15)

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I don’t like financing anything (except my house). In fact, I feel guilty; like I am mismanaging my money. For the past 4 1/2 years, I have wondered about the decision to have bought one of our cars. I have learned a lot through that process (about myself and money management). There are few things that find closure in my life, so it was a day of celebration when I clicked the “pay” button for the last time and paid off my car. And I just got the deed by mail.

When we bought this car on credit, Rhoda and I began saving for the day when we would need to replace it (which we recognize will be years away). For all of you who read my blog and will one day find yourself in the world of “Should I finance my car?” If you are able, don’t do it! If you must, then make sure to cap it at a 60 month term. Anything longer might make your payments outlive the usefulness of your car!

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[tag]Money[/tag] doesn’t make you [tag]happy[/tag]. I now have $50 million, but I was just as happy when I had $48 million.

– Governor [tag]Arnold Schwarzenegger[/tag], Money Magazine, March 2007, Page 88.

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Most Americans probably bank with Bank of America. It is the largest commercial bank in the United States and the third largest company in the world (from Wikipedia). But did you know, that if you are saving through Bank of America, you are actually losing money. That’s right, your money is worth less today than it was yesterday. I just got my statement from Bank of America and my interest rate on my Savings has gone down from 0.5% APR to 0.20% APR. Even though the Federal Reserve has increased interest rates (which means both loans and savings should presumably go up), the interest rate on my savings has actually gone down.

Now, why am I losing money by saving money? Because inflation is higher than the interest earnings on my Savings.

Check this out:

If you put $1000 in Bank of America Savings at 0.20%, your interest rate earnings at the end of the year (non-compound, but the difference is negligeable) is  $2. That’s right, $2. And then of course you pay tax on that $2, which if you are in the 15% bracket, you net with $1.70 (I think that’s enough for a cup of Grande Coffee at Starbucks).

But wait, what about inflation? A year from now, your $1000 is only worth $970 because of about a 3% inflation rate. So your $1000 is not worth $1002, it’s actually worth something like $971.70. So you effectively lost $28.30 in value.

What is the answer?

1. Shop for better Savings rates. Check out ING (and if you decide to sign-up, show me some love and let me refer you so I can get some love from ING as well)
2. For long-term, think stocks.
3. For intermediate-term, think I-bonds (government bonds that are inflation protected) or Certificate of Deposits (CDs).

Finally, for those of you who refuse to take my humble advice and want to lose your money to Bank of America, how about this, you invest in the Bank of Eddy. I will give you 1% rate on your savings (5 times better than what BofA offers) and I will pay any tax on your interest earnings. I know, I know… I’m being sooo generous!

(I’ve been meaning to start a finances only blog… maybe that’s my next hobby!)

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