Wealth Effect: The Danger to Our Economy and Our Life


Simply put, “wealth” is a state of being, a state of mind, and really just a feeling—a feeling that most people want and some spend their whole life pursuing.  What we need to understand, though, is that because “wealth” is a way of life, it is not a destination to reach as much as it is a constantly moving target you are always aligning yourself with.  The truly wealthy are not waiting for the achievement of being wealthy but instead are enjoying the journey of being wealthy.  That is when life becomes a lot more fun.

It is confusing for most to understand the current economic state of our country.  One media source reports an optimistic outlook, while others report an impending doom…HOW CAN THAT BE?  Well, get ready to be even more confused because according to the $500 Millionaire, both are telling the truth!

When you look at ALL of the economic indicators, not just numbers chosen by your favorite media outlet, you will see both an increase in the economy AND a decrease. There are multiple correlations like that, of course, but the interesting thing that the $500 Millionaire is now seeing is the negative correlation between savings and investments.  The $500 Millionaire feels the cause of this negative correlation is a term used in economics called the “Wealth Effect”—when the value of stock portfolios rise due to escalating stock prices or an influx of total money in the stock market.  When this happens, investors feel more comfortable and secure about their wealth, causing them to spend more.

Think about it from a government standpoint.  There is a need in our lives for government, and when correctly and ethically run, it is what keeps this country strong.  The issue is not government, though, the issue is the politicians. What politicians want is for their voters to be happy, and a simple way to make people happy is let them appear to be wealthy.  It is quite simple for the federal government to achieve this “feeling” by using the “wealth effect” to their advantage.  By lowering interest rates on savings, there is almost no difference between having your money sit in an account or simply sit in cash under your mattress.  This lets people feel as if they should do something with this money.  Since safe saving has little to no yield, the fed can lead consumers into other options.  The problem is that the banks need people’s money and the politicians need the bank.

When interest on savings is low, so are the bank profit margins.  Therefore, the only real way for the banks to make money is by offering loans and other liabilities.  With the interest rate so low on borrowing money, many people can now buy homes and still have more money left over. Now they can put it in things like homes, stocks, and other investments that they feel will yield a higher return. With

the fed’s help, the stock market is rising, houses are easy to buy, and spending is increasing faster than savings. Which means, more than ever, people are distracted by the “wealth effect” until eventually the bubble pops and it is too late. Click Here to See The Economic Sneeze

There’s obvious danger to our current economic situation…but also danger to our lives.  There are multiple times where the “wealth effect” can and will destroy someone’s life if not mitigated. Here’s a similar concept to what I mentioned above, when people are seeing that “things” are making them feel wealthy, they are assuming that THEY are actually wealthy.  If the $500 Millionaire wants you to get one thing out of any blog written, it is that wealth can NEVER come from “things” but instead wealth comes from experience. True wealth is eternal and “things” are not.  An achievement is a thing.  That is it.

It is a destination, and end point and achievements are merely a moment.  Have you ever reached a goal or an achievement and it wasn’t as good as you thought?  The difference between willing $1,000,000 and earning it is a night and day difference.  Same thing is achieved, yet a different journey had, and consequently a different experience under your belt.  By the time we realize an achievement has happened, it has already passed.

So why do “achievements” feel so good. Ready for this? The answer is that they actually don’t feel good.  The achievement is too short lived to even feel like anything.  What REALLY feels good is the success behind the achievement.  As you have heard in the past, the $500 Millionaire describes success as the progressive realization of a worthy ideal or goal.  It is the progress.  It is the blood, sweat, and tears put into getting to that achievement that made it worth it.

Wealth has NOTHING to do with things.  Wealth has to do with the state of mind you are in and the journey you have traveled.  Do not fall victim to the “wealth effect” in your personal or financial life.  If you confuse “things” with wealth than you will eventually be let down.  Some of the wealthiest people are not recognized as financially “rich” and some of the financially “richest” people are some of the least wealthy people.


About 500dollarmillionaire

Welcome to one of the most interesting challenges I have ever been given in my life. I am here to talk to you about the $500 Millionaire. The $500 Millionaire wants me to blog to you about how the $500 Millionaire became a millionaire from basically nothing. He wants me to give tips to people who want to live like Millionaires. One myth that the $500 Millionaire would like me to discuss and de-bunk is the people become successful because they have money. There are Millions of ways to go from nothing to something and this is geared towards helping people who want to better them self and become a $500 Millionaire. If you would like money to never be an issue again, then the one thing you can not afford missing is following this blog. The $500 Millionaire will help me address any questions you might have and give you a $500 Millionaire answer. You can ask anything from how to make money, how to save money, how to live like millionaire. Nothing is off limits and the $500 Millionaire will address any issue. These are all things that we will be able to answer and show you. The $500 Millionaire has created millions with less than $500 in some business and can show you how. View all posts by 500dollarmillionaire

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