Dddhgg's great escape plan

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Thanks, and good for you that you've succeeded.

I'm willing to take the shot. I'm not a "one-trick pony", so I've got a few aces up my sleeve as to making money. Besides, I didn't say I was going to make the great escape to Ireland or wherever right now. Within 5 to 7 years perhaps. First I'm going to find out if I can become a paid PhD researcher (in order to make some money to put aside, like you said) and if a career in writing and free scholarship really suits me.

We don't just see other people's misery, what we also see is all the great and genuine things people can do for each other when circumstances are not the best. We also start to see the real meanings behind some of the social things people do in other countries, and can use that understanding to help shape our own views and voting patterns back home. The world has tremendous capacity for wickedness and horror and war, etc., but it doesn't have to stay unbalanced like that unless we let it. And we have to first know the real world, and understand it, and accept it before we can ever hope to change it.

You're absolutely right that there will be some people who will only see you for your money, but there will be some people who won't. There's a lot of crap out there no matter where you go, and it kinda boils down to whether that crap is worth sifting through to find the diamonds, so to speak. That is of course an individual decision.

Ultimately I'm not really trying to convince you to become a traveler, only to point out in a neutral way that every plan has its benefits and pitfalls. Over the course of the past several years, I for one have dreamt of getting a cabin out in the mountains far off somewhere and just living off the land, getting away from it all. So I would only be a hypocrite to criticize your plan in any unbalanced negative way. Also, of course I don't live your life and I don't have cerebral palsy, so I don't know what you are willing to put up with, nor would I ever pretend to know. It just seems like you are very intelligent and level-headed person, that I did not think you were in any need of an "escape" plan.

Thank you! You're correct in asserting that there's also a lot of good and beautiful in the world. And I don't think your criticism is at all too negative - I find it very constructive to talk about the possible pitfalls and shortcomings of such a venture as I'm proposing. As for the need for an escape plan, I genuinely think everybody should have one, not necessarily to act upon, but rather as a way of seeing that things can, and sometimes ought to be, done radically differently if life gets unbearably rough, in short: a way towards hope. The other option I can think of is suicide, which I believe is pointless, like I said before.

You know, I really think we're essentially doing the same thing, namely exploring what it means to be fully human - you through your travels and I by building my solitary little paradise. I think men can grow through leading the observing life, experiencing all that the world and humanity has to offer, but also through solitude and leading the contemplative life.

True, true. After all, Eastern belief systems have been supporting asceticism, meditation and seclusion as a way to reach true understanding for millennia. The people doing this, however, already have a certain worldview and mindset prior to seclusion that is conducive to understanding humanity using this method. It would be conceivable that people without such conducive worldview would not get as much out of this method as they otherwise could. Same goes with traveling or any other method, though; generally if the appropriate method and mindset don't match, then they won't work as well.

People here on WP and elsewhere like to claim that everybody has his or her own values and that everybody takes his or her own path in life. Nonetheless, what I've come to realize more recently is that while everybody does take his or her own path in life, and while some paths are more circuitous than others... given infinite time and infinite means, all paths eventually lead to the same destination: to understand the truth about life and nature, and what being human really means.

Now, figuring out what to do once you reach that destination is the really tricky part...

Looks like a good plan to me. You've got the main problem (the world of work) nicely covered, and I hope you manage to make the writing game pay well enough for you to live the way you choose to.

I haven't been quite so fortunate....I once tried to escape to a self-supporting community, but the economics hadn't been properly worked out and it ran out of money. So I've had to spend a lot of my life in a straight job, where the people around me and the working conditions are not of my choosing. My escape plan is simply to save hard and to get out as soon as I can afford to bridge the gap till the pension kicks in. I'm currently looking at my investment options to see whether my savings can get a better return than simple deposit accounts can, but the potential returns only seem to be significantly higher if the risks are also greater.

This idea of moving to another country is intriguing, though personally I don't want to pull up my roots like that because I don't cope well with a raft of sudden changes. Even so, it's amazing how the currency exchange rates can turn a modest nest egg into a fortune. I'm surprised the UK hasn't lost the bulk of its exploited workforce by that route.

I'm really sorry that the self-supporting community that you joined didn't make it. It seems like a great idea in theory at least, and I've considered joining one myself, eventually to decide against it though. I'm too much of an individualist to really thrive in such an environment, and my disability might be viewed as a liability by the other community members. Have you considered joining one again, by the way? The idea is much better developed nowadays than it once used to be, and there are some nice examples that do really well, like this one. (That's in America however.)

As for investment, let me tell you that the time of just laying down some cash and waiting for the interest or dividends to flow in is over, possibly forever. Interest nowadays is barely enough to cover inflation.

What you could do is this: put a small part of your money (like 10%) in high-yield deposits and an even smaller amount in high-risk products, such as options and futures (3-5%), but invest the bulk in solid stocks and in government bonds, possibly also bank bonds, if they're solid enough (as an aggressive investor I do this in a 7:3 stock-to-bond ratio, but 1:1 or even lower is probably safer). You do have to be always vigilant though. On the other hand, reading the stock prices in the newspaper or on the internet every morning isn't that much work, and it can make a lot of money if done right. Finally, always ensure that your money is "fluid", which is to say, that you can move it from one sector or financial product to another quickly. Time is essential for investment nowadays.

Unfortunately the community I joined put me off......not just the economic problems, but more importantly the ethos of the group wasn't what it had first seemed - there was a guy who somehow wielded a lot more than his fair share of power, and he had very little regard for the feelings of others, being mostly in love with hard work for the sake of hard work. I might consider another community one day, but I'd take a much more careful look at it than I did when I joined that one. Also, like you, I'm deeply individualistic. I think I'd do better staying on the periphery of a community where my autonomy isn't under such a threat.


Your financial advice makes a lot of sense......curiously, it's very much in line with what the bank has been recommending to me - two thirds in investment ISAs, one third as a relatively safe share portfolio, with the flexibility to move the money between the two whenever it seems wise. The big dilemma for me is the increased risk - if it's such a good idea, why do so many people just stick to deposit accounts? I'm also having trouble working out how much I might reasonably expect to make, over and above simple bank interest. The bank tells me that we're about to see a strong recovery, but I've heard other economists saying that it's going to be long and slow.....the majority of people in the UK are going to see a big fall in their living standards after the next election, when the new government will implement a lot of spending cuts and tax rises to pay back its massive "quantitative easing" loans. With the masses having so little spending power, how can the economy take off again?

Mostly, because they're either lazy, risk-averse, or don't know how to do it. Yes, it does carry some risk to invest, it always has, and always will. But if you do it wisely and cautiously (though not over-cautiously) risks are low and you will never lose all your money completely. Moreover, losses, in case of a recession, are bound to be temporary. Just don't panic and sell everything.



Don't expect too much out of it. Conservatively speaking, you can make about 5 to 10 pct. in good years, up to 15 pct. in really good years (like prior to the internet bubble crash), and negative in crisis years. The trick is to compensate the bad years with the good years, while still ending up positive in the long run. Ain't very easy, but isn't extremely difficult either; people do it all the time. Advice no. 2: try to cut your short-term losses, which are inevitable in everyone's investment career, with a small amount of things like put options (put options tend to rise in value if its share falls). I'm also fond of more advanced strategies like "long option strangles", which consists of a put and a call which counteract one another, with positive payoff as long as the share price stays out of a certain interval - no matter if it's up or down. You can make it as complicated as you like.

As far as the economy at large is concerned, I'm not an expert, but the analysis in this article seems reasonable. It's never a good idea to only buy domestic stock by the way. Look at emerging markets also. China, for instance, is making a quick recovery, at least it seems to be so. Moreover, the stock market is often a bit ahead of economic developments, so if things are bound to be good for 2011, you can already notice it this year with the stock prices.

Since this thread appears to be headed towards the direction of personal finance, one thing I've always wondered about is... if everybody can theoretically use retirement/401(k) money to invest as described, and everybody then has large nest eggs for retirement and stuff, where does all this money actually come from? I mean, I know that some of it comes from dividends and the typical price fluctuations in stock prices and stuff, and some of it is just flat-out inflation. But I'm having trouble really understanding how the financial system, and especially the current US retirement system of investing in stocks and mutual funds and stuff is sustainable... and I'm wondering whether people are actually able to build up substantial nest eggs in this way, without other people actually decreasing or losing theirs.

Good question! The whole idea of money is that we use tokens to represent value - very, very simply stated. The fact that at least some of us can extract large amounts of money from, among other things, the stock market means that either the money is being continuously "pumped around" as it were and then redistributed unevenly ("another man's loss is another man's gain"), or that there is constantly a net amount of new money being created. In fact, both things are happening. Yes, there are some unwise and/or unlucky investors who lose large amounts of money in securities and related things. This then gets picked up by the smarter guys. It's basically a form of natural selection - the weak run out of money with which to compete. But unlike with natural selection it isn't true that the majority will "perish". This is where the new money comes in.

There's definitely a net creation of money taking place. Nowadays there are two agents responsible for this: the governments and the banks. The government can, to a certain extent, just create new currency out of thin air, at will. The banks create money by creating debt. This is how (very roughly simplified): suppose that there is a central bank and commercial banks A and B. Suppose that the central bank lends 1 million to A. Then A lends 800,000 to B and keeps 200,000 in reserve. The central bank is entitled to 1 million at some time in the future, after A pays of the debt. A is entitled to 800,000, after B pays off. So the "entitlement money" in the system is now 1.8 million, despite the total reserves and the last amount deposited adding up to 1 million only. Though this seems like a dirty trick at first, this is what happens all the time really. Banks in theory have lots of money, but if every single one of their creditors were to ask their money back at once and at the same time, they would utterly be unable to do so, because their so-called money is for the most part only "entitlement money".

If this were the only thing, it would definitely be an exercise in futility, because in the long run only massive inflation would result. The other possibility however, if we accept the theory of "money for value", is that there is a net increase in value going on, and that the banks and governments have to create money in order to "keep up" with the goods. This seems definitely the case. First of all, more and more physical objects are being created by the industries. There's simply gotta be more money to buy all those cars, TVs, etc. that are being produced every day. Also, mining, forestry, and so on, also produce more and more stuff: more gold, more timber, more you name it. Secondly, more immaterial things are created as well. A novel, a screenplay, a mathematical theorem - it all has to be paid for, and the amount of those increases explosively in our time. Finally, things get valued differently over time - labour for instance. And this isn't due to inflation alone. A female domestic servant in 18th Century earned about 10 pounds per annum (plus food, clothing, and shelter). Corrected for inflation this would be like 2000 pounds per year. Impossible today!

Is this all sustainable in the long run? I think it isn't, and that sometime there has to be a major re-evaluation of the way we live. But I don't expect it to happen within our lifetimes, nor within the next couple of generations. Something like a Malthusian catastrophe would have to occur, globally, for anything to change.

Hope this satisfies you. It's a bit longwinded.

Thanks very much for the explanation! It seems very detailed and thorough. While the explanation of the inflation part is not too surprising to me after having read all the stuff about the current economic downturn, I didn't really think about the possible deflationary pressure that could be caused by increased manufacturing, etc.. And although you didn't mention it, I suppose this is also closely tied to an ever-increasing population, which is itself not sustainable.

You're welcome! I'm just not an economic expert, so don't take my word for it. It indeed seems plausible to me, however, that there must be a powerful deflationary mechanism built into the fiat currency system. We don't see inflation running rampant (unless you live in Zimbabwe). Far from it. After a major take-off in the 1960s and 70s it's been steady at about 4 or 5% per year.

It's a big mistake, by the way, to think that inflation doesn't occur or is much less severe in more conservative systems, like the gold standard. The large influx of gold from the New World (with prices quoted in silver) effectively ruined the Spanish economy from 1550 onwards.

As for population doom scenarios, I'm skeptical. The reproduction rates in almost all developed countries are beginning to level out. So it's bound to be a local problem I think, especially after the West, if it behaves wisely at least, limits immigration from high-population areas. Also, the AIDS epidemic is going to curb African population growth considerably.

Well, as long as local population growth is above zero, if even slightly, it would conceivably have a deflationary effect in the way you described. However, it's not just sheer population numbers to consider, though... it's also the fact that as developing nations (with the bulk of the world population) get stronger economies, and the standard of living rises, there is increased consumption overall.

In the UK, financiers talk of a "pension time-bomb" - i.e. the old-to-young ratio is increasing steadily which means that the pensions paid out to the old are going to exceed the contributions taken from the young. Hence the government will gradually raise the retirement age to 70, betraying those who have worked all their lives under the promise of a pension at 65 (or 60 for women). What bothers me is that there has to be an upper limit to the number of people the planet can support, so ultimately we can't reproduce our way out of the problem, unless we find another planet within easy reach (unlikely). Even without capitalism it's a problem because the root of it is that there simply won't be enough young people to look after the old.

The question of how anybody can get a good return on investments without somebody else losing out is a good one. I'm pretty sure they can't - there's no such thing as a free lunch - if one person gets money without doing enough socially useful work to earn it, then others must lose. Shareholders naturally tend to move their money into whatever stocks will give the best return, which puts pressure on the companies involved to be as profitable as humanly possible, which in practice means screwing more labour out of their workforce for less wages. Any company that refused to betray its workforce in that way would simply lose their share capital.

As I contemplate investing my savings on the stock market, as a left-winger I have ethical problems with all this. I console myself by remembering that it's not really a new step for me - like most other working people, I've been paying into pension schemes all my life, and of course pension schemes are just share dealing by proxy. It isn't right, but I'm as locked into the system as everybody else.

Risk is another big issue, and it's the relatively wealthy who are at an advantage. They have so much spare capital that they can well afford to speculate and lose a bit, so they can take advantage of the more lucrative and risky investments. But if you only have meagre savings, any mistakes can ruin you. Financial service providers charge a lot for making these investments for you, and they guarantee nothing - not even your original stake.

I agree....every time a person does socially useful work, value is created, so it's appropriate that new money is created to represent that new labour, though I guess the life expectancy of commodities has to be taken into account as well.

The change in the valuation of labour is interesting - I've often wondered what it would be like if our currency unit was the labour hour instead of the arbitrary dollar or pound. Prices could be worked out as simply the labour embodied in the commodity, and all exchanges would be fair, or at least any profiteering would be immediately obvious.

I simply don't agree that buying shares involves ethical problems. In fact, investing in shares is very socially useful, in that it provides companies (and thus employers) with capital they would otherwise have difficulty raising. So, in a sense, the money invested in shares is given back to the employees. The problem of certain big shareholders with no heart for the business wielding too much power as regards corporate policies is another matter altogether, which can easily be remedied through new legislation. I would suggest, for example, that it simply be made illegal for hedge funds and such to buy more than a fixed percentage of shares in a company.