Plus: CBDCs, Emergency Funds, Bitcoin and More
Ric Edelman: It's Monday, April 3rd, and I thought I would share with you today some of the emails that I have been receiving from all of you over the past several months. There's a lot of really interesting commentary here that's I think, worth sharing with you. Here's the first one I want to read. This is an email from a listener who said, "Ric, my son has died. I know he owned bitcoin. How do I find the account that he had?"
Oh, my goodness. I did communicate with this gentleman. It's very sad and tragic. And I wished him my condolences for him and his family. But unfortunately, sadly, this is too common a tale. It just pains me when I see that people are going to the trouble of buying crypto, but they are failing to recognize that by definition, they're often doing this anonymously. They're doing this entirely online, sometimes with a decentralized finance account, meaning they're not using an exchange. And as a result, there's no ownership record anywhere. What happens if something happens to you? Too often people are focused on making the investment and not properly focused on managing the investment. And so here we are. As I said to this dad, I told him that he needs to do some forensic accounting to try to track it down. All crypto starts with dollars. The son would have sent money from his bank account to his new crypto account. He either would have wired the money or he would have done it by ACH.
So if he could find his son's old bank statements, he could perhaps identify where the son sent the money. There are two kinds of accounts. DeFi, as I said, decentralized finance. There's also CeFi, centralized finance. CeFi is an account like a Coinbase, and maybe that account can be of help. If it's DeFi like MetaMask, there's likely no way to get any potential help anywhere. Either way, however, the son managed the account, it likely would have been done on his laptop or his phone, whatever device he used to trade his crypto. A forensic accountant might be able to find that information and ideally the account name and the password, the private key. Frankly, billions of dollars' worth of crypto has been lost because people owning crypto have died, leaving no information to the heirs.
So you need to ask questions of your family members, your spouse, your children, your parents. Do you own crypto? If you do, where is it? What steps are you taking to protect the asset if something happens to you? How do we access it? It's not as simple as a local bank account. We need to recognize that fact and remember that managing assets is as important as investing assets.
I got another email from a reporter and here's what the reporter said: "I'm a reporter doing a story on how much money people should have in an emergency fund. Please give me a number. Instead of a general rule of thumb, like 3 to 6 months of spending. Explain what a good number is to aim for and why. My deadline is today."
I often get inquiries from members of the media who are doing personal finance stories, and I'm always very happy to help. But sometimes I discover that reporters are trying to invent a story or they're trying to take a story down a certain path that simply isn't realistic or workable. And if they persist in writing such a story, then it becomes very dangerous because the information they will provide their readers or their viewers is inaccurate or incorrect. When this reporter in a desperate effort to be specific, I mean, wouldn't we love to just make life simple and easy? Just give me a number. This reporter is asking how much money in an emergency fund?
Well, as I explained to the reporter in my response, there's no such way as to give a specific number. I mean, it depends entirely on how much money you spend on a monthly basis. If I were to say to you have $1,000 in an emergency fund, $1,000 might be a fortune to some people and it might barely pay for tips for somebody else. It is entirely dependent on your income. And so we need to recognize when we're reading stories about personal finance that just because you see it in print, just because someone is quoted, just because someone is offering advice, doesn't necessarily mean that that advice is any good. Too often, reporters are facing an urgent deadline. This one had a deadline of today, and that urgency can sometimes get in the way of good judgment.
And then I got an email from Barry who wrote to say, "Ric, how do you invest in CBDCs?"
Well, this concerned me a great deal. First of all, you can't invest in a CBDC. Barry doesn't seem to understand this, and that is the core of the problem with his email. Barry is trying to make an investment before he has developed a fundamental level of education, knowledge, understanding. And so let's take a step back. I'm excited that Barry's interested in the subject of crypto, and I'm encouraged that he wants to figure out how to invest, but let's make sure that we understand how to do this before we actually go ahead and do it. You can't invest in a CBDC, a central bank digital currency. This is a digital dollar that would be created by the Federal Reserve.
Well, the Federal Reserve hasn't done that yet, so it doesn't exist. And even when it does, you don't invest in dollars, whether they're digital or paper dollars or dollars. They're not investments. And that's what we need to fundamentally understand. You invest in digital assets such as Bitcoin or Ethereum or any one of thousands of other coins and tokens available in the marketplace because you think they're going to rise in value.
You think they're going to generate more income than you're going to be able to obtain from alternative investments. But that's not what a CBDC is. A central bank digital currency, that's simply digital money and it doesn't yet exist. So if you're thinking of making an investment and you can't fully articulate what that is, if you can't define CBDC, if you can't explain it to a 10-year-old, that means you're not ready to go further. You can start by reading my book, The Truth About Crypto. That'll give you a fundamental level of knowledge for what you need. Start there.
And Michael asked a question about crypto as well. He said, "I bought a little bit of GBTC. Is this an ETF that will include bitcoin?"
This is the same kind of thing that Barry put forth to me. He bought something not knowing what it is. Well, the good news for you, Michael, is that you got lucky. GBTC does, in fact, own Bitcoin. So that's what you're doing. But no, it's not an ETF. It's therefore more expensive than an ETF, and it has some liquidity burdens and restrictions that you need to read up on. I recommend you read my article on how grantor trusts like GBTC operate. The Grayscale Bitcoin Trust is a grantor trust, not an ETF.
Your Take on My Solution to the Social Security Crisis
And most importantly, what I want to share with you today are the varied responses that I've received to my recommendation, my solution, my proposal for solving the Social Security crisis. I offered that a couple of weeks ago here on the program. If you missed that show where I offered my rather unique solution to the Social Security crisis, the link to that particular podcast is in the show notes. Go listen to that real quick and then come back and return to this, because I'm going to share with you what people have said in response to my idea. And yes, I called my idea brilliant or wacky, and I asked you to tell me which one it was.
Well, it's been a couple of weeks since I offered that idea, and now I have reached the conclusion that my idea will never work. It's not because I don't think that the President or Congress would refuse to get behind it. I think it's because Americans will not support my idea if they did. You see, my idea, just to quickly remind you, is not to raise taxes to increase the revenue that Social Security needs or to cut benefits on American retirees.
My idea instead was to rely on American patriotism, to ask Americans to voluntarily reduce their Social Security benefits if they feel they can economically afford to do so. Let's face it, we have tens of millions of millionaires in this country, and they frankly can afford to live without their entire Social Security check.
Some of them can afford to give it entirely up. Do you really think Warren Buffett needs to get his Social Security check? Well, right now, there's been no incentive. There's no call for anybody, rich or non-rich, to voluntarily waive some of their check. And that was my idea. I think we can solve this problem simply by patriotically asking people to help the system survive. Well, I've now reached my conclusion that this would never work.
And I've reached this conclusion because of a survey that was just released this week by The Wall Street Journal and the University of Chicago. My idea for saving Social Security, tapping into our collective sense of patriotism the way we did in World War II when the government asked everybody to buy war bonds - that won't happen today. This new survey shows that appealing to patriotism to save the country would fail. Back in 1998, 70% of US adults said patriotism is very important. But in this new poll, only 38% now say so. Less than 4 in 10 US adults. For adults under 30, only 23% say patriotism is important to them. What has happened since 1998 to cause this radical reduction in patriotism? Well, since then, we've had 9/11, the dot-com bubble bursting, the 2008 credit crisis, new looks at police treatment of blacks, the MAGA movement, the Woke movement, COVID, the list goes on and on.
And in my view, at the top of the list is the horrible name calling and the infighting between the political parties and the engagement of that fight by everyone in the media. In fact, the survey that was just released this week says everything that used to matter to Americans has fallen in value. Religion, having children, community involvement, hard work. None of these are any longer very important to many people.
And the younger you are, the less any of this matters to adults under 30. Only 23% say having children is very important. Only 31% say religion is very important. Only 60% say hard work is very important and only 21% say patriotism is very important. There is a difference in some cases between Democrats and Republicans. Only 23% of Democrats believe that patriotism is very important, 23%. 59% of Republicans, a bare majority.
But where Republicans and Democrats are in full agreement - their belief that money is very important. Yes. In fact, the importance of money is the only sentiment that has risen over the past 25 years in this poll. There's been a 30% increase in the number of people who say money is very important. So my idea, asking people to be patriotic, which few people are today, and to ask people to give up some of their money, which few people are willing to do today, yeah, my idea to save Social Security is dead before it even gets started.
You can get a sense of this from all the comments that I got after my podcast where I introduced my idea. Remember, as I said, my Social Security solution is to ask people to voluntarily give up their Social Security benefit, to help the program survive for everyone. A patriotic act of self-sacrifice for the greater good.
Well, Jeff wrote to me and he said, "Why doesn't the government invest part of the trust fund into a portfolio so the trust fund can grow and last longer?" In other words, make more money. Well, that's not really the point here, Jeff. We have to figure out what to do with what we have. And Joe, Mark, Joseph, Eugenia and Ted, they all sent me comments in a single theme. Joe asked, "Can we to save Social Security remove the annual contribution limit so that we collect more in taxes?" Mark suggested giving people a tax deduction for waiving their benefits. Joseph says we ought to delay the age before you're allowed to get your benefits. We should tax all earnings. Eugenia said the same thing. But all of these folks are missing the point. They're all suggesting either tax increases or benefit reductions. My idea is trying to avoid both of those. But I'm talking to an empty room. Ted said it's not fair that he has to pay taxes on his Social Security checks. So I guess I can forget about him offering to reduce his monthly check.
I only got two comments of pure support for my idea. Connie said, "Ric, I think it's a good idea to voluntarily give back some of your Social Security check each month as an act of patriotism." And Lakshmi said, "I personally think it's a great idea. The President and Vice President should lead by example and urge everyone else to do the same for the country." While their comments were encouraging, Huxley brought me back to reality. He said he doesn't like my idea because no matter what we do, the President and Congress will simply keep wasting our money. Huxley has a pretty pessimistic viewpoint, but I can't say he's wrong.
And then there's Michael, Luisa and Mike. They all referenced my other idea to solve our nation's retirement security problem. I call it RISE (Retirement Income Security for Everyone). Michael wrote to say, "Ric, let's implement your RISE idea. Luisa said she sent my RISE proposal to her congressman, and Mike said he wants to know how he can tell his elected representatives about my solution. I'm not going to go into great detail here on my RISE idea. I'll simply direct you to my website that I created for it. WeCanRise.com. And yes, my RISE proposal does in fact solve not only our Social Security crisis, but it also solves our broader retirement security crisis.
Check out WeCanRise.com and tell me what you think of it. And as you can see, although my brilliant and wacky Social Security solution may be going nowhere, I'm not giving up the fight. And I'll end today with where I began.
If you are crypto curious, before you begin to contemplate making any investment in crypto, get the knowledge you need about it. And I offer you two ways. First is to read my new book, The Truth About Crypto, the number one Amazon bestseller. Larry C is a verified reader at Amazon, and here's his review "A few months ago, I became very interested in learning about blockchain and crypto and NFTs and I bought several books. Ric's book is one of the best, if not the best. The Truth About Crypto is easy to read and understand. It's comprehensive but avoids the pitfall of being technically geeky. It should be on anyone's bookshelf that's interested in this dynamic field."
Thanks for the review, Larry. I really appreciate it. Pick up my book, The Truth About Crypto from your favorite bookseller. And if you really want to demonstrate that you're serious about learning about crypto, take my new online course and get your certificate in blockchain and digital assets. Our brand-new course exclusively for investors, consumers and students. You can learn all about my new certificate course in blockchain and digital assets at DACFP.com.