Recap of Dave Ramsey's Town Hall for Hope

Here's my recap of last night's Town Hall for Hope simulcast/meeting that was put on by Dave Ramsey. I took four pages of notes (front and back) and I may have missed a few things or written them down wrong in my haste. But here's what I happened as I remember it:

• The event was seen by 1 million people in 6,000 locations and they billed it as the largest webcast ever (not sure what they used to measure it.) There were about 250 to 300 people in the church I saw it in.

• Dave came out and told why he thought America had gotten itself in trouble: We had unprecedented prosperity for the past 25 to 30 years and we got sloppy as a result -- bought things we couldn't afford, made stupid financial moves that weren't a problem because everything was going up, etc. Then, when the bottom came out of the economic system, the foolishness of these moves was exposed (such as people buying homes they really couldn't afford.)

• Having said this, Dave said that the actual situation isn't as bad as the mainstream media is making it out to be. They are panicking, crying, stirring up fear, etc. While Dave admits that our economy is hurting, he says it's certainly not another Great Depression. In fact, he says it's not even our worst recession. There were two recessions -- 1973/74 and 1982 that were worse than what we're going through now.

• He believes that the answer to our economic problems is what has made our country great: hard work, businesses with a moral responsibility to their employees and their customers, and individuals working hard and making things happen for themselves. He is COMPLETELY against the "Bush bailouts" and "Obama stimulus" and decried all the money the government is spending -- putting generations in debt -- just so we don't feel the pain of our poor economic choices. He'd prefer we feel the pain, take our lumps, suffer a bit, learn from it, and have the recovery happen on its own without government intervention.

That's the gist of his opening comments, which were about 30 minutes long. Next, he answered questions from people via Facebook, Twitter, YouTube, email, phone, in the audience, etc. Here's a summary of what he said during his answers:

• He hopes that our current economic situation is like the Great Depression in one way -- that it leaves a huge impression on the people and their economic lives are changed (for the better) as a result. Just like the Depression taught people to avoid debt, spend less than they earn, etc., he hopes this recession does the same thing for this generation.

• He believes the best investment for people with a long-term time horizon is stocks. He noted that the S&P 500 has never had a down period over any 15-year period. He said if you had that amount of time or longer, you should buy stocks (he didn't say it, but I believe he meant index funds as he talked about "buying the market") since they are at a discount price right now and should return a good amount over the years to come. He also believes real estate is a good investment and said "now is the best time in 30 years to buy a home."

• He believes that housing will actually lead us out of the recession. Why? Because a certain number of people have to move each year (some die, some get transferred, etc.) but many have held off on this for quite awhile. With interest rates so low, eventually the dam will break and people will start gobbling up homes. As a result, prices will rise quickly. Then prices of new homes will be a bit more competitive, home building will start up again, and the economy will respond as people buy more homes, equip them, etc. He thinks employment and the market will recover after that.

• He said "85% of financial advisors are taught how to sell versus what to sell." :-)

• He banks with local banks and credit unions because they still treat people like people versus the big banks where you're simply a number.

• He thinks inflation is likely if the government keeps spending like it is and it could be a problem in the future. In this and in all his other comments, he said he didn't know these facts for sure, no one does, that these were his opinions. He also noted that “economists' forecasts are around simply to make weathermen's forecasts look good."

• He hates gold as an investment. From 1833 to 2001, gold returned 1% a year. Since 2001, it's returned 15% a year. It's at an all-time high now, so you especially don't want to buy. He also thinks goods and services, not gold, would be the standard currency if things got really bad. His example was New Orleans after Katrina. He noted no one was carrying around bags of gold down there, but trading water, gas, etc.

• He said is could or couldn't be a good time to start a business. He gave examples of many businesses that were started in bad economic times, so it can be a great time to work for yourself.

• If you don't have a job, you need to take personal responsibility for your situation and "get after it." Make things happen. Take action like your life depends on it (since it may.) Too many people are looking for someone else to pick them up when they need to pick themselves up.

He ended the evening with three steps people should take if they need more hope:

1. Get up. Take action. Get moving. Your best bet at success in the long run is you, and you're not making progress by sitting at home watching Oprah.

2. Don't participate in loser-talk -- grumbling about "how bad it is" and so on. Instead, feed your brain with positive books and positive people that will help you grow. Have a positive, can-do attitude for life.

3. Give. If you've lost hope, go volunteer at a soup kitchen and you'll see what people with no hope look like. You'll eventually get your focus off yourself, and when you do your hope will return. He believes that if all Americans gave time and money like they should and can, we wouldn't need the government for any sort of bailouts, social programs, etc. It was a very interesting thought.

Overall, I liked the evening and Dave Ramsey gained a lot of points in my book simply for doing this. It was free to everyone and he simply tried to encourage a nation that's frightened, hurt, and without hope. Whether he did this or not and whether you agree with him or not, at least you have to give him credit for trying to take action and make the situation better rather than worse.

Here are more recaps:

• Suburban Dollar

• Man vs. Debt

Comments

[BobV]

I also listened last night - Great Summary.

I think one of the key things he said throughout the presentation was self accountability. This is a theme he echoes anytime I have listened to him. We can not depend on the government to help us or bail us out. We should be responsible for our actions and do whatever we can to improve our finances vs. looking to others or the government.

[rwh]

"He is COMPLETELY against the "Bush bailouts" and "Obama stimulus" and decried all the money the government is spending -- putting generations in debt -- just so we don't feel the pain of our poor economic choices. He'd prefer we feel the pain, take our lumps, suffer a bit, learn from it, and have the recovery happen on its own without government intervention."

Herbert Hoover on Andrew Mellon:

the “leave it alone liquidationists” headed by [my] Secretary of the Treasury Mellon, who felt that government must keep its hands off and let the slump liquidate itself. Mr. Mellon had only one formula: “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.” He insisted that, when the people get an inflation brainstorm, the only way to get it out of their blood is to let it collapse. He held that even a panic was not altogether a bad thing. He said: “It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people”...

Milton Friedman quoting R.G. Hawtrey of the British Treasury "Mellon and the others who thought in 1930-1933 that the big danger was excessive inflation were "crying 'Fire! Fire!' in Noah's Flood." A nationwide banking panic is altogether a bad thing. In this dismissal of Mellon's economic policy Friedman was in complete agreement with John Maynard Keynes:

Keynes: It seems an extraordinary imbecility that this wonderful outburst of productive energy [over 1924-1929] should be the prelude to impoverishment and depression [today, in 1932]. Some austere and puritanical souls [like Mellon] regard it both as an inevitable and a desirable nemesis on so much overexpansion, as they call it; a nemesis on man's speculative spirit. It would, they feel, be a victory for the mammon of unrighteousness if so much prosperity was not subsequently balanced by universal bankruptcy. We need, they say, what they politely call a 'prolonged liquidation' to put us right. The liquidation, they tell us, is not yet complete. But in time it will be. And when sufficient time has elapsed for the completion of the liquidation, all will be well with us again...

[BigBoy]

FMF- I agree he did a good job of presenting and giving people some answers to their questions.

[Money Beagle]

Did he say anything about how manufacturing will play into our recovery? One thing that is 'different' in this recession than the two he mentioned is the simple fact that our country has lost a huge portion of the manufacturing base. That base was a key part of the recoveries of those recessions that we simply don't have anymore. Yes, for decades we spent a lot, but at least we were making what we were spending on. Now, the spending may recover but how will it truly help the economy if we're not making what we spend on?

[kitty]

"He is COMPLETELY against the "Bush bailouts" and "Obama stimulus" and decried all the money the government is spending -- putting generations in debt -- just so we don't feel the pain of our poor economic choices. He'd prefer we feel the pain, take our lumps, suffer a bit, learn from it, and have the recovery happen on its own without government intervention."

Yes, and his understanding of the crisis is extremely simplified - it is on the level of an average guy on the street not that of an expert. No mention of the total freeze of bank-to-bank lending which is the necessary part of bank operations, of runs on banks and money market funds - the latter are vital to the economy, the risk of huge losses in these funds, of the risk of total collapse of financial system that we had in September. No understanding of CDOs and CDS and fractional reserve banking/mark-to-market and how they amplified the mortgage losses exponentially and caused banks to hoard cash instead of lending it. If we hadn't had a bailout in September when the Libor rate was at 4.5%, banks weren't lending to each other or to legitimate businesses, the freeze that was felt even in far-away countries by international dry bulk shipping companies that weren't able to deliver ore since they could not borrow to pay their crews (they normally get paid only after they deliver goods), etc. He also doesn't mention the issues with banks' solvency - these weren't present during 70s or 80s recessions but were present in 1929.

@rwh - great post.

"Dave said that the actual situation isn't as bad as the mainstream media is making it out to be. They are panicking, crying, stirring up fear, etc. While Dave admits that our economy is hurting, he says it's certainly not another Great Depression. In fact, he says it's not even our worst recession. There were two recessions -- 1973/74 and 1982 that were worse than what we're going through now."
There are several very important differences between 1982, for example, and today. 1982 recession was caused by high interest rates the government introduced to fight inflation. I remember in 1983 opening my very first CD and getting 13%. Once the inflation was under control, the government started lowering the rates again. Lowered interest rates and tax cuts increased consumer spending and helped get the country out of recession. Plus the financial system which is a key to economy was much healthier than today.

This recession is deflationary. The government has already lowered the rates to 0, but it's not helping to increase spending. There is a lot of de-leveraging that needs to happen on all levels before consumers start spending again. Not to mention that since we all watch TV, even those of us with money and no debt don't really want to spend. I am catching myself thinking "why should I buy X when I'll probably be able to buy it cheaper 3 months from now" - this is a typical deflationary thinking and it is very difficult to change. Another difference is that this recession affects people on all levels - rich as well as poor. Yet another - while the job losses aren't as high yet, the speed with which these losses occurred is really high.

[Jim]

Ramsey's economic predictions should be taken with the same grain of salt as Ramsey thinks economists opinions should be given. He's just one guy giving his opinion. Why should we trust Ramsey's opinion any more than an economist? I wasn't there, but maybe Ramsey that was his point.

I DO agree with him on many areas. Americans need to be accountable for our own actions. Gold is a *horrible* long term investment and it peaked a year ago. Stocks and housing are both good buy's right now.

I do NOT agree with him on the bailouts and stimulus. Both were necessary to fix the economy, just like piling up debt to fix the depression and fight WWII were very necessary and neither broke the back of future generations. But I do think the bailouts and stimulus should have been handled better with more accountability.

But like Ramsey I'm just one guy spouting my opinion.

[Christy]

“Gold is the Snuggie of the investment world… It’s sold on midnight cable and if you buy it, it’ll make you look silly.” now that was funny...

[MC]

Who is this Ramsey? Is he the acknowledged God of finance or something?

Sorry, I just never heard of him before.

[rwh]

I'm just one guy too. I don't dislike Ramsey. But I don't think his advice is any different than what you would hear from your average, sensible person. He certainly doesn't have a perspective unique enough to warrant all the attention he gets, but there you go. He's good at selling himself.

[Mike Wachowski!]

Nothing new! Finances and Economics 101.

Where's the advice for people who recognize that hyperinflation is a serious possibility in the next two decades and will wipe out the savings of the middle class and others who don't have income-producing assets?

[ZC]

"Where's the advice for people who recognize that hyperinflation is a serious possibility in the next two decades and will wipe out the savings of the middle class and others who don't have income-producing assets?"

He gave a bit of advise to that. BUY INCOME-PRODUCING ASSESTS THAT WILL BE EFFECTED BY INFLATION!

It's kinda common sense. When there's inflation, buys those assets that will be inflated upon the most and ride the wave up rather than being drowned underneath it.

And if you don't have any income-producing assets, then you're an idiot, in my opinion. Sorry if you find that rash, but if you're not securing your future, it's what you are, and you're going to suffer because of it.

[Wise Money Matters]

I liked when he said that you will make, in income, within 10% of your 10 closest friends. Makes me want to go find some new friends. Hehe.

[Steve]

I'm not too worried about hyper-inflation. The fed can take care of that by raising rates. I'm more worried about deflation right now, which is why the fed is printing so much money and there was a stimulus package.

[tlm]

I like Dave in many ways, and he inspired me to get out of debt.

That said, he has COMPLETELY missed the seriousness of the housing collapse. He was telling people not to worry about a bubble in 2006. And last night, he said that it was the best time to buy a house in, well, pretty much forever (mostly because of low rates). Believe me, anyone buying a house anywhere in the U.S. right now will see it lose 15-50% of its value over the next 5 years. Yes, even in the "non-bubble" states.

[Anondi]

"Believe me, anyone buying a house anywhere in the U.S. right now will see it lose 15-50% of its value over the next 5 years. Yes, even in the 'non-bubble' states."

And then it will pop right up again 10-15 years afterward, give or take, and continue like normal, like it always does.

[Emily]

I think dave Ramsey is an idiot. People treat his word as God and I think he is way too conservative that it is outright dangerous. I think his advice is common sense and anyone could write it. Put God into finance, and the christians gobble it up. He is smart in that respect and now rich.

[Nate]

God created finances. It was us that took him out. His advice IS common sense. Why is it so uncommon then?

[kitty]

@Wise Money Matters: "he said that you will make, in income, within 10% of your 10 closest friends."

He said that? This is purely anecdotal, but I have friends who are richer than I am, and I also have friends and even cousins who are poorer or even just poor. With rich friends it helps that they aren't huge spenders. They may have some things I don't, but there are also many areas where our ideas about what is cheap and what is expensive are similar. With friends who have less money, I simply adjust my choices to what they can afford, choose activities that don't require spending or cover the cost depending on a situation.

I think it's not really about income level, but spending habits, ability to accept that some people just can afford more and about consideration for others. If you "richer" friends place you into situations where you feel pressured to overspend, then they aren't such good friends. At the same time, you have to be able to accept that your friends just may be able to afford things you can't without envy. This disparity in means is a pretty common situation among first generation immigrants where people with similar interests and education may have different means simply because one has lived longer in the US or came to the US at a younger age, so we are very accustomed to dealing with it.

@tlm: "Believe me, anyone buying a house anywhere in the U.S. right now will see it lose 15-50% of its value over the next 5 years. Yes, even in the "non-bubble" states."

I think it depends on the area. I think in some areas, especially in past bubble places that saw more of a collapse, the prices may have bottomed. In other areas - especially those that haven't seen that much of a decline yet, like, for example, NY - the prices still have room to fall.

[JimL]

Emily,

How can you say Dave is an idiot when you say his advice is common sense. Just think if the U.S. did as Dave suggests (avoid debt, save for future needs, take responsbility).

Tell us what you suggest is wrong with what Dave says and how that is too conservative for you.

I will take that "conservative" path every day of the week.

[Kirk Kinder]

I wasn't able to listen or attend this event, but this was a great recap. As many have pointed out here, Dave's advice shouldn't be taken as gospel. It is his opinion. However, if one follows his advice of hard working, saving, avoiding debt, and being thankful for what you have, then you will be ok.

For those who think the government is helping to save us, and there are quite a few, you need a real history lesson. Sure, the government spending didn't break our back, but it is an ineffective use of capital relative to the private market. Economies only work optimally when labor and capital is being deployed in its most efficient manner. The massive government spending in the 30s didn't get us out of the Depression. It extended the Depression. In fact, Rex Tugwell, a member of Roosevelt's administration, even admitted in 1939 that the massive government spending did nothing to right the ship and only put the nation in greater debt. We had similar crisis' before the Depression (1896, 1907, 1920), and in each instance the government sat by and watched. Sure, there was short term pain, but in every instance the economy was growing again at 3% + rates within 18-24 months. The Depression was substantially longer due to the government intervention.

It amazes me that so many people put their faith in the Fed. They think they will have the foresight or political courage to raise rates if inflation resumes. Plus, why trust the same financial geniuses that couldn't see this mess coming. In fact, strong cases have been made that the Fed was the cause of the Depression in the 30s and is today. They print money at a substantially higher pace than economic growth. This eventually leads to a debt bubble, which is only rectified through deleveraging like we are experiencing now.

[kitty]

Kirk Kinder - by the time government started spending in the 30s it was too little too late. In 1929, right after the crash, Hoover raised rates. This caused the depression.

What got the US out of the Great Depression was the Second World War or rather massive spending for the war.

[Pablo Rivera]

To "MC", who posted on April 24th: I don't mean to disrespect you, but if you've never heard of Dave Ramsey, you're living too sheltered a life. His daily talk radio show is heard nation-wide by well over 2 million people. Whether you agree with him on nothing, some things, or a lot, he'll make you rethink how you view your finances.