Easy come, easy go.

When prosperity arrives too easily or too quickly, it comes with a built-in self-destruct mechanism.

At best, the new wealth simply vanishes as quickly as it came. At worst, it blows up, leaving deep, lasting scars.

The opposite happens when we face up to the challenges of adversity and hard times. We’re driven to develop the tools and the skills to overcome them. We truly earn the wealth and prosperity that ensues. The good times are real and self-sustaining. They rarely self-destruct.

As I write to you this morning, four examples spring to mind — two from history, one from my own family, and one from the American economy today …

SPAIN AND BRITAIN

Christopher Columbus discovered America. Hernando Cortez conquered the Aztecs. Francisco Pizzaro conquered the Incas. Two advanced civilizations practically fell into Spain’s lap.

Within a few short decades, the Spanish crown was awash with riches beyond its wildest dreams. They took over operating gold and silver mines. They decapitated and replaced the leadership of vertically organized political and social hierarchies. They inherited massive, ready-made, labor forces. Then they looted and squandered that wealth like no empire before or after.

In contrast, for the British in the Americas, wealth didn’t come nearly as easily. Their colonies had to be built from the ground up, taking more time, more capital, and more ingenuity.

As it turned out, though, the ultimate value of Britain’s hard efforts was far greater than the instant value of Spain’s grandiose riches. Britain vanquished Spain’s armada. Britain leaped ahead of Spain with its industrial revolution. And Britain left Spain in the dust as a world power.

Misfortune was transformed into a self-sustainable fortune.

BRAZIL AND JAPAN

For half my youth, I lived in two different regions of Brazil — the state of Goias in the center of the country and the state of São Paulo in the south. And for many years since, I have lived in, or studied, Japan.

When I started on my doctorate at Columbia, my area specialty was Brazil — its people, history, and economy. When I finished, my area specialty was Japan.

So, I know both countries and cultures intimately. But despite any knowledge, it is still difficult to fathom and explain the one difference between these two countries that is obvious even to the most uninformed:

Japan is largely devoid of natural resources, with very limited arable land … and with a history of violent civil wars, natural calamities, and turmoil.

Brazil has been blessed with some of the richest iron ore and minerals in the world, fertile lands vaster than the United States’, a history of relative peace, and virtually no threat of natural disaster.

Yet, Japan overcame its adversities and emerged as an economic powerhouse. Brazil, mired in inflation and indebtedness for most of the twentieth century, did not.

The reasons are complex, but the same fundamental principal I just told you about is evident in this example as well.

Brazil’s many flirtations with wealth and prosperity came quickly and easily. But in retrospect, they were mostly cycles of boom and bust: Their great rubber boom and bust of the 1920s … their great construction boom and bust during the regime of Jucelino Kubichek who tried to build Brasilia virtually overnight, unleashing the worst hyperinflation in the country’s history … the rise and fall of the military dictatorship from the 1960s through the 1980s … and worse.

Brazil’s economic booms were great while they lasted, but they almost always came with built-in time-bombs. And when the bombs exploded, they left a trail of underdevelopment, confusion, and misery in their wake. Only now, under the leadership of a president who understands the true value of austerity and sacrifice, is Brazil finally beginning to find its way.

In Japan, natural adversity had precisely the opposite consequence of Brazil’s natural wealth. Indeed, that struggle itself was the country’s greatest single asset.

Even after a long series of cultural transformations that were introduced from the outside world — first Confucianism, then Buddhism and later modern capitalism — Japan’s cultural core endured.

“Bushido,” the way of the samurai, became the code of the long-term career professionals that took over Japan’s government when the Tokugawa family, the last samurai rulers, finally caved in to modern development.

Bushido was also the underlying philosophy of the Japanese “salariman” — the businessmen who helped transform Japan into a high-tech, industrial economy.

Japan’s past can best be summarized in two words — sacrifice and discipline. Brazil’s can best be summarized in four — easy come, easy go.

TALENT FROM DISABILITY

Soon after our son Anthony was born, in September of 1981, a dear friend of the family gave us a gift that would forever change his life — and ours.

It was a kit. Nothing elaborate or expensive — just a cardboard box about the size of a phone book containing a set of learning tools, including a little guidebook entitled “TEACH YOUR BABY TO READ.”

At first, I was skeptical. I was no fan of parents that push hard on their young children to learn Beethoven when they’re two or the Britannica when they’re three.

But the guide intrigued me, and I was relieved to see that the author recommended no pressure on the child. No humiliating tests. No reprimands for non-performance. All the learning was a low-key game, and the game itself was the reward for good behavior.

So I studied the method carefully, even enhanced it a bit in my own way.

By the time Anthony was past two years old, we had a nice little routine going. Every evening, after we put him to bed, I would create a new customized, home-made book for him to read. The next morning, as soon as he woke up, he’d climb out of his crib, pop into my lap, and avidly devour his “book of the day.”

You see most children’s books have large colorful illustrations with small words printed on the same page.

That doesn’t work.

The type face is too small for their eyes to focus on. And their attention to the words is continually distracted by the pictures. They soon get the message that the little words in the book are just for the grown-ups that read to them … and the only thing THEY are supposed to pay attention to is the pictures.

My books were different. With a thick, red, felt-tip pen, I neatly printed giant words in lower case letters on one page … and then pasted in a corresponding snapshot or picture onto the next page. Later, in more “advanced” books, the ink went to black and the font size got progressively smaller.

Regardless of the size, though, Anthony could see the words — and then the pictures — but never both at the same time.

He gravitated to reading like a fish to water. His words and books were his “best friends” and he loved them.

So while most other kids were getting the kind of instant gratification that only T.V. could provide, Anthony could usually be found surrounded by a pile of books, oblivious to the T.V.

It wasn’t until a couple of years later that we finally began to suspect one of the reasons reading was so important to our son: He seemed to be hard of hearing.

At first, the pediatrician scoffed at the notion. The doctor examined Anthony’s ears. He talked to Anthony and asked him a series of questions. Then he concluded: “If Anthony really had a hearing problem, his speech would be slurred and nasal. But his speech is perfectly normal. So his hearing must be normal.”

We let the subject drop for a while. But one afternoon, when I picked up Anthony from his kindergarten class, his teacher wagged a finger at the two us, saying: “Anthony is not a good listener. Please teach him to listen better.” His gymnast teacher said essentially the same thing.

That’s when we took him straight to an audiologist, and we were shocked by the results: His hearing impairment was not “mild” or “moderate” as we had thought it might be. He had a 50% loss, in both ears.

I’ll never forget that day. We stood there, staring at the test results in a state of disbelief. The audiologist, who had been chatting with Anthony, also seemed surprised. He asked us if Anthony had been undergoing intensive speech therapy from an early age. We shook our heads.

Apparently, Anthony had fooled us all by compensating for his deficiency in hearing through his proficiency in reading.

Most of us learn to speak first and read later. But Anthony was often doing the opposite: First he’d learn new words from his reading. Then he’d figure out how to pronounce them. And in the process, he somehow managed to figure out phonetic rules, which, in turn, helped him fill in the gaps in his auditory learning.

Fortunately, back when Anthony was a baby, our friends had not given him an ordinary toy. Instead, they had given us all a powerful tool. And with that tool, plus a lot of effort, he overcame his disability and developed a valuable talent.

THE WEISS SCHOOL

The audiologist finally fitted Anthony with some relatively powerful hearings aids. Plus, we bought him a closed caption decoder box for the TV. Anthony said TV was “boring,” and we had no problem with that. Unfortunately, he also decided school was “boring,” and to us, that WAS a problem.

Historically, Palm Beach County, despite its wealth, ranked near the bottom of the national ladder in educational standards, even behind many poorer areas in the United States. Some private schools were a bit better, but not by a significant margin.

This alarmed us. We had heard too many stories about bright kids getting into serious trouble at schools with low standards, and we certainly didn’t want that to happen to our son. We started researching other school districts — Fairfax County, Virginia, Upper Montclair, New Jersey and others near the top of the national charts.

“How in the heck can we move, though?” I asked. “What about Weiss Research? What about all our staff that work on the Weiss newsletters and the Weiss ratings? And what about THEIR families? Can we expect all of them to move to Virginia or New Jersey, too?”

A few days later, we came up with a better solution. “Why don’t we start our OWN school right here, with a gifted curriculum?” we asked.

A few months later, the Weiss School was founded — with one classroom, one teacher and eight students, including Anthony.

Today we’re in our 15th year, with over 20 teachers and 250 students. The school has outgrown the one third of our Weiss Group building that we had allotted to it in 1994.

And just last month, our other three companies — Weiss Research, Weiss Ratings and Weiss Money Management — moved to a still larger, nearby location. And right now, as I write to you this morning, the Weiss School is taking over the entire facility formerly occupied by the other three.

The chain reaction of events in our life — the same one that began with that simple gift from a friend 20 years ago — continues to accelerate.

But we still follow the same basic principles: We avoid providing one-time, instant gratification. We seek to give our students — and our customers — the tools they need to create their own sustainable success for years come.

We know that if it comes too easy, it’s really not worth it.

THE RECOVERY ON A PLATTER

I wish our leaders would apply the same principles to our economy today.

Unfortunately, they’re doing precisely the opposite: Instead of giving Americans what they need for a sustainable recovery, they’re trying to hand out “free money” and instant riches on a platter. Instead of giving us the tools to build a sustainable recovery, they’re giving us a series of quick fixes.

You don’t have to know economics to understand this. You can see it everywhere, all around you. Instead of encouraging sacrifice and discipline, or at least providing the tools to overcome adversity, here’s the message our government and corporate leaders are sending to Americans …

>> “Want to buy a new car? No problem! Just hop over to your favorite auto dealer, pick out the model you like, fill out some paperwork, and presto! It’s all yours! No money? That’s OK, too. Your down payment is zero! Your interest is zero. And your monthly payments for the next six months are also ZERO! Same deal for furniture, appliances and other major items.

>> “Want a new home? Be our guest! Just go to any bank or mortgage company. There are hundreds vying to give you money. Better yet, sign up for a mortgage guaranteed by a government-sponsored agency. They’ll let you move in for less than the deposit on a rental.

>> “Need some extra spending money on top of everything? Fine! Your tax-cut check is in the mail.”

It’s easy, and for a while, it works. But as history has clearly showed us, it’s not that simple.

TOYS AND SUFFERING

Read the story in yesterday’s New York Times (December 7, front page) about the “Ruse in Toyland.”

It’s about one of those few low-tech toys with educational value that have survived the onslaught of bloody, killer video games.

The toy is Etch A Sketch (one that Anthony also used to play with once in a while) and its survival is a minor miracle. But the means of its survival is a blemish on its manufacturer … and the scourge of our times.

For 40 years, the Ohio Art Company used to make the toys — in Bryan, Ohio, a town of 8,000 tucked in the northwestern corner of the state. Now, the company buys them from a company by the name of Kin Ki Industrial, based in Shenzhen, China, across the border from Hong Kong.

The company’s managers did everything in their power to keep their production facilities going in the U.S., trying to stay competitive, slashing costs to the bone. But three years ago, they gave up. Their wages, at $9 per hour, were twenty-seven times the legal minimum wage in Shenzhen, and nearly THIRTY-EIGHT times the ILLEGAL wage that Kin Ki Industrial is actually paying its workers.

In Bryan, Ohio, the standard work-week is 40 hours, as in the rest of the country. At the Kin Ki factory, the unwritten standard is 84 hours!

According to the workers, the factory operates with the intensity of a military campaign. They start at 7:30 am, breaking only for lunch and dinner, and continue working until 10pm. Saturdays and Sundays are no different. So a regular work-week is seven 12-hour days.

Those that complain risk getting fired, or worse. Were it in Japan, the samurai term “kubi-kiri” (literally “neck-cut” or rolling of the heads) would be used. In Southern China, the equivalent term is “fried squid.”

Inspecting officials apparently know — or say they know — nothing about this, and the New York Times seems to agree, reporting that the inspectors are routinely duped by an elaborate ruse.

My point: None of the anti-deflation or anti-recession measures taken by our government even begin to address this fundamental problem in our economy. Our costs are too high. We have not made the sacrifices. And we’re vulnerable. So much so, that even far-away companies with low technology and no scruples can take our jobs away.

Sure, the Fed has given us 13 successive interest rate cuts, making money and debt cheaper than at any time in the past 45 years.

Sure, the politicians — Republicans AND Democrats — have given us a series of new government spending bills and tax cuts, putting trillions of dollars into the pockets of American consumers.

But have they encouraged the sacrifice and discipline needed to really overcome what ails our economy? Have they at least provided the tools to create real wealth and a sustainable recovery? I’ll let you answer that question.

While you do, consider also what I told you a few weeks ago: Debt is not wealth. Debt is merely one of those self-destruct mechanisms that typically comes along with premature, forced recoveries. A falling currency is another self-destruct mechanism.

And yet, big debt and a falling dollar are the two legacies of prevailing economic policy that are most likely to endure.

Fortunately, as I told you last week, there’s a real, tangible limit to this madness.

Most politicians are dumb most of the time. But they can’t all be dumb all the time. Sooner or later, some will wake up and smell the coffee. And the U.S. economy will eventually emerge far stronger than it is today.

This particular “recovery,” however, is not yet it. It’s too easy, too soon. And it could easily self-destruct.

Good luck and God bless!

Martin

Martin D. Weiss, Ph.D.
Editor, Safe Money Report
Chairman, Weiss Ratings, Inc.
martinonmonday@weissinc.com

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