America, like most of Europe must take the first step to recovery and admit we have a problem. The problem is simple, we are addicted to spending. This is
not just a government problem, it is a problem with nearly each and every one of us. The federal government, state and local governments, individuals and
corporations have all taken on massive amounts of debt that are rapidly approaching dangerous levels.
Taken from US Debt Clock.org
- Federal Debt - 12.9 trillion
- State Debt - 1.1 trillion
- Local Debt - 1.9 trillion
- Credit Card Debt - 830 billion
- Mortgage Debt - 14 trillion
- Consumer Debt - 2.4 trillion
- Total Personal Debt - 16.54 trillion
- Total US Debt - 55.75 trillion
Unfunded Liabilities (Money we have committed to spend but have no way to pay for)
- Medicare - 75.2 trillion
- Social Security - 14.3 trillion
- Prescription Drug - 18.9 trillion
- Total - 108.44 trillion
Federal, State and Local government debt is all rising at a rate faster than the overall economy while at the same time personal debt in all
categories is slowly falling. The personal debt reduction would appear to be a good thing but the devil is in the details. Most of the reduction
in personal debt is coming from people defaulting on their mortgages, credit cards and consumer loans. When your house is foreclosed upon or you
declare bankruptcy that money comes off the books of your personal debt. There has been a trend by individuals to save more and spend less in the past
two years but the effect is small compared to people defaulting on debt.
Like all addictions and addicts there are a standard list of players in the story. Along with the addict you need a supplier, and enabler and
For the government the supplier is a list comprised of individual investors, foreign investors, the federal reserve and the financial
institutions. We all own state, local and treasury bonds that finance the unfunded spending of each level of government. China owns
nearly a trillion dollars of this debt, Japan more than a trillion. The Social Security trust fund is actually just trillions of dollars worth
of treasury bonds, IOU's stuffed in a safe somewhere. All the excess SSI tax that has come out of everyone's paycheck for decades has been
stolen by the federal government and used for other things.
In the case of government the supplier is also the enabler. The federal reserve bank which is charged with printing money and setting interest
rates has enabled the federal government to spend at this level by making borrowed money nearly free. They are essentially the enabler and the
supplier of the entire country's spending addiction. The federal reserve has acted as the most massive money laundering organization in the
history of earth. The banks borrow money from the federal reserve at an almost zero interest rate, use the money to buy treasury bonds and then
ultimately sell those treasury bonds back to the federal reserve. They are simply taking money from one pocket and putting it in the other
and somehow this covers their debt. The banks end up making a nice profit in the process.
The unfortunate reality about to kick all of us in the face is that we do not operate in a vacuum. The federal reserve cannot control interest
rates and print money as they see fit for much longer. Interest rates are rising internationally as only the United States and most of Europe are
still mired in an economic downturn. The Asian economy has been growing at a rapid pace causing increased demand for all kinds of raw materials
and high overall inflation throughout the region. It is only a matter of time until the price increases due to increased demand and inflation in Asia
begin to take effect here. With our total debt in excess of 55 trillion each 1% increase in interest rates costs us 550 billion annually. At a
minimum rates will rise 2-3% in the next decade if we are lucky.
Like a drug dealer that gives the addict free drugs until they get hooked we have been given access to cheap money and now are we ever hooked.
The dealer though is not in business to give you free stuff and at some point is going to start asking you for a lot of money. Are we going to
start behaving like an addict, selling our possessions, lying, cheating, stealing and doing unimaginable things to support our habit. Are we going
to wait until we hit rock bottom before admitting we have a problem and getting started on the road to recovery. Sometimes that works out, take
Robert Downey Jr. for instance. In other cases it doesn't, like Elvis, John Belushi and Anna Nicole Smith.
Right now Greece is about to hit rock bottom and the signs are looking more and more like they will end up more like Elvis than Robert Downey.
There is violence in the street right now as the people who are addicted to government handouts and cushy government jobs are protesting the
cuts they must make in order to survive. When you take the drug away from the addict they tend to become violent shells of their former selves.
Is this the fate we are willingly leading ourselves towards?
We don't need to wait for rock bottom to turn things around. The good news is that we have within our control the ability to change course
and avoid the dangerous crash. Once we admit to the problem the solutions is simple but far from easy.
We must stop spending money we do not have and we must demand the same from the people who represent us. Each of us needs to get to the point
were we are not beholden to anyone. When the interest rates rise and prices skyrocket if you are not in debt you will be able to survive. The
other option is to continue in denial living in ignorant bliss. I'm sure the government will be there to take care of you when they foreclose
on your house and your car.
April 26 - This time you've been warned.
April 23 - Mutually Assured Economic Destruction
April 22 - The Truth, Does it matter?
April 21 - Name that Mob?
April 20 - Why So Quiet?.
April 19 - The Deadbeat Bubble.
April 16 - Oh no you didn't.
April 15 - The Party of Silence.
April 14 - You've got to be kidding me.
April 13 - Where do we go from here
April 12 - Youth of the Nation
April 9 - Turning the Tables
April 8 - New Age of Discrimination
April 7 - Thank You Kind Stranger
April 6 - The Cost of Compassion
April 5 - Happy Days are Here Again
April 2 - Of Course We Can Do a Better Job
April 1 - The New Normal
March 31 - Take a Deep Breath
March 30 - Metaphors and Blinking Lights