Thursday, August 19, 2010
Random thoughts from a warped and fevered mind...
Lee Iacocca, the former CEO of Chrysler Corporation, once famously said, "The main thing is to keep the main thing the main thing." With all the rhetoric and bloviating that emanates from Washington, it is very easy to lose sight of the "main thing". So, friends, I am going to attempt to give you the "main thing" that each of us should, regardless of political persuasion or station in life, should be focused upon. Ready? Here it is. Our government has more fiscal obligations than they ever possibly can cover. Or, to put it more bluntly, our country is bankrupt. How do I come to this dire conclusion? Professor Lawrence Kotlikoff of Boston University has estimated that the present and future obligations of our government (social security, medicare, medicaid, socialized medicine, and other social programs) is $202 trillion. TRILLION. With a T. Our Gross Domestic Product, basically our national income, is $14 Trillion per year, of which, approximately $2 trillion is collected in taxes. Total long term indebtedness of our country is $202 trillion dollars; our annual taxation is $2 trillion. You can tax 100% of the earnings of this country annually and not get close to paying what we owe. And that is the main thing.
If you think about it, the original "point and click" interface was made by Smith and Wesson.
To continue the point I was making above: currently, our country spends 62% of our GDP on paying debt, according to the Congressional Budget Office. By 2030, we will spend 146% of GDP if nothing changes. Consider that Greece defaulted when spending was 120% of GDP and had to be bailed out by the European Monetary Union. Our profligate spending in Washington has doomed our country to a severe and austere fiscal future. Last month, our government spent $165 billion dollars that it didn't have and this was added to our budget deficit. $165 BILLION! IN ONE MONTH! This was more than the entire budget deficit for the full year of 2007. While we have in times past been able to grow ourselves out of recessions and deficits, the ability to do so now is absent without substantial spending restraint from Washington. With spending occurring at this rate, there is no way to outgrow these deficits. Despite the rhetoric, obfuscations, and lies that come out of Washington, this is what we should know: that our government is fiscally dangerous with our future and they are spending us into oblivion. And that is the main thing.
The other day, my wife asked me if I would like to know how and when I would die. I told her, "No." She said, "Okay, forget it."
Think of the situation in our nation as if it was a situation in your own household. The financial decisions that you make can have a lasting if not life long affect on your standard of living. Commit early on to save a little each payday and live within your means, and generally you are in good financial shape. Overspend on credit cards or equity lines of credit and the consequences can be disastrous, especially if the unexpected happens. Lose a job or have uninsured medical expenses and the tenuous financial situation is now desperate. Get desperate enough, and be unable to pay your debts, and there are few options. Bankruptcy is the most likely course of action for many people. Our country is no different. Yes, Ben Bernanke can smugly state that he has the power to print all the money that he thinks is necessary, but here is the reality: that money (the U.S. dollar) is worth only what world markets say it is worth. And here is the truth: a nation cannot print its way out of debt. To attempt to do so will cause the currency to collapse. Our current levels of spending and failure to implement fiscal responsibility are limiting the options that we will have in the future for financial stability and solvency in this great nation.This will impact you and me as our standard of living diminishes significantly. And that is the main thing.
I got a sweater for Christmas. I really wanted a screamer or moaner.
And that, my friends, is my view.