Archive for the 'deficit' Category

Paulson, “Congress, Can I Please Get My Credit Limit Increased?”

The secretary of treasury wants to increase his spending again.  I think the debt professionals at Saturday Night Live have some advice for them.

 Now I know this is complicated, so maybe the Secretary of the Treasury should watch this once again. 

I thought these people were supposed to be smart.  There is a threat of a recession on the horizon, and we are spending more and more now.  If we can’t manage our budget during the better years what will we do when things actually get bad?  What are they thinking? 

The worst part is that we continue to have faith in them.  Social security is going to be a complete disaster, medicare and medicaid will be worse, and who knows who will finance the retirement of military vets.  It’s going to be great.  A bunch of cranky old sick people who know how to kill other people wandering around town in a bad mood.  If we already have massive liabilities that we don’t know how we are going to cover, why are we increasing spending right now?  We should be cutting expenses and getting ready for the perfect storm that is coming, both as a country and personally.  That means, “Don’t buy stuff you cannot afford”. 

Savings rates were once positive in this country.  The fact that they are already negative is very scary, especially seeing that baby boomers are still supposed to be socking away money.  If, as a country, we have a negative savings rate now, where will we be in 15 years when all of the baby boomers retire.  With those extremely negative savings rates, our credit rating around the world will be dropping like a rock.  We will be the country that is paying high interest rates because there is so much doubt in our ability to repay our debts. 

It looks like they may just use infaltion to debase the debts, slaughtering the accounts of those who were responsible and saved.  The catch is actions like this promote irresponsible behavior in the citizens.  Savers are what allows growth of industry through financing new equipment, factories, and research.  Why do we punish them?  I guess the government will end up getting the citizens it deserves in this case. 

It will be interesting to see how things shake out, but it would be a lot more pleasant waiting if both our government and our citizens tried to be a little responsible in the meantime.

America Has No Trade Deficit

Everybody says that America has a massive trade deficit, and I will agree that it looks that way.  On closer examination, I realized that America was sending just has much value abroad as we are receiving here.  If this wasn’t the case, why would people send us the goods?  The big question is, what are we sending abroad?

 We are exporting faith in the government.  As we send more and more dollars abroad, our government is exporting the faith that its citizens have in her.  The dollar has fallen rapidly.  China is being forced to keep exert efforts to keep the value of its yuan low.  All of the dollars that China has accumulated have turned faith in the US government into faith in the government of the People’s Republic of China.  The US is still the head on international finance, but her pre-eminence is slowly being sold away for televisions and video games.  They will not sell back cheaply what they have paid so dearly for. 

Why do I even care about faith in the government?  Well respected governments attract the best businesses and the cheapest capital.  The US attracts the best and the brightest from around the world, with their ideas and expertise.   Investors all over the world accept below average returns from the US because of the below average risks.  A secure, stable, and low tax  environment for operations is one the best resources available.  The US has eliminated the work and thrift ethics that first lead to the accumulation of capital here, and now they are selling away the trusted environment that was built up through years of steady work, thrift, and available capital. 

There are  a lot of things that we could leave for our children.  The beautiful environment, education, and happiness are all fantastic, but they will be bought from underneath our children unless we leave them work ethic, thriftiness, and a little capital in the country that we haven’t sold to the chinese.