The U.S. debt situation when broken down to one of family statistics really seems absurd. Yet it’s true. It’s a slow motion train wreck that can be seen coming miles away but which, like deer paralyzed in the headlights, everyone is unwilling to face up to and to take any meaningful corrective action – and it will be the downfall of them all. Words: 550
So says Simon Black (www.SovereignMan.com) in paraphrased excerpts from his latest post* entitled Ending up like the Joneses…
[This article is presented compliments of www.munKNEE.com (Your Key to Making Money!) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.]
Black goes on to say in further edited excerpts:
Based on 2012/2013 data here is the U.S. debt situation:
- 2012 US Tax Revenue: $2,469,000,000,000
- 2012 Federal budget: $3,796,000,000,000
- 2012 Budget deficit: $1,327,000,000,000
- US Federal Debt as of January 18, 2013: $16,432,620,067,491
- Total interest paid on the debt in 2012: $359,796,008,919
- Budget increase/decrease between 2012 and 2013: $38,500,000,000 INCREASE
Now chop off eight zeros and imagine the same numbers for the Jones family:
- Annual Jones family income: $24,690
- Annual Jones family expenses: $37,960
- Annual Jones family shortfall borrowed from friends and neighbors: $ 13,270
- Total interest the Jones family paid last year: $3,598 (at practically 0% interest)
- Total Jones family debt (mortgage, auto, credit card): $164,326
- Change in Jones family spending this year: ++ $385
Not to mention,
- Aunt Bertha, Uncle Ned, and Grandpa are all coming to live with the Jones family this year… which is only going to increase household spending and
- little Johnny, who is about to graduate from university, has no job prospects.
Further, the Jones family hasn’t made any substantial changes to their lives…
- no jobs training,
- no skill development,
- no investment in education.
Yet somehow they feel confident that their income levels will rise much faster than the debt.
Friends and neighbors who have loaned them money are starting to get nervous.
Papa Jones has put a plan together, however, to cut the family’s annual shortfall… so that,
- 5 years from now, they’ll only be short $8,000 per year instead of $13,270 and
- that, because his great-grandfather was a hardworking professional with an excellent reputation, that the neighbors should just cut him some slack.
The extended family is also getting nervous… but Papa Jones tells them not to worry. They believe him because he is very charismatic and has a great jump shot.
A few projections:
- The Jones family is obvious too ignorant to know that they’re bankrupt. This ignorance is even more dangerous than their insolvency.
- The kids are going to inherit all of this debt, and if they’re lucky enough to find work, will spend the rest of their lives paying interest and supporting the rest of the family.
- Friends and neighbors who have loaned money to the Jones family have had enough, and they are slowly beginning to reduce their exposure to this disaster.
- Papa Jones is going to deal with this by grounding his children, raiding their piggy banks, and sending them next door to fight the neighbor’s kids.
When you look at it this way, it really seems absurd. Yet it’s true… a slow motion train wreck that you can see coming miles away.
This is why the principles of international diversification are so important– you live in one country, your money lives in another, your business lives in another, you have an escape hatch in another, etc.
This ‘multiple flags’ lifestyle is a strategy that anyone can adopt – and it’s one of the best ways to avoid ending up like the Jones kids.
[Editor’s Note: The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
If you’re reading this and under 30, let me be absolutely clear about one indubitable point: your government is going to sacrifice your future in order to pay for its own mistakes from the past. [If that kind of future does not sit well with you] then get out of Dodge. Stop playing by the same rules of the game that used to work in the past because the old playbook of “go to school, get a good job, work your way up the ladder” simply doesn’t apply anymore. [This article outlines what is being laid out as your future unless you take independent action and, in conclusion, outlines suggestions on how to make a better life for yourself. Feel free to share this article with one and all!] Words: 1058
Like health, freedom erodes gradually over time… then all at once. We lose a freedom here, there, through a slow, measured deterioration of civil and economic liberty: body scanners at the airport; declarations of foreign accounts; mandatory health insurance and then, suddenly, there’s a bifurcation point when the deterioration goes nonlinear. It’s like the old saying about going broke– it happens gradually, then all at once. We lose our freedoms in the same way. [That is already happening in Argentina where the government is] screwing everyone, big time: banks, businesses, workers, retirees, professionals, entrepreneurs, even government employees and the U.S. is starting to go down this road as well. [Let me explain.] Words: 625
With both the fiscal cliff and debt ceiling looming, US stocks beginning to trail stocks overseas and the much increased volatility of the US market compared to those outside the United States, it is getting difficult to argue that the United States is still the “safe port” in a storm. Given the changing dynamic, we continue to believe that this is a good time for investors to consider lowering their overweight position in US equities while raising the allocation to international stocks. [I explain my position more fully in this article.] Words: 711
The United States and most of Europe…risk an eruption and collapse of the mountain of unsustainable sovereign debt built up over the last two decades. Frankly, the U.S. dollar and national debt situation is so dire – and our means to contain a sovereign debt crisis so limited by multiple wars and Washington’s debt and political incompetence at home – that anything could happen, almost overnight. [The best] America and most European governments and the central banking elites, which created the criminal sovereign debt fiasco, [appear able to do is] try to buy more time and delay the inevitable. This inaction means the threat of an immediate US debt and dollar collapse cannot be ruled out. Therefore, readers who have not protected themselves certainly have cause to worry because now could be too late. [Let me explain further.] Words: 1689
The U.S. has reached a Debt to GDP ratio of over 100%. Indeed, at no point in history has the U.S. had this much debt during peacetime – and the fact that we’re overspending by this amount at the exact time that other countries are showing signs of shunning US Treasuries is a formula for disaster. With that in mind, it is highly likely that the U.S. will enter at the very minimum a debt crisis and quite possibly a currency crisis during the Obama administration’s second term. [Such being the case,] now, more than ever, investors need to get access to high quality guidance and insights [and this article does just that] to help you navigate the markets and protect your wealth. Words: 964
Many articles are being written these days that more or less scope the dire financial circumstances the U.S. is in. That being said, I had not been able to find one “analyst” – even one – who had the guts to outline the probable outcome and general hopelessness of the situation and to offer any meaningful prescription for investors to survive this coming catastrophe – until now. Words: 710