The Social Security system, or more accurately Social Insecurity, is a great example of government mismanagement. Instead of collecting more money than it pays out, and investing the money it has collected, the government is now paying out more money than it collects. And instead of investing to get rich, it simply spent the money to make us poorer. To the tune of $2.5 trillion.
This article on Yahoo has some interesting facts about Social Insecurity. The article neglects to mention one of the biggest problems with the system. And that is the fact that people are living longer. It is estimated that people are living as much as half a year longer with each passing year. That means that in 20 years people could be living 10 years longer. Does the government factor this in to the Social Security payments estimates? No.
After reading this article on Yahoo, I really started thinking about how the global economic environment has changed. China is on track to be the biggest and most powerful force in the world. What does that mean for the U.S.?
One thing that I have noticed is that many people like to dismiss China as not being able to compete with America. They say, “Oh, China will never overtake America. Our technology is just too good.” Or some other nonsense. These are the same people who say, “Buy American. We need jobs.”
Thanks to Robert, I found a great new resource about America’s precarious financial situation and the future financial chaos. It is a movie called I.O.U.S.A. What better way to learn about economics than through a video?
Curiously, embedding the movie is disabled, so here is the preview instead:
After reading this article on Yahoo about the ever-growing national debt, I took a look at the U.S. National Debt Clock. Not only are we having record deficits each year, but the debt per American has reached unsustainable levels.
As you can see, the debt has reached $42,698 per American! And, $119,524 per taxpayer. The average savings in America is a small percentage of these figures.
On of the reasons that our economy is in a precarious position is that it is composed mostly of spending. Specifically, it is created by the desire to consume ever greater amounts of newer and bigger stuff. And we don’t need most of that stuff.
The American Dream
Contrary to popular opinion, most people only spend about 30% of their money on things that they really need. People don’t need a cell phone. They don’t need new clothes or to go out to eat. They can survive just fine on cheap food like pasta or rice or vegetables.
The challenge is that we grow up thinking that if we can buy just one more thing then we will be happy. And the problem is exacerbated by easy financing. The cell phone is a perfect example. If you sign up for service, you can get a deal on the phone and start using it now.
After reading this article, it reminded me that the U.S. will not be the most powerful country forever. The article says that U.S. debt is not as safe as everyone thinks.
Image courtesy of The Heritage Foundation
America has had a free ride for the last hundred years. America has had the most natural resources, the most immigration, strong investment in industry, and, most importantly, the ability to print money without limit. Why? Because the dollar has been the world’s reserve currency.
That means that the demand for U.S. debt has been unquenchable. Whenever a country or individual wanted to invest in a safe way (whatever that means), they would buy dollars denominated U.S. debt. Whenever the government needed money because it did not manage its finances responsibly, it would just issue more debt.
There’s a decidedly strong backlash against government spending.
There’s always a backlash against government spending. It’s only right: we’ve all done our due diligence cutting our own spending, trying to invest properly, and finding new sources of revenue.
We’ve managed to create and live on a budget.
But here’s the thing. This is nothing new. The movement to force government into the frugality has been going on for a long time. But, each time government services are cut, there’s a huge backlash against that, too. Reagan faced it. In the 1990s, when national parks began to close, budget-cutting was demonized.
What about earmarks? We all hate earmarks, but gladly vote for politicians who hold big check photo-ops into our neighborhood, right?
Here’s the question then: what are we prepared to do to make our government more frugal?
After watching the gold market for the last few months, I noticed something pretty interesting about the current rally, that started on March 25, about 2 weeks ago. It has been a very strong, smooth rally with almost no retracement. It has been very similar to the last big rally, that set the all time high (in nominal terms) at $1.215.
I found this interesting video of Alf Field, discussing the future of the price of gold. This is a fascinating video because many of Alf’s predictions have come true. This video was recorded in 2005, and in the years many of the ideas that he discusses have turned out to be quite accurate.
He suggests that the U.S. government would throw large amounts of money at a series of problems that have been brewing for more than 50 years. He didn’t imagine that a new administration would come in and take deficit spending to a whole new level. But those new developments support his argument.
He says that the U.S. government is going to have to deal with the following major problems. And, that by attempting to fix them by spending, they would destroy the dollar.
The new record breaking budget deficit of $1.8 trillion could have massive repercussions for the economies of this country and for the entire world. The future deficits are expected to rise. This deficit might be the straw that breaks the dollar’s back.
Image courtesy of The Heritage Foundation
There have been many factors that have been putting pressure on the dollar, going back nearly 100 years when the government started running a deficit. It’s been a free ride for the last century because the dollar was the default currency for the world. America was the most powerful economic superpower, and the only country that was a military threat was the USSR. It was like having an infinite line of credit; we could print as much money as we wanted.
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The One Minute Millionaire is a great book about how to become a millionaire. Written by Mark Victor Hansen and Robert G. Allen, this book combines an inspirational story with practical everyday skills.
The Art of Learning is the fascinating story of Josh Waitzkin, the world champion in both chess and Pushing Hands. His style is mesmerizing, and the strategies for learning are priceless.
The Alchemist is one of the best-selling and most inspirational books of all time. Anyone who has ever had a dream in life needs to read it. Perhaps my favorite book of all time.
Love is the Killer App is a powerful, step-by-step book about how to have a wonderful experience and spread love in any working environment. Think the office has to be a source of bad energy? Think again.
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There’s a decidedly strong backlash against government spending.
is one of my favorite financial books of all time. It's an allegory about a guy who has a terrible job, and how he overcomes challenges to achieve his dreams.
