Saturday, March 21, 2015

Debt craze

This evening I was sitting in my LazyBoy recliner reading a book. All of a sudden it dawned on me that it was just about a year ago that MsTioga and I ran ourselves off of Interstate #5 and into a farmer's field. I did not know it at the time, but that accident was to change my life forever!

You may read about MsTioga and myself a year ago on our accident day, March 15, 2014, by clicking [here].

But that accident is not why I started typing a blog post to you this evening. I wanted to write to you about something that I have been doing during the last few months. I've been doing a ton of studying about a new direction for my retirement funds. The reason for these months of my studying is the National Debt that our government is pursuing. It is my observation that hardly anybody in the financial world and in our government recognizes that our National Debt is an economic craze.

There have been lots gigantic financial crazes during the last 500 years. Here is a [link] to a story about several of the famous bubbles. This list does not include bubbles that you may know about because they happened just a few years ago:
  • The 1990s Dot.Com bubble
  • The United States housing bubble that peaked in early 2006
The bubble that I am writing about this evening, is the United States federal government's National Debt Bubble. There is a lot of writing out there that claims that our national government is in great financial shape. That our national government is not in big trouble. But my studying has convinced me that our federal government's 18+ trillion national debt may well be on the way to becoming the biggest bubble of them all.

For me, the question now is not "if" the National Debt is a bubble. The question is "when" is this bubble is going to pop.


12 comments:

  1. George, what alternative investment ideas have you discovered to protect against that day the bubble pops?

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    1. Hi Kathe,
      I am rebalancing my IRA to 25% cash, 15% gold and 60% Vanguard international funds. My direction is to get out of US dollars and stocks.

      George

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    2. Thanks. I'll consider that.

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    3. Here is an interesting link to a history chart of US national debt over the last 75 years. Everyone loves to declare an emergency today but its wise to understand what has been going on over time and not just recent trends

      http://en.wikipedia.org/wiki/National_debt_of_the_United_States

      also, be careful of foreign investments as those foreign governments may have an even bigger debt bubble than the USA.


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    4. Another issue to worry about with foreign investments is that if the dollar does lose value the exchange rate from foreign currency will get very expensive when trying to turn those foreign investment profits back into dollars so you can spend it here in the USA.

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    5. Here is a 200 year history chart of the stock market vs gold and bonds and cash. It gives a great perspective on how the American economy performs through such times as the great depression. http://41.media.tumblr.com/fa1f8211e150ef0fd5a3223b0bb48fe9/tumblr_mz7dc1975V1t1h2pvo1_1280.jpg

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  2. George, I've been unhappy about the Federal Deficit since I was a young adult and finally understood what my father was talking about back in the late 60s when I was a teen-ager. If you don't live within your means; it will come back to bite you, whether you are an individual, a business or a government entity.

    Not sure I would go with international funds, because from what I've seen, they are in just as bad a shape as our country/economy.

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    1. Hi Judy,
      You may not be comfortable with international funds. However, those funds invest in companies whose stock is denominated in the currency of another country. NOT in US dollars.

      I do not know what will trigger a run away from dollars or when that run will begin. But something is coming to start that run. Because it is not possible, in my opinion, to service our 18+ trillion dollar debt and stimulate the country economically forever with borrowed money.

      George

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  3. Glad to hear you've got on board George. Our leaders are bankrupting the country. Consider the increase in the national debt over the last 15 years. Our debt in 2000 was a little under $6 Trillion. By the time Obama took over it was up to $10 Trillion and now it's close to $18 Trillion.

    If we keep increasing the debt it like this we will find ourselves in big trouble in the not too distant future.

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  4. well, if the dollar fails, so will the other currency of the world,,the problem will be if they raise interest rates they would be unable ever to pay China..down that road..so how much could they save if they stop wasting our money and start running things as if it was private industry,,,you know checks and balances,,,i read yesterday they lost 50 billion somewhere ,,WTF

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  5. Here is a 200 year history chart of the stock market vs gold and bonds and cash. It gives a great perspective on how the American economy performs through such times as the great depression. http://41.media.tumblr.com/fa1f8211e150ef0fd5a3223b0bb48fe9/tumblr_mz7dc1975V1t1h2pvo1_1280.jpg

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  6. Before you can have an intelligent discussion on gov't finance or economics you have to understand the numbers.

    New reports bandy around numbers like a $100- million, or $5-billion or now our national indebtedness of say with unfunded liabilities of around $18-Trillion. As a raw number the human brain can't conceive what these numbers actually look like. Therefore it's important to get a grasp of them in order to make informed judgments about them.

    We'll start with something we can visualize. 100-$1-bills. This dainty little stack will be less than a half inch high...actually the official height would be .43 inches.

    For sake of space, next will be a stack of $1,000 in $1-bills. It will be 4.3 inches tall.

    A stack of $1-million, $1-bills will be 358ft high, roughly the height of a 30 to 35 story building.

    A stack of $1-billion in $1-bills will be 67.9 MILES high. Now we're getting into real numbers.

    It's important to note that just a few years ago, gov't spending numbers were merely hundreds of billions.

    Our stack of now $1-trillion in $1-bills now reaches 67,866 MILES high...more than a quarter of the distance to the moon. Higher than any of the earth orbiting satellites.

    First we'll make this stack a bit more manageable by switching it from $1-bills, to $100-bills. This makes the stack much shorter, about 678.66 miles high. Because our debt is $18-TRILLION, the stack of $100-bills to represent the debt will be 12,216 miles high.

    In an effort to help you comprehend how difficult it's going to be to pay off the $18-trillion, if we froze spending at todays level to keep the debt from increasing, and stopped all interest on it...paying on the debt at a rate of $10,000/day would allow us to FINALLY get it paid off in 273,972 YEARS!!!

    It's usually related to indebting our future generations. Given a generation is generally considered to be 20 years, it means our CURRENT DEBT LEVEL has indebted 13,699 GENERATIONS. That's a lot of levels of grandchildren.

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