Debt In Perspective – The Startling Truth

I recently received an email in which our national debt was broken down to a level
that really hits home. Here is how it went.
• U.S. Tax revenue: $2,170,000,000,000
• Fed budget: $3,820,000,000,000
• New debt: $ 1,650,000,000,000
• National debt: $14,271,000,000,000
• Recent budget cuts: $ 38,500,000,000
Let’s now remove 8 zeros and pretend it’s a household budget:
• Annual family income: $21,700
• Money the family spent: $38,200
• New debt on the credit cards: $16,500
• Outstanding balance on the credit card: $142,710
• Total budget cuts: $385
If this was a real family, and sadly it is more often these days, chances are they
would be speaking to a bankruptcy attorney about now. There is no way this family
could ever pay off their debts if they continue down this path. Something has to
change.
In our example of this family, chances are the credit card companies and other
lending institutions have cut them off. They are likely behind on their payments with
no clear way of overcoming their circumstance.
This is our financial situation in America. The only difference is with the
government they have access to virtually unlimited borrowing from the FEDS. There
is an appearance that we are making our debt obligations, but to what consequence?
Sooner or later something has to give.
There are two likely scenarios – both of which could occur at the same time – if we
continue down this road.
1. Money will become less and less valuable. It will lose its purchasing power. This
is inflation at its most basic level. If we continue to have the FEDS print money, each
dollar printed has less value. As a result cost of goods and services will rise. We’ve
seen this. Calculate the pennies that each item at the grocery store has rose. That is
inflation. Some items are up 30% or more in the past year. Now look at the price of
gas, utility bills, etc., we all feel the effects of inflation.
2. The next scenario is that someone is going to have to pay the debt! And who will
that be? You and I. Taxes are obviously not sufficient to cover the out of control
spending. We created almost 2 trillion in new debt this year, with NO tax revenue to
cover it, now or in the future.
Is it likely that tax rates will go up if revenue doesn’t meet the insatiable demand?
What will happen to your retirement plan or 401(k)? Do you think tax rates will be
favorable when its time to withdraw money?
Lots to think about and prepare for. What are you doing?
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