Is America Going Broke?

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Is the United States going broke?

Many would roll their eyes at this notion; they would tell you that the country has never defaulted on its debt that its long-term interest rates are historically low; that the dollar is the world’s reserve currency; and that China, Japan, and other countries have an insatiable demand for U.S. Treasuries.

Others would argue that the official debt reflects taxonomy, not fiscal essentials; that the total of official and unofficial liabilities is enormous (The costs of hurricanes Katrina and Rita alone could easily total $200 billion over the next few years); that federal spending and medical expenditures are exploding, and that the United States has a history of defaulting on its official debt by means of inflation.

On the other side of the coin is China; China is saving and growing at such astonishingly high rates that it can potentially provide the United States, the European Union, and Japan with huge quantities of capital. Some would suggest that China could serve as America’s savior provided China is permitted to invest massive sums in our country (assuming they would want to).

The massive debt looming over the country has ominous implications for our children and grandchildren. Leaving our $65.9 trillion bill for today and tomorrow’s children to pay will roughly double their average lifetime net tax rates (defined as the present value of taxes paid net of transfer payments received divided by the present value of lifetime earnings). [Gokhale, Kotlikoff, and Sluchynsky 2003].

Times are bleak for the U.S. consumer. The average household owes 20 percent more than it makes each year. The personal savings rate is in negative territory. Record numbers of Americans are losing their homes to foreclosure, and millions more are struggling to keep up with their monthly bills and obligations.

The House and Senate have passed economic stimulus packages that include rebates to taxpayers, which the government is encouraging them to spend, which seems like an irresponsible message for taxpayers who have debt or no savings.

Bankruptcy, once regarded as a shameful and humiliating failure, has become an everyday fact of life: More Americans filed for bankruptcy last year in the United States than in the entire 1960’s.

Speaking just hours after the Federal Reserve helped to engineer a rescue loan for investment bank Bear Stearns, Bush said that, although times are tough, the economy is resilient. The country has endured tough times before, he said. “Every time, this economy has bounced back better and stronger than before,” Bush said, expressing his optimism in the future of the country.

Bush rejected several proposals being offered in Congress, including the purchase of boarded-up homes by cities and states, changes in the bankruptcy code to allow mortgages to be discharged in bankruptcy, and extending federal loan guarantees to more homes once lenders have accepted their losses. Markets need time to correct, he said. “Delaying that correction would only prolong the correction.”

So as a Realtor, Investor, and an American, I do hope the correction comes, and comes soon.

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14 Comments

  1. It always amazes me that givernments do not care about the countries debt. I guess they just think that they may not be around for long so they will keep everything nice and happy by not raising taxes too much.

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  3. lol. There is one thing to have pride in one’s country. It is another thing altogether to be fooled into believing everything you hear from your President. The US is not ok, and is not in a state of good economic health.

    The subprime mess is just a tiny piece of the overall picture. Don’t forget about the declining dollar, inflation, mounting foreign ownership of US debt, Social Security & Medicare funding crisis, etc.

    This mess isn’t going to be repaired for a long time!

  4. The nice thing about debt is that it’s worth less the longer you wait to repay it. Here’s an example.

    In the 1970s, you could buy a house in Laguna Beach for $70,000. That was an expesive price back then. Today it would be worth over $1 million, easy. If you never refinanced, you’d still be paying on the $70,000 mortgage, if it’s not already paid off. It’s no longer a massive amount of cash. Inflation took care of it for you.

    So it is with the national debt.

  5. i think many people have the attitude ‘if you don’t think about it, it will go away’

    there is no doubt that the country is facing some tough challenges ahead. i think this election year will decide many thing for this country’s future.

    imo, this current administration has put their own interest ahead of the country’s. We need a president that will focus it’s attention back on the domestic issues haunting this great nation and stop making enemies from foreign countries.

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  7. We are a defiantly in some trouble times. The Real Estate Market is in serious turmoil. However, if you don’t currently own anything, this would be the time to purchase. This is truly a buyer’s market with Interest Rates at a low and housing prices falling. BUY! BUY! BUY! this is what I tell all of my clients.

    by the way great article, very good information.

  8. just like the roman and babylonian empires disappeared. so is this country. UNSINKABLE. yeah right. so wheres the titanic now? underwater. haha. to give opportunities to others to become huge and great nations.

  9. I don’t believe the country will sink, not by a long shot. I certainly wouldn’t feel it was a “ha ha” situation if it did.

    If the US sank, others countries would soon follow; as many are already struggling to survive this meltdown.

    America is not an island that can sink into the sea as the fabled Atlantis. I think we merely got a little to confident, much to careless, and trusted to many educated people in high postitions to take care of business.

    I’m quite sure during the Great Depression some felt we would never bounce back, and that wasn’t exactly accurate. So we’re not quite like the Titanic, as its yet to rise.

  10. Find the “Money Mechanics” video on the net and learn the truth about how the American money system works and the fraud that all of you are going through!!! Your money does not exist and its fraud and money laundry/forgery!!! For those in Canada the “Oh! Canada Movie” is very similar as both systems are debt based and they on go in a downward direction. If one watches the movies and does the research you’ll find all the information on the net for yourselves and court cases and court files of people who are filing class action suits or have won/lost and how to sue the banks/ gov’t/ IRS for fraud!Even the IRS has no law saying you have to pay but they insist though! They have broken laws and violated the constitution. In Canada for example you do not require a license to practice law or even joining the bar association which is a “club”. The primary requirement is passing the university courses which qualify you not going the club!!! If they don’t join then there persecuted for it. Under ultra vires, contract laws and promissory notes and failure to disclose the method of money supplied it’s void contract “people” and you can withhold payment during the dispute!!! If you hire a real lawyer they will defend you and show you how to do it cheaply to represent/educated yourself or get aid and how to fill out the right forms. Even advise you without putting there career in jeopardy!! For fear of the “bar association”!!!! If your going broke what do you have to lose! Sign your name on petition’s and through numbers we can put it back the way our forefathers had it because they new this would happen!!! Under the law if you claim bankruptcy you and “idiot”/mentally incapable and like slaves its a seven year’s before your FREE………..You don’t have to be a lawyer to win just well versed in the law!!

    (LAWYERS/JUDGES)THE STUPIDITY IS THAT UNLESS YOUR THE ‘ELITE’ ALL YOU SAVINGS AND MONEY WILL DISAPPEAR WITH THE BANKS GOING BROKE!! SO UNLESS YOUR A BILLIONAIRE OR HIGHER YOU CAN SERVE THEM BUT IN THE END YOU’LL GO BROKE AS WELL BECAUSE YOUR NOT HIGH ENOUGH ON THE FOOD CHAIN!!! THINK ABOUT IT!!! “SLAVES IN THE TOMB WHEN ITS SEALED OFF!!!” DUH!

    -the 1930’s are an example of this……………… you may want gold or silver coins/jewels in a can in the back yard!!!!

    Don’t believe me then do the research yourself and see!!!!!!!!!!!!!!!!!!!!

  11. Guys, just yesterday i commented on a thread and looked back and realized how off based i was
    discouraging to the ones that are following me in this business.First you can not solve the problem dealing with it on the same level it was conceived .This atmosphere of hostility has and
    will resolve itself with the efforts of us all working and listening to and working with each other.
    Remember for the people and by the people.I have lived through some very bad times and i
    have traveled all over the world. You can be assured, America is the greatest country on earth
    and will continue to be for sometime to come.It is my hope that i lite a fire under you all as you
    have me.Lets get back to doing what we do best.As kick ass businessmen and women making it a
    WIN?WIN…………….Enjoy the day guys…….

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