We are spending ourselves into oblivion

On a personal level, we all understand that spending more than we make is poor financial management, and we will bring repercussions down upon ourselves if we try. Being hounded by bill collectors, having our credit rating downgraded, and even going into bankruptcy are possible outcomes.

The lesson is one that seems to require learning again and again, as many of our ancestors, when the truth is told, came from debtor’s prisons. It was common for a British judge to tell the man standing in front of him to “Go to America or go to prison.“

We tend to spend everything we gain, not considering the possibility of changes or emergencies. Many of us are only a couple paychecks away from being “street people” at any time. Loss of a job, health problems or an accident, or many other factors, can quickly bring about financial destruction. In the United States there have been about 840,000 foreclosures and 545,000 bankruptcies so far in 2009.

At the national level, the same lessons apply - with even more serious consequences. To spend a few minutes of real sobriety, go to the US Debt Clock online at http://www.usdebtclock.org/
The constantly changing figure on the national debt was well over $11,000,000,000,000 last Friday. That figure is hard to conceive, but it translates to $37,000 in debt for every man, women and child in America.

In addition we are committed to payments (unfunded liabilities) of about $58,000,000,000 or about $190,000 per citizen.

Our slide into debt has quickened to a dizzying pace with the huge amounts being spent by the government in the last few months. For the year to date, the government has taken in just over one trillion dollars and has spent nearly two trillion; the deficit this year alone is fast approaching a trillion.

To get the funds for this deficit, the government takes two tracks. One is to borrow money. The main lender to the United States in recent time is China. But China is becoming skittish about loaning money to an increasingly shaky economy. Even if China is willing to loan the money, the interest payments are becoming a huge part of the national budget.

Ironically, a good bit of the money borrowed from China is to buy goods produced in China, which shifts our balance of trade in their favor, and puts American workers out of their jobs.

Another way to get the funds for deficit spending is to create money. The government has the option of artificially inflating the money supply with illusionary creations by the Federal Reserve. Or the government can actually print more paper money. Either way, it devalues the dollar. For the first time in history, the creditworthiness of the US government is being called into question. In the 20th Century, the dollar was the standard currency around the world. Now the dollar is regarded as shaky, and other currencies are taking its place.

How will this impact each of us?

For sure, we know that prices are going to rise. As our dollars become worth less and less, the world will charge us more of them to buy their products. Since the majority of the manufactured goods we purchase today are made abroad, this means we will face a rapid rise in the cost of essentials, and a severe reduction in the luxuries that we can afford.

In short, we are headed toward poverty, if we do not change our ways. The only question is will it be a slow slide or a sudden crash. Today, China could topple our economy overnight by calling in our debt to them. True, they would topple their own economy in the process, but we know just from looking at our own, that political leaders are not always rational.

In the 1930s, inflation of the currency in Germany was so bad that it literally took “a wheelbarrow of money to buy a loaf of bread.“ The runaway economy provided the opportunity for Hitler to seize power.
Where will it end?  Despite talk, the government shows no signs of slowing the spending pace. There is talk of raising taxes to balance the budget, but that could stall any recovery from the current recession.

The only way we can imagine any real change in our onward rush toward destruction, is for citizens to use the power of the ballot to install leaders who will absolutely commit to spending only what we have.

Our current leaders have proven themselves unworthy.

It’s time for a clean sweep in Washington.