C
CPA2
Guest
Debt
Debt is a huge time bomb. The United States is the greatest debtor nation in the history of mankind. The government admitted to a $500 billion deficit for 2004. However, the 2004 deficit did swell to $1 trillion. The government does not count the billions that they borrow from the Social Security Fund, or increased funding for the war in Iraq. Additionally, the average credit card debt in America is at a record $8,500. Household mortgage debt is also at an all time high. Households must spend a record 18.3% of their after-tax income just to service their mortgage debt. By any standard, we are in the middle of the greatest debt bubble of all time.
Alan Greenspan, head of the Federal Reserve in 2004, insisted on lowering interest rates during the 1990s to encourage spending. However, debt did weigh heavily on the minds of individuals during the 1920s, before the Great Depression. Our ancestors took on much less debt than people easily accept today. Most people in the 1920s paid off debt as soon as possible. However, many people in the 1920s borrowed money to speculate in the stock market. My grandparents told stories about the horrors of debt when times got tough. We Americans may repeat the hard economic times of the 1930s, and fall into the same trap of not saving for a rainy day.
People today have a false sense of security. They think that “big brother” is always protecting them and preventing them from suffering through another depression. We are becoming overconfident. We forget to save for that rainy day that could bankrupt us overnight because of a disaster, sickness or unemployment. Many people see no reason to save for the future.
People develop a false sense of security. They believe that their jobs will always be there. However, many companies are experiencing falling profits. Even Coca-Cola and Wendy are suffering declines in earnings. Ailing companies are laying off workers by the thousands. About 10 million Americans are now without jobs. These Americans are struggling to keep a roof over their heads. The mortgage delinquency rate is the highest in 30 years. Additionally, the foreclosure rate on home mortgages is the worst in 52 years.
Many individuals experienced a false sense of job security when they were working for one of the largest companies in the world, Enron. They lost not only their jobs, but they also lost their retirement funds that they had invested in the company. Having debt in a time of extreme need is dangerous for one’s financial health and stability.
Debt can have a great impact for individuals, companies and even countries. Cash reserves and investments allow for stability during difficult times. Debt can multiply investment gains in good times and, like a double-edge sword, multiply investment losses in bad economic times. Debt is like a Swiss-made watch; it keeps on ticking, even during bad times.
We hear that the bad times are behind us and bad economic times will never happen again during our lifetime. Many say that history will not repeat itself. The stock market crash of 1929 and the ten year depression will never happen again. Uncle Sam, or “big brother,” will always be watching over us. However, the Federal government is impotent to end the bankruptcy crisis or to save the stock market.
What assurance do we have that we will not end up like Russia? Our money could one day become worthless. President Nixon removed the backing of gold from the U.S. dollar. All we have now is our confidence in the dollar and our trust in the economy.
The current budget deficit is devastating the dollar and boosting the price of gold. Gold was $250 an ounce a few years ago and it is now trading around $1,200 per ounce. It does not look like there will be an end to the dollar’s woes or the rising price of gold. When our economy hits rock bottom, will we repeat history and transition into a depression?
Debt can be cruel and unforgiving. Economic times can change like the weather. Bad times can appear on the horizon with little or no warning. Being self-reliant and saving regularly can save one from financial disaster. Look at the financial destruction that occurred in Florida because of hurricanes Frances and Charley. Thousands of people had extensive damage to their homes and have no insurance. Many of these people are typical Americans with $8,500 of credit card debt plus 30-year mortgages on their homes. Being prepared at all times and understanding the economic forces that lay ahead will help one’s chances of survival. Learning from our history ensures that we will not make the same mistakes. Too much debt can be deadly.
Debt is a huge time bomb. The United States is the greatest debtor nation in the history of mankind. The government admitted to a $500 billion deficit for 2004. However, the 2004 deficit did swell to $1 trillion. The government does not count the billions that they borrow from the Social Security Fund, or increased funding for the war in Iraq. Additionally, the average credit card debt in America is at a record $8,500. Household mortgage debt is also at an all time high. Households must spend a record 18.3% of their after-tax income just to service their mortgage debt. By any standard, we are in the middle of the greatest debt bubble of all time.
Alan Greenspan, head of the Federal Reserve in 2004, insisted on lowering interest rates during the 1990s to encourage spending. However, debt did weigh heavily on the minds of individuals during the 1920s, before the Great Depression. Our ancestors took on much less debt than people easily accept today. Most people in the 1920s paid off debt as soon as possible. However, many people in the 1920s borrowed money to speculate in the stock market. My grandparents told stories about the horrors of debt when times got tough. We Americans may repeat the hard economic times of the 1930s, and fall into the same trap of not saving for a rainy day.
People today have a false sense of security. They think that “big brother” is always protecting them and preventing them from suffering through another depression. We are becoming overconfident. We forget to save for that rainy day that could bankrupt us overnight because of a disaster, sickness or unemployment. Many people see no reason to save for the future.
People develop a false sense of security. They believe that their jobs will always be there. However, many companies are experiencing falling profits. Even Coca-Cola and Wendy are suffering declines in earnings. Ailing companies are laying off workers by the thousands. About 10 million Americans are now without jobs. These Americans are struggling to keep a roof over their heads. The mortgage delinquency rate is the highest in 30 years. Additionally, the foreclosure rate on home mortgages is the worst in 52 years.
Many individuals experienced a false sense of job security when they were working for one of the largest companies in the world, Enron. They lost not only their jobs, but they also lost their retirement funds that they had invested in the company. Having debt in a time of extreme need is dangerous for one’s financial health and stability.
Debt can have a great impact for individuals, companies and even countries. Cash reserves and investments allow for stability during difficult times. Debt can multiply investment gains in good times and, like a double-edge sword, multiply investment losses in bad economic times. Debt is like a Swiss-made watch; it keeps on ticking, even during bad times.
We hear that the bad times are behind us and bad economic times will never happen again during our lifetime. Many say that history will not repeat itself. The stock market crash of 1929 and the ten year depression will never happen again. Uncle Sam, or “big brother,” will always be watching over us. However, the Federal government is impotent to end the bankruptcy crisis or to save the stock market.
What assurance do we have that we will not end up like Russia? Our money could one day become worthless. President Nixon removed the backing of gold from the U.S. dollar. All we have now is our confidence in the dollar and our trust in the economy.
The current budget deficit is devastating the dollar and boosting the price of gold. Gold was $250 an ounce a few years ago and it is now trading around $1,200 per ounce. It does not look like there will be an end to the dollar’s woes or the rising price of gold. When our economy hits rock bottom, will we repeat history and transition into a depression?
Debt can be cruel and unforgiving. Economic times can change like the weather. Bad times can appear on the horizon with little or no warning. Being self-reliant and saving regularly can save one from financial disaster. Look at the financial destruction that occurred in Florida because of hurricanes Frances and Charley. Thousands of people had extensive damage to their homes and have no insurance. Many of these people are typical Americans with $8,500 of credit card debt plus 30-year mortgages on their homes. Being prepared at all times and understanding the economic forces that lay ahead will help one’s chances of survival. Learning from our history ensures that we will not make the same mistakes. Too much debt can be deadly.