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Personal Versus Public Debt

Not a day goes by that the present state of the economy isn’t at the forefront of business conversation. Typically humming along at pre-determined, aimed for numerical targets, it has missed ‘the numbers’ for several years running. Between the housing market crash, and the resultant financial turmoil that revealed shady lending practices at nearly every lending institution, the economy hasn’t returned to its old smoothly running ways. And there is real debate over when, or even whether, it will ever do so. Many flaws inside the system have been revealed, and those flaws create an environment in which it’s hard for a nation to thrive.

Take for example, the national debt. It’s enough to cripple this country, should our debtors come calling, demanding the payments which are rightfully theirs. Adding the numbers up, it appears that America is broke, having borrowed and spent simultaneously to such a degree that the debt owed per citizen is staggering. And that’s just the national debt.

Personal debts have risen to a larger degree than ever before in our nation’s history. Where typically Americans have been savers, putting away money for that time in the future when they might need it, that trend erased itself during the last decade. On the whole, Americans now spend more than they earn. This has created a double whammy of debt inside the country, best labelled personal and public. While each person might tighten their own spending belt in order to pay off their personal debts, there has been little of the same governmental tightening. The government isn’t even meeting the interest payments on its debt, which is why the debt continues to grow so rapidly. Thus, the economy continues to suffer.  There are accredited online colleges provides much better understanding on personal and public debuts.

Filed Under: Financial, General Tagged With: , ,

The National Debt Crisis to Come

With the nation’s deficit continuing its ever larger upward spiral, it’s easy to wonder what will become of this great nation in time. As a group, the country has overspent to such a large extent, for such a large amount of time, that it owes far more than it produces in a year. Represented by the government bond market, the total amount of funds owed are astonishing to the uninitiated. Bonds represent money that was borrowed with promises to pay backing the borrowing. They’ve grown steadily for decades, as the collective United States consumer mentality has used up more than it has produced. As spending has ruled the, ahem, decades, those promises to pay back the borrowings haven’t resulted in action.

Unfortunately, a side product of a seemingly healthy bond market is that debt rarely gets paid off, or even paid down. Typically, it is rolled over into a new bond offering. That means that old promises to return the borrowed money are nullified, and replaced by fresh promises. This cycle seems as if it could continue indefinitely, and certainly it looks like the nation’s fiscal leaders have tried this route. The unfortunate truth is that the situation has continued unchecked for so long now that simple productivity seems unlikely to be able to ever repay the full amount of American debt.

With literally trillions owed – Americans owe the Chinese over 1.2 trillion dollars alone – this is a problem that, like disappearing oil, will require drastic changes to accommodate. Change hurts in most cases, but in this case, it could hurt worse than anyone anticipates. The ultimate solutions could easily bankrupt the country, lead to cataclysmic economic collapse (which would probably look similar, if slightly different), or, depending on one’s viewpoint, look even worse than either of those. Ultimately, Americans might have to sell off land, even entire states, to pay their debts.

Filed Under: Financial, General Tagged With: , ,

Interest Rates May Well Hold the Key to the Near Term American Future

It may not be politics as usual again, as Utah’s legislature attempts to push through a return to permitting the use of precious metals in the currency. Banned since the Great Depression, gold and silver coinage have been absent for eighty years. Their worth inside of coins has been replaced with far-from-precious metals, in a symptom of the truth – American money has become worth less and less over time. The ‘strong dollar’ policy of Federal Reserve chairmen past has been slowly disintegrated over time.

Interest rates are, and have long been, at very low levels in an effort to stimulate the economy and to encourage spending. Unfortunately, low interest rates maintained for a lengthy period of time have historically led to inflation. Sometimes, that inflation has turned rampant, and costs have zipped upwards in such a speedy fashion that chaos has ensued. Black markets tend to arise from nowhere in these instances. Such markets tend to be based on the barter system, in which goods or services are traded between the “have’s,” while the “have-not’s” have tended to suffer in a mighty fashion. America is not there yet, and there is still, possibly, time to avoid this devastating, classic, historical, scenario.

To avoid the problem is to recognize it beforehand, and take active steps to rectify the situation. While this problem may be recognizable to any student of fiscal history, it is up to the Federal Reserve chairman – entirely responsible for the raising or lowering of interest rates – to see, and confront the problem. By raising interest rates before inflation begins to show its head, the seeds will be planted to cut off the maelstrom before it arrives. Each American citizen would do well to hope that the chairman sees the problem before it is too late to do anything about it. Beyond hope, there is always letter writing!

Filed Under: Financial Tagged With: , ,

War in Iraq Hurts and Helps US Economy

There are two different schools of thought in the financial community concerning whether wars and other military actions hurt or help the U.S. economy. In truth, both sides have some valid considerations. Sometimes the  reactions of a nation include things that boost an economy. For instance, World War II, following the Great Depression, created a large number of jobs, boosted the industrial industry and many more citizens to work. The same can be said for some of what is happening today. Additionally, those who are enlisted in military reserve units must vacate full time jobs when they are called out to serve, creating job openings for others left here at home.

On the other side of the issue, our economy is taking a hit from the amount of money that must be spent on social programs and other related items. For instance, the Veteran’s Administration requires much more funding to help those who were injured or disabled during their tours of duty. The loss of lives also means the loss of a parent or bread winner for many American families, sending more of them to government assistance programs for aid. All of this government expenditure takes a toll on the taxes paid by those who remain at home and employed; more taxes taken from a paycheck means less money for families to spend in discretionary income.

There are other considerations that show how being involved in military actions overseas are hurting the economy at home. Our national debt continues to grow, because our resources are not able to keep up the pace of spending that a war of this length demands. The funds spent on helping those families negatively affected is not able to be invested in ideas that would have helped our economy and the larger community of our nation. There is little doubt that the damage to our economy has been done; the only question remaining is how much worse it will have to get.

Filed Under: General Tagged With: ,

Government Programs That Help Foreclosure

The housing market in the United States for a number of years was riding high. Millions of people were buying and selling homes like it was candy. However, over the past two or three years that has all caught up with people. A major housing crisis combined with a mortgage system that was a bit corrupt has lead many people to face the possibility of losing their homes through foreclosure. If you are one of the many Americans facing foreclosure there are a number of government programs out there that are designed to help you through the foreclosure process.

Here is a look at some of the available government programs that will help you should you be facing foreclosure.

The United States Department of Housing and Urban Development. This part of the government has developed a number of programs that can help those facing foreclosures. The biggest program that has been started under HUD is the affordable living program. This allows people who got into mortgages that have ballooning payments to file for an affordable housing option. Under this option the mortgage can be renegotiated so that the payments are realistic and the home owner is not paying 70, 80 or 90 percent of their income just to save their home. Other programs developed under HUD include lender incentives to renegotiate with foreclosures and even a counseling service that will help lenders better budget their finances and possible get out of the situation that they are currently in.

Federal Housing Administration. The Federal Housing Administration has created a new foreclosure protection program. This is commonly called the FHA Secure mortgage incentive. This is available for those that might have good credit. It allows home owners to refinance their mortgage loan at any time so that they can take advantage of lower interest rates.

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