Sean’s Rant

Which of the above is the United States? It seems to be a mesh of the three and the socialism portion is growing.

Government Payments now make up 18% of Personal Income. A new record. The joke about France is that half of France works for the other half of france, because supposedly about half of the personal income in France is Government Payments. Is the U.S. slowly turning into France? With 4/5 people working for the other 1/5 people that is a large portion for a democratic republic.

I agree that some social programs are necessary and help out the country, but do we really have the money for these social programs? Aren’t China and other buyers of U.S. treasuries which constitute the $10 Trillion+ we are in debt to really subsidizing our social programs? (This number does not include personal debt, just government debt) If you want to dig into the data, the website is http://www.bea.gov.

What you’ll find is that the U.S. is currently taking in about $3 Trillion a year in revenue, and spending all of it and more. At this pace how soon will the $10 Trillion be paid off? Lets look at an example at the individual level. If Joe Bob makes $50,000 a year net after taxes, spends $62,000 a year and owes $150,000 when is Joe Bob going to be out of debt? Well he first has to stop spending more than he makes, then he has to pay off the debt with his current income. If he did this he would have to pay down the principal at $10,000 a year for 15 years, $5k for 30, $1k for 150!. This doesn’t even include the interest on the debt! Someone with this much debt would probably go bankrupt.

Now lets look at the U.S. If the U.S. were to try and pay off its debt it would have to pay down the principal at $500 Billion for 20 years, $250 Billion for 40 years, and $100 Billion for 100 years!!! This is in addition to all of the interest, and that assumes that we’ve not only cut the budget to spending less than we make but enough to pay down principal too. Yeah Right.

The investing moves for this are obviously commodities, because this doesn’t make a very good case for a non-backed dollar. I would say short the treasuries, but the effect of the treasuries losing value as the government becomes more likely to not repay its debt is offset by the Federal Reserve buying those treasuries. Isn’t that humorous, its like buying your own debt with monopoly money which then gives you access to real money.

Related posts:

1. I’ve said it before and I’ll say it again. The decline still isn’t over and heres why I’m short the DJIA.
2. China finally declares that the US should no longer be the reserve currency of the world