Have you ever seen someone that is living beyond their means? They make $4,000 a month but spend $4,500 a month. But wait…there are always credit cards, right?
So, for a while, the person continues their lifestyle (seemingly unaffected) as they just put $500 on their credit card each month.
They’re really bankrupt, but they don’t feel the effects of it yet. But sooner or later, there comes a “day of reckoning” where the debtor reaches its credit limit and now they have to “face the music.”
Our government is living like this too.
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They haven’t made spending cuts in good times or bad. They’ve outspent their income (which is obtained through taxing us) and they still go deeper and deeper in the hole. But they just serve their elected term and let the next elected official to deal with it all.
Now here’s the catch-22 that America is in right now. On one hand, if we don’t continue to raise the debt limit, then it could stop the pay to our veterans, our soldiers presently in the military and even Social Security recipients. It would also cause cuts in education, healthcare and public transportation.
On the other hand, if we don’t reduce the deficit, then we’re bound to have our credit rating reduced, which makes issuing debt more expensive (which costs us more money to pay back in the future).
So if you’re a government worker, I feel for your pension.
Also, get ready for fewer healthcare services, weaker education (which will still cost more). Get ready for states to go bankrupt, too.
Now, some may say … states don’t go bankrupt! Well, at least 32 states have already borrowed more than $37 billion to pay unemployment insurance because without it, more than 60 percent of Americans wouldn’t have continued to receive their unemployment benefits.
California, Michigan and New York were the “biggest offenders” when it comes to not being able to pay their unemployment benefits.
So with all of this happening, both Moody’s and Standard and Poor’s have threatened to reduce the U.S. outlook to negative and even lower its credit rating. When that finally happens (and probably even before it happens), it will cause even more confidence to be lost in the U.S. dollar.
Therefore, not only does the future for U.S. citizens hold higher costs and higher taxation but also fewer benefits and to top it all off…a decline in their dollar’s purchasing power, which will drive up costs even more. It’s going to be a vicious cycle.
So if you’re a government worker, member of the armed forces, veteran, Social Security recipient or anyone else that is dependent upon government funding as a source of some or all of your pay … I’d suggest starting to find other means now for when the crap truly does finally hit the fan.
It’s going to be one of the most challenging periods ever for many Americans.
But in the end, it all leads to further decline in the U.S. dollar during the years … which means further erosion of your wealth if you don’t do something to stop it now.
That’s why most everyone should own foreign currencies and get involved with the foreign currency market to some degree so that they can forge a plan to protect themselves.
About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here
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