Archive for July, 2011

This has the same heading as a blog I wrote well over a year ago….same heading same theme but a different message.

I wrote about consumerism , how we were then  (in 2010) spending as through there were no tomorrows with very few people worrying about how  government debt would be repaid. I also questioned what lessons ( and messages) we were teaching our children by just going out there and borrowing money against the promise  of money we had not yet earned.

Much of my advice falls on deaf ears….but I tell you people are waking up but it is now too late.

Backtrack several years previously (2004 to be exact) and I was writing about the American Debt clock….and at 9 Trillion Dollars (the Amount Americans owed in loans ,borrowings, I owe U’s, Government Promissory notes etc) and my doubting how  was this amount of money was ever going to be paid back.

Well today ( July 2011) that amount has  soared to a staggering and totally unmanageable 14 trillion United States dollars, and today the President is pleading to pass a bill which will allow him to keep spending beyond the  ceiling limit of the 14 trillion dollars, in order that America can keep paying their bills.

What has changed since since almost a year ago, when the same president was asking the same question , for the same reason….only that time he was given more money and more time…..this time        ( July 2011)_I don’t think he will be so lucky.

What will this mean? Well America ( USA) will default on its obligations to pay ….either countries, or more of concern its public servants. The implications are huge and widespread. All aspects of American life will be effected….each State in the United States require federal assistance to survive, to pay utilities  amounting to collectively billions of dollars in a fiscal year.

The United States will lose their treasured AAA+ credit rating and their credit worthiness will be downgraded.But that is something that everyone in the world has known about for years, but no one has seem to bothered to do anything about.

So who did all the spending????

The most “prudent presidents” were Nixon, Ford and Carter….the worst Reagan and the two George Bush”s.  It is interesting to note a pattern…..When ever the Red team gets in the debt escalates.  It is then up to the blue team to bring it back down.

It is interesting New Zealand’s red team ( the Labour Party ) has the same spending tendency. Maybe there should be a red card given to Governments who cannot guarantee fiscal responsibilities.

Under President Carter debt to GDP was around 40% today under President Obama it is close to 100%. That is explained in a single easy to understand sentence….everything  dollar that is being earned ( and paid for in taxes) is going to pay off debt. All 14 trillion dollars of it.( or the interest paid on that debt)

Even if by some Houdini feat of escapism, President Obama gets himself out of this one….there is no way out of it for the United States Economy and its present status as the worlds number one economy. It is like you ( my astute readers) having fun time with your credit card, and whilst you have a mountain load of consumerable goodies….your once friendly ( but now positively feral ) bank manager  is coming around for what will be really hard times as you see all the goodies go, your credit card destroyed and your credit worthiness in tatters.( and not just for a small time) … it will leave an indelible stain on your financial character maybe for the rest of your life.

So what can you do???

Unless you have huge amounts of cash and assets ….probably not much. The smart ones have probably sold their US cash and invested in Gold (it has risen 20% in the last quarter ) . The big loser will be the people in the USA because interest rates will increase ( the USA when borrowing will pay a higher premium  for credit )property will in the United States will fall ( again) people will look to invest in other places …….and when the dollar has parity with the New Zealand and Australian dollars many will then buy up the United States dollars .

All sounds like a great plan. But I really must sound a word of caution . Those expecting a massive rebound and improvement in the United States dollar maybe in for a long wait… because of the size of the debt it may not be seen in this lifetime.

Any cold  or influenza America gets,invariably  gives its cold or flu to the rest of the world. Some nations may not survive the Tsunami of Financial debt that such a melt down will bring. Some countries are already struggling to remain afloat: Iceland, Ireland, Greece, Spain and Portugal to name just a few.

Despite the doom and gloom there is a simple answer, and that is not to lean on your own understanding. Instead look for wisdom , and I only know of one place in which to look. And where is there a better place to start than in the book of Proverbs. It enables you to better relate to the imperfect world we live in….how to relate to people as well as the most comprehensive range of topics imaginable.

Start by reading in a bible translation you understand with Chapter 2 ….the Value of Wisdom.

The incredible value in reading this book, is that you are given the same wisdom that God gave to King Solomon , when God invited Solomon to ask for whatever he wanted….and King Solomon asked for only one thing….Wisdom.

Having Wisdom marks you as a person who is wise. If you seek God through his word you will fear nothing that the world can dish out…not now and not in the future.

Do I have the answers …Of Course Not …But God has and he is willing to share them with you if you ask.

I will write again soon

Lindsay Walker

26th  July 2011