The U.S. debt situation when broken down to one of family statistics really seems absurd. Yet it’s true. It’s a slow motion train wreck that can be seen coming miles away but which, like deer paralyzed in the headlights, everyone is unwilling to face up to and to take any meaningful corrective action – and it will be the downfall of them all. Words: 550
So says Simon Black (www.SovereignMan.com) in paraphrased excerpts from his latest post* entitled Ending up like the Joneses…
[This article is presented compliments of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.]
Black goes on to say in further edited excerpts:
Based on 2012/2013 data here is the U.S. debt situation:
- 2012 US Tax Revenue: $2,469,000,000,000
- 2012 Federal budget: $3,796,000,000,000
- 2012 Budget deficit: $1,327,000,000,000
- US Federal Debt as of January 18, 2013: $16,432,620,067,491
- Total interest paid on the debt in 2012: $359,796,008,919
- Budget increase/decrease between 2012 and 2013: $38,500,000,000 INCREASE
Now chop off eight zeros and imagine the same numbers for the Jones family:
- Annual Jones family income: $24,690
- Annual Jones family expenses: $37,960
- Annual Jones family shortfall borrowed from friends and neighbors: $ 13,270
- Total interest the Jones family paid last year: $3,598 (at practically 0% interest)
- Total Jones family debt (mortgage, auto, credit card): $164,326
- Change in Jones family spending this year: ++ $385
Not to mention,
- Aunt Bertha, Uncle Ned, and Grandpa are all coming to live with the Jones family this year… which is only going to increase household spending and
- little Johnny, who is about to graduate from university, has no job prospects.
Further, the Jones family hasn’t made any substantial changes to their lives…
- no jobs training,
- no skill development,
- no investment in education.
Yet somehow they feel confident that their income levels will rise much faster than the debt.
Friends and neighbors who have loaned them money are starting to get nervous.
Papa Jones has put a plan together, however, to cut the family’s annual shortfall… so that,
- 5 years from now, they’ll only be short $8,000 per year instead of $13,270 and
- that, because his great-grandfather was a hardworking professional with an excellent reputation, that the neighbors should just cut him some slack.
The extended family is also getting nervous… but Papa Jones tells them not to worry. They believe him because he is very charismatic and has a great jump shot.
A few projections:
- The Jones family is obvious too ignorant to know that they’re bankrupt. This ignorance is even more dangerous than their insolvency.
- The kids are going to inherit all of this debt, and if they’re lucky enough to find work, will spend the rest of their lives paying interest and supporting the rest of the family.
- Friends and neighbors who have loaned money to the Jones family have had enough, and they are slowly beginning to reduce their exposure to this disaster.
- Papa Jones is going to deal with this by grounding his children, raiding their piggy banks, and sending them next door to fight the neighbor’s kids.
When you look at it this way, it really seems absurd. Yet it’s true… a slow motion train wreck that you can see coming miles away.
This is why the principles of international diversification are so important– you live in one country, your money lives in another, your business lives in another, you have an escape hatch in another, etc.
This ‘multiple flags’ lifestyle is a strategy that anyone can adopt – and it’s one of the best ways to avoid ending up like the Jones kids.
[Editor’s Note: The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
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