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Debt Ceiling Crisis?

July 25, 2011 By Shane Ede 13 Comments

If you’re even slightly interested in the US economy, and, let’s face it, most of the world is, then you’ve likely been at least marginally following the last few weeks worth of debt ceiling news.  The quick and dirty of it is that the US government has a debt ceiling that puts a cap on how much debt the US federal government can carry.  If they reach that cap, they can no longer issue treasury bonds and the like to raise money to pay for things.  Based on what I’ve read, everyone would like us to believe that it’s a major crisis, and the world will end if we don’t raise that debt ceiling and allow for more debt.  But, is it really a crisis?

Let’s think about this just a little bit.  Replace “U.S. Government” with John Doe in everything I’ve just said, and all the news you’ve read.  If we were talking about an individual, we wouldn’t be talking about how the world would end if they weren’t allowed to accumulate more debt.  We’d be talking about how they need to radically cut costs, increase income, pay off debt until they can get their finances in order.  Would  it be called a crisis?  Maybe on a personal level, John Doe would believe it was a crisis.  But, it certainly wouldn’t be world ending.

Bus1I’ll admit that it is a bit different when it’s a government entity that we’re talking about.  If the US government goes bankrupt, there will be some pretty serious problems with the economy for a while.  Which brings up another issue altogether.  The US economy needs some diversification of it’s revenue streams.  Way too much of the economy balances on how much money the US government sinks into it each month.

It’s time we start asking the same questions of the US government that we would be asking of John Doe.  Do you really need that expenditure?  That service?  All three cars?  The McMansion?  Unfortunately, those that are in charge in Washington are playing political ball instead of really trying to solve the problem.  They think way to hard about what programs they can cut that won’t lose them votes in the next cycle, or how much they can raise taxes without losing votes, when, instead, they should be looking to make the US government financially solvent and stabilizing it’s fiscal situation.  You or I would start with a balanced budget, I don’t see any reason why the government shouldn’t do the same.

What do you think?  I don’t think I’m being to idealistic in asking that they carry a balanced budget each year.  Or that they cut costs until they can do that.  Yes, they’ll likely have to raise taxes some to pay off what they’ve got for debt, but if it doesn’t come with some pretty significant cost cutting, they’ll all be looking for new jobs in 2012 anyways.

photo credit: Public Notice Media

Filed Under: budget, economy, Taxes Tagged With: budget, budgeting, debt ceiling, federal budget, government, Taxes, us government

WaMu Fails, Gets Bought in the Same Day

September 25, 2008 By Shane Ede Leave a Comment

Earlier today, banking giant WaMu, was put into a conservatorship by the U.S. Treasury.  That’s a nice way of saying that the bank was failing and failing fast.  I’m of the opinion that if they can’t handle their money very well and fail, then let them fail.  Sure it disrupts things, but that’s the American way.  Or it was.  Now we just print/mint more money to bail these businesses out and off they go.  How come nobody bailed out Enron?  And don’t tell me it was because of the fraud stuff going on.  You should note that several other institutions that have “failed” and been put into a conservatorship recently were announced as being under investigation for fraud.

That’s neither here nor there though.

Later this evening, it was announced that WaMu was being bought by another financial giant, JPMorgan Chase.  What we are now seeing is a consolidation of many of the failed banks.  It’s the cycle of business life.  Businesses near failure and get bought.  Or fail.  Some just slip into the ether and are never heard of again.  But if this continues, we’ll only have three or four major banking businesses around.  Not exactly horrible, but it makes it pretty hard if you dislike a couple of them.

With a bailout looming for the economy (with money freshly minted from thin air) we might begin seeing a turn around.  I kind of doubt it however.  The Government doesn’t have the 700B that Paulson says it will take to bailout the economy so they’ll weaken the dollar to nearly nothing by doing it.  Sure, it’ll weaken if they don’t, but we can’t just go around making money as we go.

Filed Under: Financial News Tagged With: bailout, economy, government, jpmorgan, jpmorgan chase, wamu

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