How Do We Solve the U.S. Debt Problem?
There are three basic options, and none of them are very tasteful. Neither is the medicine we take for sickness for the withdrawal symptoms to stop smoking, drugs, or overeating.
(1) U.S. begins to print massive amounts of money. It will trigger hyperinflation, create a Zimbabwe-type outcome, and set back capitalism 150 years (ah, the old cottage industry.) It will further show the difference between the “haves” and the “have nots.”
(2) Do what Japan did after their 1990 financial and stock crisis. The outcome was 20 years of hardship, an economy that did not move, and a flat stock market. Most people will go into denial and hope that the debt problem goes away. That is what the government in the U.S. did by bailing out bad banks and companies. They are delaying the eventual outcome. Doing so like Japan will create periods of deflation and minimal growth.
(3) This option most people have not even considered….set up a workout similar to what was done in the Asian contagion financial crisis of ’97-’98. The strategy entailed the IMF creating a bailout package for us. It would require drastic reforms for us, (which most Americans will not like;) massive deficit reductions by governments, businesses, and individuals; and letting banks and businesses fail while interest rates would increase substantially.
None of these are fun options….but Americans were on a “high” creating a false standard of living that was created with debt. The policy makers in Washington created a “con” by convincing everyone that people were “entitled” to get free things from the government (really from their neighbors who were paying taxes.)
Did this “borrow now, pay later” attitude just develop overnight? No!
I remember it started when I was a young child (living in New England some 50 years ago.) An ad on TV was encouraging people up north to take a vacation during the winter to sunny, warm Florida. “Fly now….pay later.” See, up until then you saved your money, paid cash in advance for the trip, and then enjoyed the delayed gratification.
Some of you will remember the old “Christmas Clubs” where you saved money all year, took the money out at Thanksgiving, and paid “cash” for all your gifts. Instead, people now charge it and pay for it over the next two years at 39% credit card rates. So, the gift really costs you 80% more.
Hmmmm!! You are angry at the U.S. Government for borrowing to create a false sense of happiness today. The thinking is….later on I’ll pay it back….How? I do not know! Oh, I’ll just think about it later (Good ol’ Scarlett O’Hara.) This sounds like the attitude in Washington.
Isn’t it funny most Americans have done the same thing as Washington and are continuing to do the same thing? Gee, Paul, are you suggesting that we all go back to the old days and save up our money before spending it, or, do those goofy Christmas clubs?? You decide, but we were never on the edge of bankruptcy as a nation as we are now! You cannot tell our representatives in Washington to change if you do not change first.