How to prepare your family to survive and thrive in todays uncertain world

An Alarming Economic Picture

I don’t really want to harp on our economic issues too often, but there have been a few tidbits in the news lately that I feel compelled to discuss.

Despite the current claims by the national media and the government, things just aren’t going all that well.

Our Oh So Sustainable Deficit

Our federal deficit continues to skyrocket to impossible levels.

In 2007 one of the big stories was the natural deficit that Bush was rocking. Spending was unsustainable according to the media, at $162 Billion.

Today, four years later, we’re looking at a budget deficit of….

$1.65 Trillion

Remember that unsustainable Bush Deficit of $162 Billion?  Well, on several occasions during the Obama administration, including most recently February of this year, we have had MONTHLY deficits that are higher than the ANNUAL deficit of 2007.

And Barack Obama tells us that our government needs to live within its means. Boy, looks like we’re doing that, doesn’t it?

Here’s a picture that tells it all (h/t to GatewayPundit via Barron Barnett)

Let’s Talk About Interest Rates…

Now that you’ve seen that, lets play some numbers.  Last year we spent about $180 Billion in debt interest payments on $14 Trillion in debt.  Based on simple math, that’s a 1.3% interest rate.

Let’s play a little game and say that the interest rates go up to about 4%.  Not at all unreasonable .. in fact, it’s still relatively low considering our history.  That $180 Billion in interest payments jumped up to over $560 Billion a year.

This will decrease the amount of money that the Government can spend before it runs a deficit by sixty percent.

Now picture a completely reasonable scenario where the world assumes we aren’t going to be able to pay any of this off in the long term … because we can’t … and they bump our interest rate as a result of that to 8%.

Try $1.2 Trillion a year in interest payments ALONE.  That leaves about $800 Billion left over before we run a deficit.  Oh by the way, that’s what we spend every year on Medicare.  Or Social Security.

Do you understand the ramifications of that?

Someone tell me how we get out of this without a total collapse, because I don’t see it. There is ZERO political will in DC to change a damn thing.

The Handouts Grow and Grow

Somewhat related, we find out thanks to CNBC that our federal government hands out so much money to people that it is the equivalent of 35% of all wages and salaries earned in the US.

Tens of millions of Americans now depend on the government to put food on their plate. How do you think they’ll react when the inevitable cuts come?

This seems to me to be a reasonable guess…

A Fascinating Video and a Compelling Promise

Finally, there’s an interesting YouTube video I came across today. It’s from a hacker group that just recently announced they’ll be releasing documentation on Monday that shows Bank of America willfully and intentionally committed mortgage fraud. Nice.

Let me know what you think about the video…

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4 Responses to An Alarming Economic Picture

  1. My feeling is that you cannot be a victim of a fraud, mortgage related or otherwise, unless you allow yourself to be. I can’t imagine not reading and understanding every line item of the most important investment of your life, I really can’t. That’s what real estate attorneys are for.

    Re: the economic picture. It isn’t pretty and hasn’t been but sadly, most ignore it. The writing’s been on the wall for a few years now(2005) but many aren’t paying attention. We have been, since 2005.

  2. Lynda, I’ve come from a financial background and I have seen many people put into really, really poor situations due to predatory lending. Have you ever read a mortgage contract? According to your comment you have, but perhaps you are blessed with a better than average understanding of the legalese. I know how lending works and I know when people sign a contract for any loan, most of them cannot afford to hire an attorney to review the paperwork first. Especially considering these people who were getting in over their heads, they barely thought they could afford the house itself.

    We definitely need to hold people accountable for their decisions, but when those decisions are pushed upon them by someone who is taking advantage of the fact that these people are perhaps not fully equipped to make those decisions, we do need to hold them responsible as well.

  3. Bethany, with the number of free legal services available in every state it behooves those getting a mortgage or any loan to avail themselves of their services. Yes, I have read my mortgage, now paid off, as well as previous loans and each was explained in full when those line items were questioned.

    If one feels he cannot afford a house or barely afford it then common sense dicates that waiting is better.

    I worked with a very intelligent young guy, fellow chemist, and he knowingly bought a $400,000 condo with his wife. Interest only loan for a few years, then the balloon payments were going to come due. In the meantime, knowing the condo was losing value and that it would cost him about ten grand to refinance(part of the original contract) he took a total of 4 trips to the Bahamas and other exotic locales which easily amounted to that amount of money, when he could have put the money to better use. Last I heard he was going to walk.
    He also complained to our manager when he didn’t get the raise he thought he was entitled to. After all, he had credit card bills to pay. I was astonished when he told me this and told him the same thing she did. The company did not give raises based upon what their employees owed.

    I refuse to feel sorry for people like this and there are far too many of them. Using their equity like a credit card or an ATM. No planning despite the many warnings given almost daily.

  4. Interesting video. I’d like to see more.

    I agree with Bethany and Lynda.

    Bankers are crooks and prey on the weak. They give loans that are impossible for people to pay. They are in bed with the government.
    People are stupid and should be held accountable. Parents should teach their children to save their money and buy what they can afford, but children learn from example and our parents have not taught most of us well.

    Jane in Alaska