Debt Deals And Market Crashes

As I am a Financial Coach, I like to include personal finance advice on the blog from time to time. Often those times are Fridays. It seems like “Financial Friday” might become a permanent fixture around here.

Today I’m just going to fire off some UnConventional thoughts about what’s going on in the financial world at large.  Almost every newscast over the past week or two has had coverage of the debt crisis in the United States and the potential downgrade of the country’s credit rating.  Just this week there was a big drop in the stock market, one of the biggest in years (though it ended up today a tiny bit).  These are some of the things I wish mainstream economists and government talking heads would realize so they could get out of the way and let the economy recover.

Each of these may someday be a separate blog post of their own.  Let me know if there’s one that is particular interest to you and I will get to it sooner.

– If the problem the country has is too much debt, how can the solution possibly be to take on more debt?  If one of my coaching clients had a similar plan for their personal finances, I wouldn’t be able to help them much and they’d be bankrupt within months.

– The U.S. avoided having it’s credit rating downgraded, at least by two of the agencies.  This is pure politics and optics.  Anyone who thinks buying American debt is as good now as it was 20 years ago is insane.  Minutes ago Standard and Poors actually did downgrade the rating to AA+, which still sounds kinda high for a country seemingly being run by out of control teenagers with their parents’ credit card.

– Government spending does not help “create jobs”, no matter what President Obama says in press conferences.  Rather, it can create jobs in certain sectors, but only at the expense of x jobs somewhere else (where x>1).  Government can only help by getting out of the way, i.e. cutting or eliminating payroll taxes and other barriers to true job creation.

– “We need people to spend, not save” to help the economy.  You may have heard some economists saying this.  It is completely wrong.  Saving and living on less is what individuals (and the country) need to do in order to prosper. 

– The coming “double-dip” recession, or the continuation of an ongoing recession, however you want to describe it, is a good thing.  Easy credit and money creation has created a boom that must be followed by a bust in order to correct it.  The more the government and the Fed try to push the recession off, the worse it will eventually be when it fully its.

– Deflation is not the bad thing it’s made out to be.  Deflation makes everything cheaper for consumers!  But it is very bad for debtors because the dollar becomes worth more.

– Inflation is a terrible thing that is really an additional tax on the poor.  Government loves it because it allows them to pay back their debts with cheaper dollars.  Hence TARP, QE1, QE2 and whatever other qualitative easing gets rolled out in months to come.

– War does not help the economy, nor has it ever.  War always destroys wealth, countries, and lives and hurts the economy.  The sooner the US and Canada bring their troops home and stop spending money on war the better off all the citizens will be.

– The U.S. government’s debt is enormous, it can not and will not ever be paid off.  All the current Congress can do is pass the buck on to future generations and hope the worst hits after they are gone.

I hope that no one is too depressed after reading all that.  It feels good to get it all of my chest and into print though.  Watching the news makes me pretty angry sometimes as all these politicians who clearly have no idea what they’re talking about are making decisions that are going to affect the lives of hundreds of millions (even billions) of people around the world.  I hope it all ends up well, but I’m afraid I just have very little confidence that anything positive and long term will happen. 

Is there a point above that you don’t understand or disagree with?  What do you think about the current debt crisis and how the government is going about trying to fix it?

Image: jscreationzs / FreeDigitalPhotos.net


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