Article Tags : debt . debt countdown . debt crisis . fannie mae freddie mac . GNP . inflation . invest in gold . invest in silver . obamacare . politicians . Swiss Francs . tax the rich . U.S. debt 2011
1. Three years ago, I said we should take our medicine and face reality – we are living way beyond our means and continue to do so.
2. The stimulus as I predicted did not work because government borrowing and investment does not have a real solid multiplier effect.
3. Government spending as a percentage of GNP has averaged 20%, but we are spending 25%.
4. Taxing the rich does not work. Statistics show over time tax revenues will adjust to a certain level and not increase where there are tax disincentives.
5. Fannie Mae and Freddie Mac continue to be a travesty – more of the same policies that continue to bilk American tax payers.
6. Keynesian economics does not work – running deficits and building enormous debts is not a sound strategy.
7. Economies have natural ups and downs, but our government – both parties – seemed appalled by down markets. So they manipulate until they distort markets and paint themselves in a corner.
8. All entitlements – Medicare, Social Security – have to be cut. Here, the rich can shoulder more by taking less benefits. But, ObamaCare will raise the real costs of health care dramatically. Sadly, no one, again, wants to face reality.
What to do:
Step 1: Run a balanced budget like any bank account. But politicians will resist this because it stops them from promising what they can’t deliver.
Step 2: Prepare for a big inflation – gold will correct when the politicians cook up a poor compromise solution, but they will print more money.
Step 3: Soon, interest rates will go up and this will add expenses and debt to the U.S. – and affect the real estate and other debt sensitive instruments.
Step 4: Keep cash to pick bargains – even though with inflation it will lose value. Look at Swiss Francs.
Step 5: Keep at least 10% in gold and silver. There will be dips as the government will fight gold since gold reflects the depreciation of the dollar.
Just know the compromise will come, but many crises are still to ensue.