Friday, September 23, 2011

The Joy Of Spending Other People’s Money

In case you are still wondering why US debt was downgraded by S&P, just take a gander at the country's finances:

U.S. Tax revenue: $2,170,000,000,000
Federal budget: $3,820,000,000,000
New debt: $ 1,650,000,000,000
National debt: $14,271,000,000,000
Recent [April] budget cut: $ 38,500,000,000


Now, let’s remove 8 zeros and pretend it’s a household budget:

Annual family income: $21,700
Money the family spent: $38,200
New debt on the credit card: $16,500
Outstanding balance on the credit card: $142,710
Budget cuts: $385

If this were your personal financial condition what would you do? Cut expenditures, continue to borrow and spend because there is a deficit of demand, or just throw in the towel and declare bankruptcy?

Of course, countries are not people and they don't necessarily have to earn their way out of a bad financial situation by working two or three jobs or learning new skills to significantly improve earning power.  Countries can crank up the printing presses and inflate the debt away, or they can lower interest rates and keep them below the rate of inflation to once again inflate away the problem, or they can impose exorbitant taxes on their citizens, or they can restrain spending and try to grow their way out of the problem.

Via Small Dead Animals

Keynesian Therapy

1 comment: