Read Below for the US Situation simplified
The large numbers are so staggering, that it is impossible to wrap your head around it. The family example brings it down to earth. So if you ever had doubts about your doubts about the position of the US, you can dispel those doubts (the ones about the doubts).
I wanted to preserve this summary from Simon Black of Sovereign Man, here is his website.
January 18, 2013
Santiago, Chile
There's a funny take on the Fiscal Cliff floating around the
Internet that several of our keen subscribers have passed along.
Like most things floating around the Internet, though, the
details are inaccurate. So I've gone back and modified the parody with accurate
numbers, and a bit more plot. What follows is 100% accurate based on 2012/2013
data:
2012 US Tax Revenue: $2,469,000,000,000
2012 Federal budget: $3,796,000,000,000
2012 Budget deficit: $1,327,000,000,000
US Federal Debt as of January 18, 2013: $16,432,620,067,491
Total interest paid on the debt in 2012: $359,796,008,919
Budget increase/decrease between 2012 and 2013:
$38,500,000,000 INCREASE
Now... chop off eight zeros and imagine the same numbers for
the Jones family:
Annual Jones family income: $24,690
Annual Jones family expenses: $37,960
Annual Jones family shortfall borrowed from friends and
neighbors: $ 13,270
Total interest the Jones family paid last year: $3,598 (at
practically 0% interest)
Total Jones family debt (mortgage, auto, credit card):
$164,326
Change in Jones family spending this year: ++ $385
Not to mention, Aunt Bertha, Uncle Ned, and Grandpa are all
coming to live with the Jones family this year... which is only going to
increase household spending. And little Johnny, who is about to graduate from
university, has no job prospects.
Further, the Jones family hasn't made any substantial
changes to their lives... no jobs training, no skill development, no investment
in education. Yet somehow they feel confident that their income levels will
rise much faster than the debt.
Friends and neighbors who have loaned them money are
starting to get nervous. But Papa Jones has put a plan together. He aims to cut
the family's annual shortfall... so that, five years from now, they'll -only-
be short $8,000 per year instead of $13,000.
He also insists that, because his great-grandfather was a
hardworking professional with an excellent reputation, that the neighbors
should just cut him some slack.
The extended family is also getting nervous... but Papa
Jones tells them not to worry. They believe him because he is very charismatic
and has a great jump shot.
A few projections:
1) The Jones family is obvious too ignorant to know that
they're bankrupt. This ignorance is even more dangerous than their insolvency.
2) The kids are going to inherit all of this debt, and if
they're lucky enough to find work, will spend the rest of their lives paying
interest and supporting the rest of the family.
3) Friends and neighbors who have loaned money to the Jones
family have had enough, and they are slowly beginning to reduce their exposure
to this disaster.
4) Papa Jones is going to deal with this by grounding his
children, raiding their piggy banks, and sending them next door to fight the
neighbor's kids.
When you look at it this way, it really seems absurd. Yet
it's true... a slow motion train wreck that you can see coming miles away.
This is why the principles of international diversification
are so important-- you live in one country, your money lives in another, your
business lives in another, you have an escape hatch in another, etc.
This 'multiple flags' lifestyle is a strategy that anyone
can adopt. And it's one of the best ways to avoid ending up like the Jones
kids.
