Wednesday, November 28, 2012


The United States is not going to go bankrupt. At least, not in the way those private companies do when they sell off all of the assets and liquidate operating altogether. Many forms of bankruptcy exist where the company sells off some assets and consolidates the business into a smaller operation. No, the United States can just print more money to pay its bills. This just leads to a lower value of the currency, as we have been seeing for many decades now.
This form of bankruptcy is what some of the countries in Europe are beginning to experience. They have found that they can’t borrow enough money to continue to spend at current levels, so they have to consider reductions in expenses. Besides, the other countries in the Euro simply can’t go giving them money forever. Sooner or later, the United States will reach this position and we will face the same choices. We had that chance in the last election and we chose not to do anything about it.
The United States is the largest economy in the world. We had a great deal of wealth stored up from the 19th and first part of the 20th century. We have gone through much of this wealth, but we still have many advantages that continue to prop us up. What is the concern is that we are moving at an increasing rate. The ‘crisis’ that keep on popping up at an accelerating rate are a signal that danger lies ahead. Sooner or later, you can’t just print more money. Countries and people will begin to refuse to take it. This is when an ‘adjustment’ is mandatory. We got a glimpse of this back in the late 1970’s when inflation was a real problem. The next time around will be worse. How can it be better when your overall financial position is weaker and you have increased your spending habit?    

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