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I was recently asked to comment on the following article which outlines the top 20 countries and their relative debt rankings. They compare the country’s GDP to Debt ratio. Here’s a link to the article

CNBC Article

Here were my comments:

Seems like that list is filled with Socialist style governments, which makes sense as they have to pay for their generous benefits. In considering a typical politicians view of the world, it makes complete sense. I knew about Ireland, but was surprised by the UK and some of the others. There are various opinions as to the reason for the problem and whether it’s a problem, but in my view the problem is that we have politicians that live for the now and the “now vote”, so they are willing to rack up enormous debts in order to get each vote so they can stay in power. They don’t necessarily care about who has to pay for it. The bigger problem is that they aren’t investing the debt into the future growth of the economy. It’s mostly wasted on programs that have short term impacts.

I think, and have considered starting a movement, that my generation should resolve to create a generational tax in order to pay down the debt we have inherited. We inform the current generations that are in power that their estates will be taxed at 90-95% in order to pay back the debt which has provided their wealth as a result of leveraging our generations future earnings. Instead of living within their means in the USA’s time of dominance (past 60 years), they have squandered the wealth selfishly and burdened future generations. If we could get 80% of the younger voters to sign on, it could have an impact on the actions of the current generation that’s in power. Probably over simplified and unrealistic, but it would at least send a message that we’re fed-up with the behavior.

More problematic is that ow that corporations have “taken over” our government (actually more like handed the reins), we will probably have a harder time getting anything done that will fix the problem as it will result in more taxes/regulations for them, which they will fight tooth and nail. This means we’re going to see the slow decay of the American lifestyle and prosperity as a result of the influence of the vary structures that were created to protect and enhance our lifestyles. It comes down to short sightedness and greed. It’s not a bright outlook, but the most realistic.


What do you think?

Here’s a link to one of the best pieces of satire that I’ve seen in a long time regarding the current spending orgy the government is going on. The actual satire isn’t so much in the words said, but the fact that one of Washington’s own big spenders is doing the talking… yep… Â our own actor turned Senator, turned failed Presidential candidate …. Fred Thompson.

http://www.silverbearcafe.com/private/12.08/goodnewa.html

So here we are in the middle of another Wall Street financial meltdown, Congress is pointing fingers, economists are hypothesizing about it’s length and cause, and pretty much everyone’s a bit worried about their own financial future. As we learn more details surrounding the triggers of the crisis, I can’t help but think back to my college finance and economic classes and the lessons on the causes of the Great Depression. Seems to me that the commonality between them is that lawmakers and regulators allowed our banking and financial institutions to get “too big to fail” without the necessary checks and balances to ensure solvency.

In the case of the Great Depression, the fact that banks controlled everything from insurance, to mortgages, to deposits lead to a very rapid economic crisis once their liquidity evaporated and the paper profit balloon deflated.  To address it, Congress enacted Glass-Steagall to limit the potential size of the financial institutions and the limit the breadth of future market liquidity crisis. It did a lot of other things as well, like create the FDIC, but I focus on this one aspect because it was repealed in 1999, again allowing greed to creap from the banking industry to other industries. The elite economists, arrogant lawmakers, and butter tongued lobbyists convinced the American people that these protections, created by our grand parents whom had suffered through a depression and wanted to prevent future generations from having to relive it, were so 1933. Regulators were way smarter now, and the industry had learned it’s lessons and could regulate itself.

What a dangerous concept to allow a group that holds everyone’s money to gamble with it without strong oversight and a willingness to accept that gamble from the depositor. Congress opened the door for these institutions to take risks in one part of their business knowing the government will catch them if they fall because of the link to the banking portion. I can’t understand how Congress forgot to see this when they repealed Glass-Steagall. In terms of industry stability, market focussed financial institutions are safer to the system as a whole.  There’s a reason that smaller regional banks staved off this crisis.

If Congress really wants to fix the problems of the financial sector, they’ll act fast to fix the fundamental problem in our banking system, reenact legislation that will limit and separate the sizes of banks and what they can invest in. This way future meltdowns will be easier to contain, regulators will be able to focus on specific aspects of the industry, and  you and I will be able to trust putting our money into banks. We won’t get the “Their too big to fail” line again in 15 years. But, if Congress doesn’t act, than maybe there is something to the words of Thomas Jefferson…