Since the subject of economics is no longer taught in the public schools (with a few exceptions of course) and many college students have no idea about the impact of compounding interest, balance sheets or profit and loss statements it’s time to reintroduce economics at a discussion level. Try this concept for example;
America, Inc. is the largest publicly traded company in the world. You’re a shareholder, I’m a shareholder, and so is every other dollar holding American. In fact, every time we buy, spend or save a dollar we are trading shares.
But is America, Inc. a good investment? Consider this…
- America hasn’t passed a budget since April of 2009…almost 4 1/2 years
- Its annual income is $2 trillion while its total debt obligations are $121 trillion (That’s a debt ratio of 60/1…typically anything over 1/1 is a HUGE red flag to any investor that a company may not be able to pay its debts in 12 months’ time.)
- Since 1900, its expenses have increased by an average 24% a year while revenues only went up 15% a year
- It has lost money 42 out of the last 47 years
- The U.S.’s expenses are 56% higher than its revenue
- America expects to double its debt within the next 10 years (the interest on that debt alone will equal $1 trillion a year)…
Current Total U.S. Debt Obligation: $121 Trillion
America, Inc.’s real trouble is that the executives running the company in Washington D.C., just can’t control their addiction to debt–and debt has ruined more companies than anything else. Just take a look at General Motors, Pan American Airways, and most recently Twinkie-maker Hostess Brands.
Fifteen years ago the U.S. ran a -7% deficit, last year our deficit ballooned to -56%. This outlandish kind of spending increases are not sustainable, but far too many inside Washington believe, deficits don’t matter.
But real world economics has revealed massive deficits like this have dire consequences. Harvard economist Kenneth Rogoff has shown throughout history that economies struggle to grow once debt to GDP reaches 90%…the U.S. now has a debt ratio of 101.5%!
Like it or not, America, Inc. is a business, and what’s clear is most Americans don’t realize that their entire financial well-being is based on the health of the U.S. dollar and the insane decisions made by the bureaucrats in Washington…
After all, most Americans get paid in dollars, hold retirement savings in dollars, have investments in U.S. companies and own homes in the United States…which means the majority of Americans have all their eggs in one basket.
It’s no different than working for Enron, and having your entire 401(k) plan in Enron and then investing all your personal savings in Enron stock as well.
Who in their right mind would base their entire financial well-being on one single company?
Well, that’s exactly what every American does when choosing to keep all their wealth invested in America, Inc.
Like any savvy investor, you have to ask yourself: Is it time to diversify? Is it time to sell some of your exposure to America Inc. and put that wealth to work outside the U.S. dollar?
If you understand the obvious risks inherent in owning a company overburdened by debt, out-of-control budgets, and incompetent executives that’s an easy answer.
As we face the prospect of runaway inflation movement from paper assets into real property and even certain spendable precious metals. The purchase of a home with a mortgage at 4% (up .5% over the last few months) will keep housing cost at a flat line as the value of the dollar diminishes. The net effect is that you property will sell for far more dollars in the future.