Uncle Fed’s magical computer.
Listen To You Tell Me Texas Friday 4/29/16
A recent article by James Grant in Time does the best job I’ve have seen in explaining just what a mess America’s finances are really in. The article overcomes the problem attendant to comprehending huge sums of money.
When you say the government (meaning you, me and all who come after us) has an outstanding debt of $19 trillion, the number is incomprehensible. It just bounces off. Listening to someone talk about the national debt is much like hearing that the Andromeda galaxy is 2.5 million light years from the Milky Way. You just can’t wrap your head around it.
So James Grant makes it simple. He takes the average American family earning the average American household income of $54,000 a year. In Grant’s illustration, that family spends $64,000 a year. They cover the deficit by borrowing $10,000.
For our discussion, let’s say they put it on the MasterCard.
Many years of such deficit spending has resulted in a sizable balance. Our family now owes MasterCard $223,000. The minimum monthly payments come to 62 percent of the family’s monthly income.
But this family is not like your family or mine. This family is special. They have an uncle living in the guest bedroom whom they call “Uncle Fed.” Uncle Fed has a computer in his room upon which, with the tapping of some keys, he can conjure dollars out of thin air.
Those dollars – rather than dollars from paychecks earned doing something of economic value – are deposited into the family checking account to fund the monthly minimum payments to MasterCard.
Relieved of the burden of covering monthly credit card payments out of monthly paychecks, our family is free to buy cool electronic gear, eat in nice restaurants whenever they want, go to concerts, take lavish vacation trips – and keep borrowing.
All of this seems to work rather well. Oh, sure, the wife’s father keeps telling her that a reckoning is coming. But he’s been saying that forever and the reckoning never seems to come. Besides, he’s getting up in years and tends nowadays to be a bit grumpy.
Yet with age comes wisdom and the daughter should listen. MasterCard – which knows that the dollars they are receiving have been whisked into existence by some sort of sorcery – will one day begin to wonder if those magical dollars are actually worth anything.
When that day comes, MasterCard will begin declining this family’s charges. By then it will take all and more of the family’s paycheck just to cover the payments and there will be no money left for food.
This family will suddenly find itself in a whole world of pain.
So it will be for the United States. We don’t know when but we know the day is coming.
Yet has whomever it is that you’re supporting for president said anything concrete about doing away with the need to borrow that $10,000 every year?
Anything at all beyond generalities and platitudes?
Funny, nothing from my guy either.