Could this economic Crisis be due to a deep structural debt problem in our system?

Check out the Comptroller General of the United States who has been sounding the warning bell about the USA debt problem. It is the same issue that Ross Perot, Paul Tsongas and a few other canaries in the coal mine.

Well, this is a pretty important and non-political person who has the job to that would KNOW this stuff....and here he is in these two videos telling it like it is.

• US Government Immorality Will Lead to Bankruptcy

• GAO: "USA is living beyond its means"

An interesting article that talk about "intervention" for those with "spending / debt" problems

My girlfriend is an addictions councelor so she would have a lot better read on the additions angle on this thought.....but I think the article is an interesting read.

From the article:

Financial interventions, by contrast, are usually conducted by amateurs on impulse. And giving up money isn't an option.

"Financial mismanagement is more like an eating disorder," Willis said. "We have to have a relationship with food, and we have to have a relationship with money."

And instead of breaking through someone's denial, face-offs over money often just lead to resentment.

Check it out. I think we all know people that we can see who are steering their "ship" toward the rocky coastline.....and we want to just reach out and grab the rudder. (described as a train wreck in this article)

But I guess it isn't all that easy.

Two news reports from a local NH TV station that describe the condition of the economy

The Whitehouse assesment of the state of the economy is one full of positive spin. I suppose this is what you would expect for anyone trying to make the job they are doing look good....so I suppose we might want to just consider that when we read it.

But there were two articles that came across my email today that make me wonder how things are going. I don't know if they are leading or lagging indicators....but I assume that might be the latter.

The first talk about the number of homeless in NH doubling in the latest "one day count" just recently taken. The state apparently takes this count on the same day every year in an attempt to have a standard metric of measurement. The count of homeless is taken on January 30th, and this year's count showed 2600 people vs 1300 for last year. (with 484 of them sleeping on the streets and not in shelters) A two fold rise is a significant increase for sure, especially since the article noted that the numbers have been essentially FLAT for the past 3 years. What's going on? The winter wasn't that warm that people flocked to NH to be homeless here as opposed to a southern state.

The second article I read today talk about the increased debt load that college students are now taking on as opposed to students in the past. It turns out the the average student has about $20,000 in debt upon graduation.....with credit card debt averaging about $3300. Several "experts" noted that they felt today's students had too many credit cards and too much card debt.

The article noted:

Overall, 46 percent of students and 55 percent of former students were reported delinquent on credit card payments. Lowe said she was surprised that 21 percent of college freshmen were at least four months behind on their credit card payments. She also said she was shocked that 42 percent of students had at least six open major credit cards, not including store-issued cards or gasoline cards. "The delinquency shows that they really don't know the consequences of what happens when they don't pay their credit card bills," Lowe said. The consequences include lower credit ratings, which could affect their chances of renting an apartment, getting a job, getting another student loan, or after graduation, buying a home.

Six credit cards.....yikes, I have two and never use one holding it as a back-up. It sounds as though some of them are going from one to the other in order to juggle between them. That seems like financial quicksand to me!

Even with the $3300 credit card debt, it would take 11 years to pay that off with minimum payments. (and not adding at all to the amount....so much longer if you do)

Again....is this a leading or lagging indicator.....you decide.

Slow and Steady wins the race? (didn't I post about this before?? :-)

I was reading through by list of finance BLOGS when I came across this one....and I have to day I was very pleased to read it.

First of all. most people are doom and gloomers....and I guess I'm also not at the top of the heap of positive people when you start talking about our economy...the exporting of jobs....and the value of our currency......but there are bright spots all around that we should be able to point to.

I was shocked to see this article suggest that 1 out of 3 people in the USA are Millionaires....that is, they have a net worth above $1,000,000. That's outstanding....and it is even more interesting to see that these people did it "the old fashioned way"....they "SAVED" it.

No venture capital start-ups.....no gambling in Vegas......no leveraged stock buys......just spend less than you make and invest the surplus "for a rainy day".

This actually makes perfect sense when you consider another statistic......did you know that the great depression of 1929 only had unemployment rates of about 25%. Now that's high for sure, but given what you read about times back then and all the rationing and shortages that were in existance.....a full 75% of the families were working. (Though I am not sure that tracked "underemployment" as they might today.)

But then if you read other BLOGS like this one and then this one that describe the workings of the 1929 depression, you will note that they talk about the great disparity of income and net worth that further caused problems. Apparently wages increased 9% in the 10 years after 1929, but that incease was not across the board, but heavily skewed toward those making more. (the top 1% wage earner made a 75% increase while the average factory worker only 8% while their productivity increased 32% for the same period)

So what to do you ask? I guess the first thing......stay out of the debt snare. What to do with savings....this is the $64,000 question, isn't it.

Debt is Slavery - Book and Interview of Author on MONEYBLOGGER Podcast

I was listening to the MONEYBLOGGER Podcast this morning on the way to work, and the interview was one that I found very interesting.

It was an interview of Michael Mihalik, author of a book titled "Debt is Slavery"....and this is a title that I totally appreciate.

I appreciate it not so much because of my own troubles with debt, but some of the people I know (in my own family too) who have found themselves working every hour of their existance just to pay the minimum payments on credit purchases for things they don't even own any more!

The book is apparently 10 short chapters that outline 10 "rules" for handling money. Mr. Mihalik talks about a talk he had with his nieces, and the 10 points he outlined to her. It changed her life, and so he felt it might be useful for others too.

During the Podcast he discussed 2 of the 10, and he did so in a way that brought them home and easy to understand. His nieces comment to him was that she had wished her mother or father had explained money to her in such a clear way.

I love the idea, and I might just buy the book to read and pass along.

Check it out yourself....it is coming available on February 28th and is currently available for pre-order at Amazon.com as well as the Publisher's website. It costs only $14.95, and looks like a simple yet useful read.

BTW: Here is a review of this book by another personal finance blogger, www.mymoneyforest.com.

Also...here are two articles by Mr. Mahalik:
1) Debt–The New American Slavery (about his book)
2) What is Financial Security?

Who funds our debt when the world isn't so dependent on us in the future?

I admit to being an Electrical Engineer and in no way an economist....so my ideas of how the world works may not exactly line up with reality.

I have noticed that I sometimes do not have a good perspective on how "fast" certain things tend to take....basically because the economic systems are so much bigger than I tend to imagine. (there is a huge inertia....sort of a big flywheel effect)

So when I read this article about how this US recession would not really affect the growth and health of the European and Asian economies....it caused me to go back to one of my personal predictions that the giant and growing economies of China and India are sort of "loaning" the USA the money we need to buy their goods. I felt that they NEED us because we are the big consumers, and in order for them to become the big producers, they need consumers.

Given the imbalance of trade, they quickly accumulate wealth from us...and by buying our debt with their savings, they keep us buying more and more. (and also going more and more into debt)

Apparently the US delegation to China this month seems to have come to some agreement on both counties working to lower the imbalance, but this sounds like "saving face" talk to me.

I don't think it is a fluke that China keeps their money valued low and tied to the dollar...this way it makes their goods cheaper to us and we ultimately can NOT resist them! (and in fact are going further into debt with every purchase)

But the above article sort of indicates that our slowdown is not slowing them as much as might be normal....so it seems that they are beginning to become almost "Self-sufficient"....and by that I mean that perhaps their middle class has about built up enough wealth to support the growth of their own production.....so may be they need us less and less as things go on.

Could this be why the Chinese signaled to the world that they were going to start thinking about diversifying a higher percentage of their $1 trillion cash reserve in other currencies besides the dollar?

Now I'm not predicting a crash of total melt-down of the dollar and therefore our economy....that would make their $1 trillion dollar reserve evaporate....that's not what the Chinese want either....but perhaps this might be the start of a slow "backing away" from the dollar by the world who now looks at the dollar as being better than gold.

I worry that our country needs to fix things NOW....while we still have the ability to do something. Our debt to the world is already of record size....but our country and currency still has very good standing in the world, and we need to get our house in order before we lose that too.