THIS IS MY 137TH BLOG ON UNDERSTANDING MONEY
TOOLS
August, 2018
understandingmoneytools.blogspot.com
In this blog we will continue on “America”.
Before we get started let’s recap from the previous blog
covering socialism and immigration for this country. Viewing history of good socialistic countries there have to
be fundamentals and we do not have them; small geographic area, nationalism,
similar cultures including religions, and more. The big “more” is a country that is solvent and debt
free. Unfortunately, America is
the most indebt country in the world both as a country and per capita on an
individual basis.
The first step to equalize the “playing field” might be
taxation. Something like this
might work: no personal income tax
on the first $15,000, then a flat tax with no exemptions perhaps 15% for
everyone. I also think a needed
“asset tax” should be included.
Corporations are passing through far too many hundreds of millions of
dollars to top executives and shareholders. An asset tax would set a very
liberal personal amount, let’s say $50 million. Above that amount of personal assets you would pay a fairly
hefty tax.
Much holds true for immigration. Successful immigration into a country only comes about
defining how many immigrants should be permitted in, (exclusive of humanitarian
situations), what will be the need for immigrants, how will the country support
these immigrants, how will a country regulate and control these people
including children and set up a defined workable system, and more. Again, the big “more” is how to pay for
it.
From a strictly humanitarian standpoint it would have been
much smarter for the G-20 countries to have come together, worked with war-torn
countries like Iraq, Afghanistan and Syria and provided “safe zones”, within
their countries and guarded by an international group. This would have cost billions, however
less expensive in the long run than what we now have. It also would not have displaced people from their
countries.
Our prior blogs on “America” and the history of war was to
show the direct correlation that war brings with debt, and debt “kills”! So, the pernicious effects of war on
the country and individuals. I
presented the growth of debt with major wars, not including some wars like the
Mexican-American War, Philippine-American War 1899-1902, and the
Spanish-American War. Economically
America lives and thrives on “war”, making only a few people and industries
very wealthy! (Please remember the
statement of General/President Dwight D. Eisenhower when leaving office in 1961
to be very mindful of the dangers of big government and the military/industrial
complex in this country.) How
about “cold wars” through the various administrations? I can only remember two. The first was the geopolitical tensions
after WWII between Russia and the United States and its NATO allies starting in
the 1950s. The second was also
with Russia during the Reagan administration. Both eras spent a ton of money on the military/industrial
build-up. After WWII until the Berlin
Wall came down in 1989 we were to a degree fighting Communism. We had to show the world that we could
outspend the Russians and down Communism.
Here is a side point. Just
like guns do not kill people, Communism, Socialism and Capitalism and their existence
are no better or worse than the people within that society carrying forth
doctrines.
While we mentioned “cold wars” above let’s go on a side
tour. We spent a fortune during
the Reagan Administration. Who
really controls the power in the USA?
Ronald Reagan most people know as a movie actor, handsome, articulate
and charismatic. Reagan was a
Democrat and favored the policies of President FDR. In 1962 Reagan switched to becoming a Republican. The California wealthy including the
military/industrial machine wanted him to run for governor, but he needed to be
a Republican. Conservative Barry
Goldwater helped in this transformation.
Ronald Reagan became governor of California in 1967 with the help of the
“money machine”. Then, as we all
know the power players helped elect him president in 1980. (His paybacks to the wealthy and big
business came in the form of the 1986 Tax Reform Act which significantly
reduced taxes for the wealthy. It
also paved the way for the repeal of the Glass-Steagall Act and Sherman
Anti-Trust Act. The final stab in
the heart of the Sherman Anti-Trust Act came in 1999 under President Bill
Clinton. (I have covered all of
this in detail in previous blogs so if you want more information seek those
out.)
As I continue to write, I would like to make statements of
fact that I search out that may not come to you. I want you to draw conclusions
based upon these facts versus my adding subjectivity.
Let’s start out with a grandiose question and work from
there. Especially since the year
2000 has the USA had real growth or manipulated false appearances of growth
similar to a Ponzi scheme? As we
mentioned in our previous blog on America at the end of 1999 the US debt was
$5.269 trillion. Currently, our
debt is $21.276 trillion and we will probably need a call for more money to
operate within the next 6 to 12 months.
Will Congress permit more borrowing unless we are facing a war? Most likely not. This may be one reason we are building
our defenses against Iran along with Saudi Arabia and Israel. Also, it seems politicians do not want
peace with North Korea and Russia: big mistake.
Debt: The USA
gross federal debt to gross domestic product was 105.4% in 2017. Now, if you add in personal debt we
stand at about 300% debt to gross domestic product. Even though it is normally great to be number one in the
world, this is not the place to brag. The personal side of debt is how we grew
our economy. Gross domestic
product is the total of goods and services purchased during a given year, less
debt and interest and less our import/export balance of trade. Let’s take a look at our typical
American consumer who has no or little savings nor investments:
- Interest
free car loans at an outstanding amount of $1.25 trillion.
- Low
interest home loans with very little or no money down.
- Low
interest student loans at an outstanding amount of $1.25 trillion.
- Credit
cards that do not require paying off balances month to month. The average
indebtedness is now $16,000 per individual. It should be noted that in Europe and other countries that
offer Visa and Master Cards the individuals balance needs to be paid off each
month or you lose your card privileges.
- Interest
free furniture loans with no payments due for several years.
Get the point above?
No “skin in the game”. Walk
away. This happened in the real
estate industry in 2008-2010.
Right now in America we have even a greater financial threat
than presented above and that is our corporate debt in every industry. When I went to college we used a “liquid
asset test”, now also referred to as a “quick ratio test”. This simply is the ratio between the
assets on a corporate balance sheet and the liabilities. The ratio for financial solidarity was
always 1.5 or 2.0 to 1.0. This
meant you had about twice as many assets as you had liabilities hanging out
there. Currently, with the games
corporations have played with banks, Wall Street and bonds the ratio is 1.0 to
8.0. Disaster about to happen!
Yes, that means, excluding some of the top corporations we have only $1. in
assets for every $8. in debt. The
USA could never bail out this situation.
This is enough for another blog. We will continue on
“America”.
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