Ruminations

What am I missing here?

If I were to be able to pay my bills only by putting them on a credit card as increased debt, while paying only the interest on the debt, is not that a precursor to bankruptcy? While this position is irresponsible, it is real for the USA, and new, increased income is the only solution that will prevent, in the longer term, bankruptcy.

For the government there are options for avoiding default that I as an individual don't have. As an individual, I would need another job. The government has three options for increasing income. First, confiscate more money from the populace. Second, stimulate the economy with less taxation in order to produce more revenue from an increased economic flow. Third, inflation as means of paying back in devalued dollars, and receiving more dollars from current taxation levels.

Stopping increased spending is not a solution to paying off the debt, but it would help stimulate the economy. Decreasing spending would have to be radical in order to free up dollars to apply to the debt, but it too would stimulate the economy. But neither of these is likely to happen.

So. Increased taxation is not sufficient to pay the debt, and it would choke the economy even more. It could happen, but it won't be of much help.

Decreased taxation is a leap of faith for the Right and a heresy for the Left. It won't happen.

Printing more money seems the only practical means of avoiding the default, long term.

We can argue about which is worse: high inflation or the consequences of default. But it really doesn't matter, because inflation will have to be the winner. Default would be political death for many politicians.

So the question becomes: how does one protect oneself from inflation? The obvious answer was gold or metals in general. But apparently many are now opting for land. Not developed land, just land, even farmland. Around here real farm land has more than tripled in price in the last decade. Farm land is too expensive to provide a decent return on investment from farming any more, so farms are either being rented out to neighboring farms in order to cover the cost of property taxes, or are sold as hunting areas or rural retreats for the town-based wealthy. Land is like gold in that it is tangible, limited, doesn't decay. (Neither does ammunition).

More seriously, inflation alone won't solve the problem unless the unconscionable increase in spending is halted. If the orgasmic spending spree is not stopped, then inflation will have to be destructively radical in order to provide the extra dollars.

In seriously inflationary economies there have been stories of people who were desperate to spend their wages on the very day they were paid, or they would lose value overnight. The key seems to be not to keep dollars. Exchange them quickly for things that keep long term value, at least value to me, if not to others, but also value to others for future exchanges. Under the Jimmy Carter hyperinflation, the money market was a place where a dollar from yesterday kept its value, because the interest rate increased with the inflation rate. But that is not happening now. The government reported inflation rate has been applied with a stealth coating of obscure manipulations; it doesn't match the rate of increase at the grocery store. We know the truth only by our bank balances at the end of the month. Or maybe when a cart of groceries at Wal*Mart costs $120.

It's tricky. It will be much easier to lose than to win at this game.