Another Debt Crisis Averted - for Now.

Cash Tree in the Garden at the White House

The game continues. Just like the World Series, Superbowl, or Word Cup, the American government's big game has just been played. In this case instead of a winner or loser until the next season, the game ended in a draw - until the next crisis 45 days from now!

We witness this spectacle annually in the USA and most democracies across the globe. We don't know about dictatorships because we are not allowed to see inside them. Keep this in mind if you intend to vote for Donald Trump again.

If you or I go to a bank for a loan we have to prove: the reason for the loan is sound; we have the ability to make payments - the longer the better for the lender; and we have a good track record for doing so, among many factors. If we fail there are plenty of secondary lenders who are happy to charge an arm and a leg for another loan. There are also sharks who will indeed take that arm or leg if you renege on your payments to them. 

Then there are credit card companies who are more than happy to give you more credit even if you have to declare personal bankruptcy. Again lots of debt resolution firms will bail you out for huge fees over a very long time and a vastly reduced lifestyle.

Now let's turn to democratic governments. The choices are similar but the solutions are more severe. They have 4 main choices: printing more money which is always bad; borrowing more money which is easy but also bad; reducing expenses - painful for all of us; or increasing taxes which they often have to do. Too bad the last option always targets the middle class and the poor avoiding the super rich to keep their own government incomes.

This spectacle pulls me in two directions. I am a Conservative at heart and believe in balanced budgets. Governments can only live on endless credit until the next war. So far this has not happened to America. Most of the USA's is with China. Go figure. So when the GOP says it wants to move to more responsible spending and reduction of the debt, they have been just as guilty as their counterparts on kicking the problem down the road when they were in power.

By the same token as a senior retiree I do have a need for government assistance on things like Medicare and pensions, which I paid for during my employment years. If push came to shove I am willing to work for anything extra, especially if funded by the government.

The common factor for both the private sector and governments is that there is no money tree in the back yard. Both have to stop pretending that it exists and that it bears fruit whenever they need it.

Such fruit will turn rotten very quickly. In the USA the fruit is already falling to the ground and they are running out of trees!

#thebrewsterblock