Best of the Week
Most Popular
1.U.S. Housing Bull Market Over? House Prices Trend Forecast Current State - Nadeem_Walayat
2.The Coming U.S. Economic Collapse Will Trigger a Revolution - Harry_Dent
3. Stock Market Crash a Historical Pattern? - Wim_Grommen
4.Global Panic - U.S. Federal Government Stockpiling Ammo – Here’s What We’re Going to Do - Shah Gilani
5.AI, Robotics, and the Future of Jobs - Aaron Smith
6.This is Your Economic Recovery With and Without Drugs - James_Quinn
7.Gold and Silver Price Getting Set To Explode Higher - Austin_Galt
8.The Something for Nothing Society - Lifecycle of Bureaucracy - Ty_Andros
9.Another Interesting Stock Market Juncture - Tony_Caldaro
10.Inflation vs the Deflationary Straw Man - Gary_Tanashian
Last 5 days
The ISIS Menace - Just What We Need, Another War - 27th Aug 14
The Risky Business of Methane-Rich “Fire Ice” - 27th Aug 14
CFR Recommends Policy Shift that is Very Bullish for Gold - 27th Aug 14
Ukraine Standoff Signals Global Power Shift - 27th Aug 14
Stock Market Panic Decline Begins - 27th Aug 14
The Monopoly of the Government Education Cartel - 27th Aug 14
How to Invest in Silver Today for Double-Digit Gains - 27th Aug 14
The Big Solar Energy Breakthrough We've Been Waiting For - 27th Aug 14
U.S. Empire’s Bumpy Ride - 27th Aug 14
Gold Market and the Interest Rate Trap - 27th Aug 14
Stock Market Staring Into the Great Abyss - 27th Aug 14
A Look at the Coming 30-year Inflation Cycle - 27th Aug 14
Forex Trading - Will USD/CHF Rally Above 0.9200? - 27th Aug 14
Europe’s Depressing Economy Dog Days of Summer - 27th Aug 14
How The Coming Silver Price Bubble Will Develop - 26th Aug 14
A Nation of Shopkeepers - Supply-Side (Voodoo) Economics? - 26th Aug 14
Stock Market Bear Tracks Abound In Wall Street - 26th Aug 14
65,000 U.S. Marines Hold up a Mirror to the Economy - 26th Aug 14
Bitcoin Market Provides Clues for Investors - 26th Aug 14
The Key to Trading Success - 26th Aug 14
Will The US Succeed in Breaking Russia to Maintain Dollar Hegemony?... - 26th Aug 14
Even Mainstream Academia Worried about Massive Bubbles in Markets - 26th Aug 14
Iraq and Syria Follow Lebanon's Precedent - 26th Aug 14
Colonization by Bankruptcy: The High-stakes Chess Match for Argentina - 26th Aug 14
Dow Stock Index On The Cusp - 26th Aug 14
Prohibition Laws and Agency Regulations - 26th Aug 14
Will Canadian Regulators be Able to Avoid Final Fatal TSX Venture Exchange (TSX-V) Crash? - 25th Aug 14
HUI Gold Mining Stocks Elliott Wave Projection - 25th Aug 14
Stock Market Uncertainty Resolved With New High - 25th Aug 14
Go Forth Multiply And Replenish The Earth - 25th Aug 14
Dollar Dumping: When Actions Speak Loudest - 25th Aug 14
A Plethora of Currency, Stocks and Precious Metals Chartology - 25th Aug 14
Why Isn’t Fed Monetary Pumping Helping the U.S. Economy? - 25th Aug 14
Myths About Money and Inflation - 25th Aug 14
The Fed Will Raise U.S. Interest Rates in March 2015 - 25th Aug 14
Gold Price Manipulation Still Alive - 25th Aug 14
The Ebola Outbreak: U.S. Sponsored Bioterror? - 24th Aug 14
Instigating War in Europe - Understanding Ukraine in 15 Minutes - 24th Aug 14
LNG Catalysts About to Hand You the investment Opportunity of the Decade - 24th Aug 14
Another Interesting Stock Market Juncture - 24th Aug 14
The West Set Up the ISIS Endgame - 24th Aug 14
Gold And Silver Low Prices Are NOT The Reason To Own Precious Metals - 24th Aug 14
U.S. Housing Bull Market Over? House Prices Trend Forecast Current State - 23rd Aug 14
Inflation vs the Deflationary Straw Man - 23rd Aug 14
U.S. Interest Rate Rise to Occur Mid-2015 According to Fed's Williams - 23rd Aug 14
Bitcoin Price Continuation of a Move up - 23rd Aug 14
Gold and Crude Oil Price on the Verge of Something Big - Hero's Rarely Win - 23rd Aug 14
Oxaloacetate Feeds and GROWS Brain Cells - Alzheimers Cure? - 23rd Aug 14
Gold Rising Interest Rate Fallacy - 22nd Aug 14
Jackson Hole: Myth of the All Powerful Central Banker Continues - 22nd Aug 14
Partying On In The Terror State - Thank God for Nuclear Weapons - 22nd Aug 14
The Something for Nothing Society - Lifecycle of Bureaucracy - 22nd Aug 14
Hitting The ISIS Panic Button In The Middle East - 22nd Aug 14
US Stock Indices 10-Year Consolidation Patterns ... Upside Breakouts? - 22nd Aug 14
Gold and Silver Price Getting Set To Explode Higher - 22nd Aug 14
Deflation's Final Curtain Call - Part II - 22nd Aug 14 - Clif_Droke
Gold Big Picture: Most Important - 22nd Aug 14
How the “Uncertainty Factor” Drives Crude Oil Prices - 22nd Aug 14
Inflation, Interest Rates, and Why You Should Own Gold - 22nd Aug 14
U.S. Interest Rates Can Rise States Fed President - 22nd Aug 14
Why Emotional Discipline is Key to Trading Success - 21st Aug 14
Getting the Most Value from Your “Geriatric Cruiser” - 21st Aug 14
Mafia Boss Claims Stocks A Bubble, Buy Physical Gold and Silver - 21st Aug 14
Outrage! On The Beheading of Our Media Brother James Foley - 21st Aug 14
Stock Market Crash a Historical Pattern? - 21st Aug 14
The Black Box Economy - 21st Aug 14
The Bond Market is taking Advantage of Janet Yellen`s Dovishness - 21st Aug 14
Meet Your Investment Manager - 21st Aug 14
Gold and Silver Trading Alert as U.S. Dollar Soars to New Highs - 21st Aug 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Biggest lie in Stock Market History Revealed

U.S. Fiscal Cliff Dynamics Explanation: Household Budget and Family Debt Comparison

Interest-Rates / US Debt Dec 12, 2012 - 03:47 AM GMT

By: DK_Matai

Interest-Rates

Politicians around the world intuitively understand the importance of translating complicated policy and complex laws into language that non-experts, ie, average voters can understand easily.  When it comes to US budget numbers and negotiations, financial complexity can be extremely challenging.  Many Americans and non-Americans don’t know how many zeros there are in one “trillion,” much less what a trillion dollar deficit means in terms of the world's largest economy and its overall impact on the global financial markets.  In a recent poll question, for example, American respondents were given five multiple-choice answers for the question “how many thousands are [there] in a trillion” and just 21 percent answered correctly, barely more than what one would expect if everyone guessed randomly!


Let us take some of the key US economic numbers -- how much money the US government brings in, how much it spends, and how much US Congressmen are “cutting” to bring those numbers into balance -- and simply lop off eight zeros (ie, divide by $100 million) to make those numbers something that American families can relate to:

* US Federal tax revenue: $2,441,000,000,000

* Federal budget: $3,545,000,000,000

* New debt: $1,104,000,000,000

* National debt: $16,366,000,000,000 (Debt ceiling $16.4 trillion)

* Interest paid on this year's deficit: $258,398,000,000

* Not so recent budget cuts in April 2011: $38,500,000,000

* Proposed tax increase ($250,000+): $90,000,000,000 to avoid fiscal cliff

* National US debt on President Obama's first day: $10,600,000,000,000

Let us now remove the 8 zeros and pretend it is the household budget of a family in debt:

~ Annual family income: $24,410

~ Money the family spent: $35,450 ($94.38 a day)

~ New debt on the credit card: $11,040

~ Outstanding balance on the credit card: $163,660 (max set for C/C $163,940)

~ Interest paid on this year's credit card: $2,383

~ Not so recent budget cuts in April 2011: $385

~ Father working overtime to help with the bills: $900 (9.53 days worth of bills)

~ Added to credit card in last 4 years: $57,660 (35% of total)

Fiscal Cliff Negotiations:

* Tax increases, total estimated: $536,000,000,000

~ Translates to the household budget as $5,360 "raise" in family income per year

* Automatic Spending cuts: $1,200,000,000,000 over 10 years or $120,000,000,000 per year

~ Translates to the household budget as $1,200 cut in spending per year

~ Overall effect $6,560 reduction in the $11,040 annual debt added to the credit card per year

~ New revised debt still added to the credit card per year: $4,480

President Obama's Alternate Proposals:

* Tax increases: $1,600,000,000,000 over 10 years or $160,000,000,000 per year

~ Translates to a $1,600 "raise" in family income per year

* Spending cuts: unspecified, vague

~ Spending increases: $50,000,000,000 in the form of immediate stimulus spending

~ $500 per year added to the household budget

* Wants the US Congress to end the debt ceiling rules, because it is used as a leverage tool by the opposition to force spending cuts.

Conclusion

1.  Restoring Fiscal Sanity:  Even self-described policy experts find this simple approach of comparing US fiscal cliff negotiations in the context of the average US household budget and family debt eye-opening. It is harder to pretend that the leadership in Washington DC is serious about restoring fiscal sanity when the proposed budget cuts are seen in the context of balancing a given household's budget and tackling that family's debt. 

2.  Elephant In the Room:  Of course, there is no mention of the elephant in the room!  Total unfunded US liabilities are $86,800,000,000,000 including Social Security, Medicare, and federal employees' future retirement benefits, which is more than all the printed money in the world many times over and equates to over five times the total American debt claimed by the US Treasury Department of $16 trillion.  Lopping off eight zeros, this in household family budget terms equates to $868,000 owed prior to the retirement of working members with a combined income of just $24,410 per year.  Is this sustainable?

What are your thoughts, observations and views? We are hosting an Expert roundtable on this issue at ATCA 24/7 on Yammer.

By DK Matai

www.mi2g.net

Asymmetric Threats Contingency Alliance (ATCA) & The Philanthropia

We welcome your participation in this Socratic dialogue. Please access by clicking here.

ATCA: The Asymmetric Threats Contingency Alliance is a philanthropic expert initiative founded in 2001 to resolve complex global challenges through collective Socratic dialogue and joint executive action to build a wisdom based global economy. Adhering to the doctrine of non-violence, ATCA addresses asymmetric threats and social opportunities arising from climate chaos and the environment; radical poverty and microfinance; geo-politics and energy; organised crime & extremism; advanced technologies -- bio, info, nano, robo & AI; demographic skews and resource shortages; pandemics; financial systems and systemic risk; as well as transhumanism and ethics. Present membership of ATCA is by invitation only and has over 5,000 distinguished members from over 120 countries: including 1,000 Parliamentarians; 1,500 Chairmen and CEOs of corporations; 1,000 Heads of NGOs; 750 Directors at Academic Centres of Excellence; 500 Inventors and Original thinkers; as well as 250 Editors-in-Chief of major media.

The Philanthropia, founded in 2005, brings together over 1,000 leading individual and private philanthropists, family offices, foundations, private banks, non-governmental organisations and specialist advisors to address complex global challenges such as countering climate chaos, reducing radical poverty and developing global leadership for the younger generation through the appliance of science and technology, leveraging acumen and finance, as well as encouraging collaboration with a strong commitment to ethics. Philanthropia emphasises multi-faith spiritual values: introspection, healthy living and ecology. Philanthropia Targets: Countering climate chaos and carbon neutrality; Eliminating radical poverty -- through micro-credit schemes, empowerment of women and more responsible capitalism; Leadership for the Younger Generation; and Corporate and social responsibility.

© 2012 Copyright DK Matai - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

DK Matai Archive

© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014