Sunday, February 1, 2009

Could U.S. go Bankrupt?

In discussions I have with people, I have been reminding some that many countries have "failed" throughout history...simply by mismanaging their money and getting caught in a "perfect storm". I further explain that this most certainly could (and eventually will) happen to the U.S. Sometimes the response I get from the listener is, "That could never happen in the U.S. We have too many checks, balances and safety nets put in place from lessons we learned from the Great Depression."

It's hard for me to understand how arrogant we have become and to wonder how it is that so many smart people can have so little knowledge of global history. Countries and governments come and go all the time....they always have and they always will AND THAT INCLUDES US.

"There's a rumor going around that states cannot go bankrupt," German Chancellor Angela Merkel said recently at a private bank event in Frankfurt. "This rumor is not true."

In Europe, some are starting to sound the alarm as Iceland has failed and many think some European states could be next.

"I wouldn't invest any more money in Great Britain," says American investor Jim Rogers. And economist Willem Buiter, a former consultant to the Bank of England, warns of the "risk that Great Britain will become a second Iceland."

In the same German article that these quotes came from is another that I hope our leaders are reading; Countries can go bankrupt if they allow their deficit spending to spin out of control and are no longer able to service their interest payments.

Read full article here; http://www.spiegel.de/international/world/0,1518,604523,00.html

As the U.S. leaders debate another $800 Billion package to put on top of a $700 Billion package last year...I hope they remember one simple math concept; if you can't make the interest payments on your debt then you will be bankrupt. And as the U.S. tax revenues plummet the demand for social services is skyrocketing. That can only go on for so long.

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