Most Amerikans don't pay attention to financial news and
even less to European financial news. That's too bad. If you had been following
this news for the past three years you know it is all bad and getting worse.
There appears to be no end to the sovereign debt crisis. The European leaders
have failed repeatedly to come up with a plan to resolve these debt issues.
Amerikans have been little help. We and the British have our own problems and
likewise we do not have a long term solution. Two clear schools of thought have
developed along traditional lines. One, to cut Government spending to the bare
minimum, thus reducing ongoing future debt. The other idea is to spend more on
"infrastructure" to help rebuild the economy and create future tax
revenue. I'm not an Economist.
Regardless, Economist have not had a good track record over the past ten years,
so I am qualified [as Jesse Jackson used to say] to comment on the economic
mess. One point is painfully clear. Nobody in government seems to have the
answer or ability to resolve the problem.
Here in the US it is estimated that the total loss from the
crisis is about 7 Trillion dollars. That is really a lot of money. Somebody has
to pay this money back or take it as a loss on their balance sheet. The problem
is nobody wants to take on this debt or pay it off. I can understand why. It is
a crushing amount. Even if this debt is restructured....extended to be paid off
over longer time, it will take millions of tax payers hundreds of years to pay
this down.
Most of us did not create the financial crisis we are facing
as a nation. It would be easy to say, "Let the Bankers who created this
mess pay for it." The hard fact is that even if they paid back everything
they earned in salary and bonus money, it would not add up to one Trillion
dollars. Somebody else is going to have to help pay this money. If, as it is
often suggested, that Business pay more taxes, then in reality they will pass
these tax cost on to us, their customers, and in the end we will pay it.
I think each family needs to have their own Financial Plan
for the future. I have had one my whole life. I learned all about financial
planning from the economist in our family, Mom. She grew up in the Depression.
Her father died when she was young and my Grandmother struggled to feed and
clothe her four kids. Mom learned Econ 101; Spend only what you can afford and
save half of what you earn. She went to work at 14 and never graduated high
school. When she died, she only owed the phone bill. My mother was the leading
Economist of my life. Mom would say we need to cut expenses and increase
income. This is good advice for government and for each of us.
Cutting expenses means only spending on the things you absolutely
need. It also includes working to reduce or limit your tax burden. Clearly,
everyone is going to be paying more in taxes over the next ten years. You need
to know and understand the tax laws. They will be changing in the near future
as politicians try to come up with ways to increase government income [taxes].
If you don't know or understand taxes you better learn. In the macro economy
governments will be forced to cut spending and increase taxes. On the micro or
individual level the "trick" will be to find ways to cut spending and
limit the taxes you pay.
If sovereign debt brings Europe to a crash, and I really
think it will, Amerika and Britain will be drug into this mess. No matter what
happens, 2013 will be a restructuring year politically and out of this will
come new taxes and bigger spending cuts by government. Poor people will suffer.
People with income will be taxed. Each of us needs to plan ahead by cutting
spending and limiting or taxes.
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