Posted on | June 26, 2011
Watching Government Paint Itself Into a Corner
A recent USA Today article by Richard Wolf claims that “In 7 Weeks U.S. Could Run Out Of Borrowed Money”.
Here are the highlights: Exactly one month ago, the Treasury Dept. began issuing IOUs rather than bonds to some government pension funds. That allowed for continued auctions of so-called “risk free” treasury bonds until August 2nd of this year.
Unless Congress acts by then, the worlds richest nation–unable to borrow $4 billion a day to pay its bills–would risk default. Or would it?
Wolf says to hear Treasury Secretary Timothy Geithner tell it, interest rates would spike, stock and home values would sink, savings and investment would dry up and jobs would disappear. Businesses would fail and everything from tax refunds to troops salaries would go unpaid.
Federal Reserve Chairman Ben Bernanke says that it would “lead to severe disruptions in financial markets, lower credit ratings and damage to the dollar and treasury securities”.
On the other side, others say the doomsday scenarios are hogwash. Senator Pat Toomy of Pennsylvania says it would take a simple law outlining who gets paid first when the government can no longer borrow 41 cents of every dollar it spends.
As long as bond holders collect interest on time, there would be no default. Just spending cuts and furloughing federal workers or delaying welfare payments.
No one expects something so drastic to happen, but Congress and the White House haven’t found a way to avoid it. We have a serious situation in our country.
A recent article identifies 5 items that could prevent a recovery from taking hold:
1. An oil supply squeeze
2. The Euro-zone question
3. State and local debt woes
4. Another housing slump
5. A sharp slowdown in Asia
So What Can You Do?
If you’re experiencing real heartburn over the prospect of the triple whammy we’re facing over the next 10 years it’s time to pay close attention.
3 of the biggest dangers we’re facing in the coming decade are taxes going up, inflation devaluing the dollar and continuing market uncertainty.
Missed Fortune indexing strategies will teach you how to protect yourself so if the economy goes down, you don’t lose money. You may not make much, but you will not lose and that equals a win in these times. Plus the second the market turns around, you’ll be making money again.
Wall Street has already lost more than 45% of the typical investor’s money twice in the past 10 years. You cannot expose your money to that type of risk.
Those who’ve followed the Missed Fortune strategies have predictably earned a rate of return of 7-8% that has effectively doubled their money every 9 or 10 years. And they’ve been doing it consistently for the past 4 decades.
Compare that to the typical equity mutual fund investor who has only managed an average return of 3.83% annually for the past 20 years. They’ve barely outpaced inflation by a single percent. And inflation is going up.
You can protect yourself by accumulating your money in vehicles that are tax free, by linking your returns to those things that inflate when we have inflation. And finally, you position your serious money so that you don’t lose money when the market goes down and you start earning again the second it goes up.