Sunday, October 9, 2011
SPEND NOW, TAX LATER
I don’t know how families do it.
And I’m not just talking about the pain of listening to “Queen Of The Supermarket” on Bruce Springsteen’s last album.
In recent months, grocery items have fluctuated in price like stocks, and I have noticed my total at the register steadily creep up without much change in buying habits.
Some theorize that prices on things like gas, food, and stocks are inflating because of the printing of enormous amounts of money bu our friends at the Federal Reserve.
In other words, it’s not that the prices are going up but that the value of the dollar is dropping.
Why should that concern you?
If prices go up, it’s a function of supply and demand.
If I have a gallon of gas, and only one buyer, I’m pretty much going to sell that gallon for what the buyer is willing to pay. If I have five buyers, there will be a bidding war, especially if I have the only gallon of gas in town.
And even if the gallon of gas drives a price increase in other items, the market will still be a factor, and only those items dependent on gas are in play.
If the value of the dollar drops, it affects the value of everything.
All the hard-earned dollars in your 401K?
Anything imported from overseas?
Do we even manufacture anything here?
If the dollar is worth less, goods cost more.
For years, our government’s overspending was funded by the purchase of US debt securities by foreign countries. Countries like China, who had been keeping us afloat, have stopped investing their money in US government debt.
Why is that?
Well, they question our ability to repay it.
You see, unlike the American people, the Chinese are smart enough to know that simply printing more money is a BAD thing.
In a few years, the baby boomers will start to retire. And as much as people joke about they won’t be able to afford to retire, some will HAVE to retire due to health reasons.
That means that the work force left to tax to support the aging population who will be drawing benefits on Social Security and Medicare will be smaller.
And in case you didn’t know, the money that comes out of your paycheck for these entitlement programs does not go into a savings account with your name on it.
It is being spent today.
On current benefits, and on wars in Asia, and on bailouts and cash for clunkers...you name it. All the things that American voters couldn't live without.
So if you’re under forty, when the time comes for me to draw benefits, they’re going to be looking to tap YOUR paycheck.
And that tax that is currently 7.5% or so is going to go up. Dramatically.
And I hope that when that happens, all of the government excess that is going on today will seem worth it to you.
And your children.
Because that's who is really getting SCREWED by all of this.
And it's our fault, children of the sixties and seventies.
Our parents left us a better future than they had, and we're leaving our children a welfare state.
So we can own iPods or iPads or Kindles or other overpriced electronics, expensive cars and all sorts of other crap that we can't afford and buy anyway on credit.
And then we encourage our government to do the same thing.