I wrote A Nation in the Red(aff) as a call to action for concerned citizens to save this country before we become inextricably caught in the debt trap that has shocked the economies of so many countries. Moms and dads, and especially moms and dads of children in their teens, twenties and thirties (this is the generation that will shoulder the burden of this debt), need to become informed of the problems that this much debt creates and make an issue out of it with all your friends, colleagues, schools and businesses. That is the action step that each concerned parent must take to save our country.
With regard to your specific question about the role of the Federal Reserve in helping the government out of the debt crisis, the Fed is now forced to walk a tightrope. Their primary job now is to grow the economy, but the traditional growth mechanisms are not working. The Fed has created more than sufficient reserves for banks to start lending, but consumers and governments have been de-leveraging since 2008 so there is no growth in the demand for consumer debt and hence slower economic activity. This has recently turned around but has not yet had much of an effect. Some economists argue the Fed should increase it purchases of Treasuries (to create inflation) while others think just the opposite (the normal mechanisms are not working).
Once the economy starts growing the problem becomes managing interest rates because the federal government has so much debt it cannot withstand large interest rate increases. This is the tightrope: if the economy grows, interest rates will increase due to increasing demand for debt. The Fed will be forced to maintain very low short-term rates so the federal government can pay interest expense without hurting other outlays. Then, what is the Fed going to do with the $3.6 trillion of Treasuries it already owns? A sale of even a portion of this amount would create a freefall in the debt markets. This is a problem. Unfortunately, the Fed is playing with âexperimentalâ economics because no country has been here before so no one knows the exact outcome of Fed actions. Had the government not deficit spent, we would not have this problem and the recovery could be more straight-forward.
How does the U.S. get out of the debt trap? For countries that get to our debt levels, there are unfortunately only five methods out of the trap. The most used method is default and repudiation. Unfortunately for all of us, this method would devastate the world economy and needs to be avoided. The second method just recently created is a bailout, which of course is not available to us due to our size. The third method is pay the debt with newly printed money, but this has hyper-inflation side effects. The two remaining methods are grow the economy and balance the budget by spending cuts and tax increases. If we utilize the last two, my calculation is that we will be back to a 35% debt/GDP ratio in 36 years, assuming good economic growth and balanced budgets. This is where we were in 2008, five short years ago.
*Murray T. Holland is a 30-year veteran of the finance industry and managing director of Dallas-based MHT Partners. He is the author of A Nation in the Red(aff) (McGraw Hill, November 15, 2013). Readers are encouraged to visit ANationintheRed.com for more resources.]]>
This can’t help but be a problem. That being said, to put it in perspective we will spend more on Halloween candy this year than on the presidential election. I think this makes a good argument for public financing of elections. It’s hard to decide who gets the money then, but if we can do that, a billion or 2 is a tiny drop in the bucket every 4 years compared to our budget. Wouldn’t a fair election not bought and paid for by the super rich and corporations be worth it?
Note that this infographic is out of date from this spring. I think it makes a good point though. Just add a few hundred mil to each of the numbers.
According to the Constitution a candidate is required to have a majority of the Electoral College to win the presidency. In some of the early elections we had more than 2 viable candidates. The the House of Representatives. Because there were 4 candidates receiving votes none of them got over 50%. In that case the House of Representatives votes and picks a candidate.
Currently, it is impossible to imagine someone other than Romney or Obama winning a state. That means that the only way neither of them would get a majority would be if they tie 269-269. In that case, the election would be decided by the House of Representatives. As the Republicans control the House, it is likely Romney would win a tie. It certainly wouldn’t be the type of victory he’s hoping for though.
As election day draws closer, the rhetoric from both parties gets even more heated and the accusations spewed by partisan windbags on both sides becomes more bitter and less relevant. In this present election, much has been made of the slow economy under Barack Obama and the conspicuous absence of Mitt Romney’s tax returns. What has been lost in all the bickering is the fact of how similar the two candidates actually are. In fact, it could be argued that this is deliberately being ignored as it serves neither of them if it is pointed out that they have much in common. What would the partisans have to complain about? So, how similar are Romney and Obama? Are there any differences? The respective answers to those questions are “quite” and “yes.” See below.
Harvard. The name alone conjures up an image of privilege and of an enclave for the wealthiest families in the nation. Those who attend and graduate from Harvard belong to a small and elite club of people who have a head start in life as a result of going to this prestigious school. A subset of this already elite set graduates from Harvard Law School, one of the most celebrated honors in the legal profession. Both Barack Obama and Mitt Romney belong to this group. That fact alone guarantees that they have more in common with each other than they do with most of the people who plan on voting for them. They not only have received the fruits of the intensive and broad education provided by one of the best schools in the world, they have all the connections that Harvard degrees bring. They are brothers in an exclusive club, and this should not be forgotten when evaluating both men.
Another important fact is that both Obama and Romney did well academically while at the school. This is another shared element of both men’s stories. The academic drive and eagerness that they possessed may have been due to the influence of their fathers, both of whom were high achievers; Romney’s father in business and politics and Obama’s father in the field of economics. Willard Mitt Romney would graduate from both Harvard Business School and Harvard Law School. He was in the top five percent of his class in business school and graduated cum laude from law school. Barack Obama would graduate magna cum laud from law school and went on to be a lecturer at the University of Chicago Law School for four years.
By the time they entered Harvard, both Romney and Obama were older than the typical college student. Romney was 24 and Obama was 27. Both men had previously attended other schools, with Romney’s educational path going through Stanford and later on Brigham Young before winding up in Cambridge. Barack Obama’s academic path was slightly different in that he attended Occidental College in Los Angeles right out of high school and majored in political science; he would eventually transfer to Columbia University in New York. Obama would also work as a community organizer before attending Harvard Law School and as an associate at two law firms while at the school.
Michelle Ontario is a professional blogger who occasionally writes about American politics. She is a fan of election season and has written multiple essays and blog posts about the last two American presidential elections. She also contributes to Degree Jungle who just launched an infographic on the Costs to Educate President which looks at the education background of both candidates.
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