The America Way

 

What is the American way?  Debt and more debt!  Our national debt exceeds $16.5 trillion, which is greater than our GDP.  Our federal deficit for 2013 will probably exceed $1 trillion for the fifth year in a row.  Households carry $12.8 trillion in consumer and mortgage debts.  One-third of Americans has no savings and approximately half are one to two paychecks from being bankrupt.  Food stamp recipients are at a all time high.  Interest rates on all types of savings accounts for all practical purposes are "zero," which penalizes savers, or those individuals that are prudent about their financial affairs.  Since there is no incentive to save at a zero interest rate, individuals are forced to invest in high-risk investments in order to reach for yield.  The problem with that investment strategy is that with high yield comes high risk.  High risk simply means that there is a good chance that one will lose part or the entire principal that one has invested. 

So, who is responsible for this American way of life?  I hate to be redundant, but the answer is yet again the Federal Reserve System.  See, the Fed realizes that this phantom growth over the past decade in GDP has only been due to debt.  Therefore, in order to keep this game afloat, the Fed is trying to persuade the American public through the “wealth effect,” which would be the rising stock market, that its expansionary policies are really working.  If you are outside of Wall Street, say Main Street, I don’t believe that argument carries any weight. The reason being is that you want to see tangible signs of real benefits, like job growth, increase real wealth, not illusory stock market gains.  (Remember what the market gives it can as quickly take it all away.)