Thursday, February 11, 2010

Naked Capitalism....The Real Emperor With No Clothes

I don't usually like to get into it with bloggers, but this above linked too piece is just plain stupid.

The author makes the case that the Federal Budget is not like a Household budget - he is what I would term a "Forever Deficit Apologist", or an FDA for short. Put aside the notion that one can be an FDA regardless of political persuasion (I challenge anyone to name ten elected congresspeople of any party since the 70's that wouldn't fall into the FDA definition by either endorsement or action).

A couple of my favorites are that because the United States won't die, like households eventually do, the piper never needs to be paid.....perhaps somebody should tell that to our friends over in Greece who seem to be suffering a stroke right now.

Or maybe the line that we've been in debt for 173 years and we're still alive and ticking (notice I didn't say kicking). To believe this you must ignore all of the rest of history, not an easy thing to do - but a requirement if you're an FDA. The author also fails to mention that the increase in our debt has been accompanied by a decrease in our purchasing power - something on the order of 95% since the creation of the fed.

The government has the power to tax is another arguement (households don't)...this of course ignores the affects of that taxation on growth and behavior.

Without saying it, the FDA's will use trickery, like the above linked too post in order to make you believe that Deficits Don't Matter.

Deficits Do Matter.

As for the Federal Government Budget being different than a Household Budget - I agree that they are different in the short term - we (the household) must deal in reality, the government can put that off for a long time, but not forever. Just like with a household budget, a day of reckoning will come. Perhaps its not one day of reckoning, but a series of long, drawn out needle pricks that slowly devalue the debt and with it the purchasing power of all gotta face up to your bad habits, one way or another they will catch up with you (mind you, my bad habits will never catch up with me because I'm one of the Wobegon's).

The real problem we are facing is the justification of the FDA's, this must stop.

Scott Dauenhauer CFP, MSFP, AIF