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Thursday, August 4, 2011

Where is the Bottom?

    As much as I rant on the market I do not really want it to collapse.  At least not like in the Great Depression, but it sure is not looking good.  The next couple days should tell the tale.  If it keeps sliding we may be seeing the price of Procrastination by Congress.  China's downgrade of American credit surely is not the cause of all the problems. The Japanese and European Central banks actions definitely helped get things sliding.  In the "Big One" the market slid 89%.  In todays market that would put a bottom at around 1596, but in my opionion the bottom, bottom would probably be between 3500 and 4000.  I base that on where the market was at before it took off  around 1972 or 73 when we went off the Gold Standard.  Also the time involved between the Big One and the market reaching the 1000 level.   Looking at all the improvements and fixed assets in America to me that would be realistic.  Hope I am wrong.
    Regardless what it does, if there is no program to develop jobs,  it will be hopeless.  The government can not keep spending the way it is and survive.  If America can not borrow billions and billions of dollars it can not make ends meet. As many of the commentators were saying today, people are scared and they are taking their money out of the markets and sticking it in there mattresses.  If that is true it will get worse not better.
    The deal worked out by Congress gets rid of 2 Trillion over ten years.  Well that would be nice but at that rate and the rate America spends we will only be 2.5 Trillion more in debt than when we started.  The U.S. Governement spends 1.2 Billion a day on interest.  Which is only 438 Billion dollars a year.  For the ten year period that would equal 4.38 Trillion more debt.  To make a dent in the debt the number paid on the debt has to be about 1.53 billion per day.  That only breaks us "even."   If on Monday as I suspect the markets tank and inerest rates go up the price of breaking even will be even more.  America needs a plan that will generate no less than 1.53 Billion a day and 2 Billion would be nicer.  Cutting spending is not going to get it done.
     Having been through bankruptcy myself I understand the process.  The main thing that pushes you over that cliff is your financial resources dry up and no one will extend you credit.  That is probably the boat America will be in on Monday.  The only way to beat it is to generate additional income.  Whether it is a second job or creating a product the world can not live without.  You have to make more money.  When I went through bankruptcy I only had about $45,000 in depth and only about $10,000 of it was credit card debt.  After bankruptcy you will still own student loan debt and any taxes you owe.  You can not get rid of debt to or insured by the government.  I did manage to get a break though and started my own business and twenty years later I was over $300,000 in debt and over a $100,000 was credit card debt.  Yet I paid it all off and came out ahead, because I learned to use the system.  I constantly rolled credit card debt from one card charging no interest to another keeping the debt interest free.  I figured out how long I wanted to take to get out of debt and paid almost two thousand a month till it was gone.  When I paid one off I made that much bigger of a pyment on another card till it was gone.  What it took was a plan and a job that had the cash flow to do it.  Trucking generates large sums of money  and it flows through your hands and you look good on paper but the reality is most of the time you are technically bankrupt, but you learn how to play the game.  Had I understood the system when I filed bankruptcy it would not have happened.  Instead I would have diversified my business and done something else during the seasonal slow periods, but at the time I did not know how to do that.  However I learned and survived till I retired.  Did I get rich? No, but I live comfortably and I have virtually no debt compared to back then.  It is time for America to figure that out and get their house in order.  Unfortunately it may be to late.  Only time will tell on that issue.  Yes there is a way to get out of debt, but most Americans will not like it.

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