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Did you hear the latest!?!?

September 30, 2013

Will the U.S default on its debt? Oh, all the drama! We hold our breath wondering if our federal government will be able to continue operating. Can our elected leaders come up with a last minute, eleventh-hour deal? Financial markets gyrate on every word and every rumor. What theatrics! Before this crisis, it was Syria, taper talks, European bank problems or Greece defaults. After this, it will be Iran or Israel war rumors, or Portugal or Italy defaults, or the mother of all earthquakes on the West coast — you name it. These are the new fundamentals that drive our financial markets.

Really?!? The drama is just too much for me! Pictures of around-the-clock meetings in our nation’s capitol. Will our popular politicians save the day? Will they give the markets something to cheer (and, of course, rally on)? And will they kick the can down the road and dig us into a deeper hole? Will they make more policy decisions that will cause the day of reckoning to be worse when they can no longer pile on debt? Of course they will.

Let me handle this in another way. Picture our government as a middle-class family. The family income is $40,000 per year. The family debt load is a whopping million dollars and the family has recently been maxing out the charge card and opening up new lines of credit. The family has been making the minimum payments, but the debt has grown so large that there is no way they will be able to pay off their debt short of hitting a mega lotto —  a regular lotto winning won’t even be enough. That is very similar to what we have going on in our nation’s capitol. Maybe they will make next month’s minimum monthly payment, but in the interim they have opened up four new charge cards, taken out loans on two new luxury cars and a boat and are paying for two kids to attend a private university. Oh the drama! Will the family make this month’s minimum payment or not?

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