Wednesday, February 20, 2008

The financial state of our country. eeek!

First a city

Then a state
I'm thinking about the fundementals of budgets here. Whether it be a city,a county, a state, or even your budget they all seem to work the same. Now consider where the income comes from in a city or state. Taxes ofcourse, but then consider where those taxes were generated. Corporations and individuals and some income on investments fills the coffers. The main drain on the economy came at the top. A national debt that will take years/decades to pay. Add to that the insane lending practices by banks and the resulting subprime mess and the "perfect storm" is brewing. And don't listen to those who say we can borrow our way out of debt. It's much like someone saying I can eat myself skinny. It just doesn't work. So stop for a minute and consider where the income from your city or state originates. Is it from manufacturing, farming, or a service industry? I don't see many bright spots here. The bulk of manufacturing is tied to housing and automotive in some way or other. Housing is taking a beating at the moment as did automotive just last year. The service industry will be taking a hit soon as other industries tighten their belts. Farming may fair better as we all have to eat, but farmers will get dinged with rising fuel costs, tighter lending practices and cuts in subsities.
The stock market has been trying to kid itself back to a bull market but the underlying aspects of the economy say otherwise. Far be it from me to pee on somebodys parade but how could anyone expect us to get out of this mess when the government has cranked up the presses, lowered interest rates and dumped more money (albeit borrowed) into this economy than any time in history. Don't believe me take a look in the back of your 1040 book and notice how we're borrowing 9% to pay off an 8% debt. If that doesn't say something about our situation I don't know what would.

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