Dollars and Sense or "Just how much am I worth?"
Larry LaBorde
April 9, 2003
321gold.com
Everyone needs to perform a net worth analysis on himself every few years. It is sort of an economic scorecard of just how you are doing. It can be a depressing thing for many people since the stock market rolled over but it is an exercise that is necessary for our financial health.
Several years ago Vice President Gore was proposing to increase tax on millionaires. When asked to define a millionaire he got a little fuzzy. He then stated that anyone who made over $150,000/year was a millionaire. (Talk about fuzzy math). Never confuse cash flow with assets. The simple traditional definition of a millionaire is someone whose net worth on paper exceeds one million dollars. Granted, since the federal reserve started devaluing our currency it is much easier to reach this goal than in the past. However, back then the fed did not pick our pockets as hard and let us keep everything we made. So let's count up those net assets.
At any rate if you just go through the numbers and add up everything you own and subtract everything you owe - voila - your net worth. I encourage everyone to take stock of his economic life from time to time just to make sure that you are headed in the right direction.
If you are fortunate enough to end up with a positive net worth make sure you subtracted the following as part of your debts owed:
The national debt currently stands at $6.46 Trillion dollars. If we all just divide this evenly between all 281 million US citizens (lots of luck there because we all know who will pay the lion's share of this one) you will find that your little family of four is responsible for $92,000.00! If there are a few "poor" people in the country that can not afford their share guess who will have to "cost share" their part?
Do not forget the cost of our present little excursion into Iraq. Estimates of the war including occupation and rebuilding run around $100 billion (some estimates even go as high as $1,200 billion or 1.2 trillion dollars). Using the $100 billion dollar price tag, this adds another $1,424 of debt to our average family of four. (again not counting that pesky cost sharing that all of us in the middle class are all too familiar with). Also, if anyone at the Dept of State is making out a list of countries that need a regime change this number will naturally do nothing but go up and up. Unfortunately I am afraid the list of tin-pot dictators that need a trip to the woodshed will be greater than our ability to take all of them out there.
Our trade deficit represents current outstanding IOUs for our goods and services. This is sort of like a poker game where you run out of money and then start using IOUs instead of cash. Not a problem until they are presented for payment at the end of the game. These foreigners hold IOUs or US dollars that have built up on their shores. Why do they hold our paper dollars you may ask? Because our US dollar is the world reserve currency. Why you may ask? Good question! Perhaps it is because of the strength that our dollar used to have. Perhaps it is because they feel there is not an alternative. Perhaps it is just a bad habit. Many of our best friends in Europe that we are now trashing hold a large number of these IOUs that are redeemable at any time. The best I can estimate for a total of trade deficits over the past 50 years (with most accumulating recently) is $2,800 billion or $2.8 trillion dollars. If all these chickens come home to roost at the same time we must pay them off with our goods are services. Again our family of four paying its average share should add another $39,850 of debt.
The social security system also has this little problem called an unfunded liability. If Uncle Sam had to operate under the same rules as everyone else the state sponsored retirement program would be right at $5,000 billion or $5 trillion dollars in debt (this figure like all the others is getting bigger all the time). This is over and above the national debt and is not included in that figure. And you thought Enron was out of control! Our average family of four needs to add on another $71,174 of debt to its list of obligations.
There is more but I think you are starting to get the picture. We are up to over $200,000 in FEDERAL government debt for every family of four in our country. Our founding fathers started this country in mortal fear of large government. This is one reason why.
Before Lincoln invaded the CSA, President Davis send a delegation to Washington DC. Their mission was to offer to pay their share of the national debt and the fair market value of all US federal properties within the borders of the CSA including customhouses, post offices and military posts. Can you even imagine the cost of such an offer today?
There is a way out of this mess. We can live below our means and work off this debt. We can push back the retirement age and all work longer. We can scrutinize ever dollar the federal government spends and slowly take our medicine. It will take decades of belt-tightening to work our way back but it can be done with determination and will power by all of us. It will require politicians to become statesmen and vote for the good of the country and not for their next election. "Bringing home the bacon to my district" will have to become a dirty phrase. Politicians will have to talk about how much money they are not going to bring home to their districts and the voters will have to cheer them for it. The new political phase will be, "please do not leave a big bill for my grandchildren to pay."
Of course the "weasel" way out in the short term is for Washington to just to keep spending - borrowing - taxing - and printing more money. Or as they say in New Orleans, "laissez les bon temps roulez" or translated "let the good times roll." (At least for a little while longer until the wheels finally fall off).
Protect your little average family of four. Trade your federal reserve notes for "real" money (or trust Washington to do the right thing). Put your savings into something you can hold onto without fear of default. Five thousand years of history will be on your side.
Larry LaBorde
Email: Llaborde@cdswater.com
April 9, 2003 |
