This weekend we’ve seen the results of “my way or the highway” ideological thinking in Norway. We’ve also seen it closer to home. The FAA (Federal Aviation Authority) was de-funded on Friday, leading to the furlough of 4,000 FAA workers and transfer of taxes on passengers’ tickets into airline pockets. Airport shutdowns are immanent, as well.
Is this how the debt crisis will go? Just like the financial crisis — in slow motion, with one agency after another folding its wings? Until the whole house of government threatens to collapse on all our heads? Could the damage done ever be undone?
Well, of course not! Because there is no debt crisis. The debt crisis is a hoax, manufactured by politicians to make us all amenable to changes they know we won’t like. Paul Ryan’s “budget” proposal was the bugaboo that will make us think anything less that that is a relief.
Time and time again we are warned that we will have to make sacrifices and give up things we don’t like. But no one ever tells us exactly what is in any of those budget proposals. When the fake “settlement” happens as we are right on the brink of the fake “crisis,” we’ll have no time to look at the details. We’ll just have to swallow things we don’t like. Again. How nice! Are you fuming? I am.
The deficit problem
All we really have in the US is a distant “deficit” problem. We’re overspending at a rate that — in the future — could take us to a point where we couldn’t pay the interest on money we’ve borrowed (i.e., US Government debt) There’s no huge problem with overspending as long as you can pay the bills you owe along with your the interest costs on your debts each period they all come due.
And there’s no reason a government shouldn’t be in debt for things that are good for the nation. Good debt for a nation includes things that bring in more revenue: support for exports, support for business expansion; support for education, health, and well-being of its workers; and support for the infrastructure business needs to function.
The United States has created its own “crisis.” We do not need to have a debt ceiling. Other countries don’t have one, and they do just fine. And we aren’t the country with the most debt-to-GNP (gross national product)! Not by a long shot. The United Kingdom, France, and Germany all have higher debt-to-GNP ratios than we do. And those countries also have lower (negative!) per capita debt-to-income (or the effective net worth per citizen) than we do. [Note: “effective” means “actual] We actually have a positive debt-to-income ratio. Interest on our government’s debt hovers around 40%.
Yet these European countries aren’t having a crisis, well, at least not in direct relation to themselves, only through their connection in the European Union with Greece. And what is Greece’s debt-to-GNP ratio? In June of this year, a blogger wrote, “Greek debt is now at a staggering 150% of its GNP.” Pundits are predicting it might even rise to over 400% Ireland, Portugal and Spain are in similar straits. Now THAT Is a real debt crisis.
The US debt crisis is a bunch of BS (and I don’t mean Bruce Springsteen!)
How to Get Out of Debt
Debt is the big issue for America right now. Let’s look at how we should go about getting out of it. Any of us can face a time when we have a need for going into debt. Borrowing could be an option to pay for school, a child, or for living while unemployed, or for starting up a new business. For government, debt can come from the expenses of using a military force, offering new services to citizens, and/or dealing with a recession in the private sector.
Robert Kiyosaki and Kim Kiyosaki, his wife of many years are authors of a series of books called Rich Dad Poor Dad. The purpose of their books is to show people how to achieve financial security and ultimately get out of “the rat race” of employment as one gets older
The vision they offer is one where each generation of workers, as they age, can create enough financial know-how to become business owners or real property investors who are able to live independently on residual income or cashflow. This is done by offering products or services others. In other words it’s a utopia of entrepreneurs.
Whether or not this vision is possible for everyone, I can’t judge. But I can judge that some of what the Kiyosakis teach is most useful to anyone who wants to use their money to live well. And one of the the things they talk about is how to get out of debt.
As part of the free “$800 value gift” promotion for their coaching services, the Kiyosaki’s have a new audio program. It’s about 45 minutes long. In it, Robert and Kim tell how Robert got into debt and how he and Kim got out of debt. Kim Kiyosaki lists their ten steps to getting out of debt, beginning with a complete inventory of what is owed. All of these steps are important, but one step is key for understanding the government debt crisis we are all in right now.
As I’ve written, I don’t believe our national, state or local governments even have a complete inventory of government assets or liabilities, let alone make those inventories readily accessible in condensed form for citizens to see and discuss! We’re not even at step one of getting out of debt! No wonder we’re deadlocked.
The Kiyosaki get-out-of-debt strategy
Here’s the Kiyosaki’s key strategy for getting out of personal debt. You first freeze your credit card. OK, you think, that means having a debt ceiling. No! A debt ceiling is the point at which your credit card maxes out, and you can’t borrow anymore. A debt ceiling is like a credit card company’s credit limit. You don’t even want to get to the point of reaching your credit limit in the first place!
Long before that, you freeze the bills you are paying, and you decide not to spend more until you can catch up with what you already owe. Do we see our government discussing where to draw the line at not spending more? No, we don’t. We see a government that is acting like it has maxed out its credit when it has not, and like it is teetering on bankruptcy when it isn’t. This is simply insane. Why do we need all this storm and drama? I believe it’s so the “dupes” in the audience will swallow the hoax — hook, line, and sinker.
So how does anyone pay down their debt? You focus on paying off one debt at a time, beginning with the debt that can be paid off the quickest. Once you pay that debt, you take the money and interest that you are no longer paying on that debt and use that money for your next biggest creditor. After you pay the next creditor, you move on to a bigger creditor. In this way your debts get paid as quickly as possible.
How do you pay off your first debt?
But how do you pay the very first creditor? You’re broke! That’s the rub. And this is key for solving sovereign debt too. Here’s the Kiyosaki’s answer. YOU DON’T CUT ANYTHING OUT OF YOUR BUDGET – YOU FIND A WAY TO SCRAPE UP A FEW MORE DOLLARS A MONTH. That’s what you use to begin paying down your debt in an orderly way until you get out of debt.
Yes, that’s right! You get out of debt by finding an additional way to raise money. The Kiyosakis suggest that for individuals that means coming up with an extra $100 a month. That can be from finding extra work, selling something you don’t need, planting a garden, or making something others can use.
No matter how deeply you are in debt, and as I pointed out above, the US is not nearly in debt as other developed countries in the world, you don’t start getting out of debt by cutting out some big massive program, such as Medicare or the military! You start by figuring out how you can bring in just a small amount of extra money each month so you can start paying off the bad debts you already owe. What is bad debt? Bad debt is debt for things that do not make our nation more prosperous.
If you’re serious about managing debt, you begin with a plan you all agree on. Then you make a commitment to get out of debt one step at a time. And while you work on bringing down your debt, you make sure you hold down your expenditures. Just as soon as you can cover your bills again, you pay off your creditors, one by one.
Meanwhile, you find ways to bring good debt into your lives! For more on what good debt it is, see my previous post “Good and Bad Debt: Why We Need to Know About Them”.
Does the Kiyosaki’s system work? You bet it does! It isn’t easy, but I’ve done it more than once in my life, and so can you. And so could our government – IF it ever tried.
3 comments ↓
Hey Nancy—
I think you’re right on that this is a manufactured thing to keep the fear in the populous. And a whole lot of posturing for political reasons. Thanks for sharing your insights and solutions.
“So how does anyone pay down their debt? You focus on paying off one debt at a time, beginning with the debt that can be paid off the quickest. Once you pay that debt, you take the money and interest that you are no longer paying on that debt and use that money for your next biggest creditor. After you pay the next creditor, you move on to a bigger creditor. In this way your debts get paid as quickly as possible.”
This article is a Hoax and you’re an idiot. The fastest way to pay off your debt is to pay the debt with the highest rate first. Plain and simple. If you have $500 debt at 1% and a $1000 debt at 10%, you’d be stupid to pay off the $500 debt before the $1000 debt.
I do agree that government doesn’t have any idea about its liabilites and assests, but your suggestion to not cut items in a budget and instead just scrape up more money from somewhere else is just as ignorant as your before mentioned debt payment plan.
With this quote I was explaining the Kiyosaki method of paying down debt. They suggest finding an extra $100 in your budget each month and using it to pay down the debt that can be paid quickest. If you want to call Kim or Robert Kiyosaki an idiot, go right ahead, but don’t call me that.
The method you suggest for paying down debt is called the “avalanche” method. That is where you pay off the debt with the highest interest rate first. Yes, in your example of $500 at 1% interest and $1000 at 10% interest, the avalanche method is it is the cheapest, quickest way to pay off both debts.
However, most people owe more debt at lower-interest-rates and less debt at higher-interest-rates. So paying off the lowest amount of debt first usually means paying off the debt with the highest rate of interest first.
And in the case of your example, if I had a debt of 1,000 at 10% I’d do a balance transfer of $600 to a card with zero interest for six months or put the whole $1,000 on a card with zero interest for a year and pay that debt off first, even though it has the lowest interest rate, i.e., zero.
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