It is often heard that the the Federal Government should act like any business or family--live within their means. Maybe comparing the government to a family seems trite, but current events seem to justify the analogy.
A family has income supplied by the adults in the family through their own efforts--either through their employment or their entrepreneurial efforts. They can incur debt up to a certain point. And what is that point? When no creditor is willing to lend them any more money.
Up until that point, to borrow any further, they are likely to have to pay more in interest rates. Even to the point where they have to find lenders who would charge exorbitant fees and interest rates.
With the passing of Michael Jackson, the media related that he was 500 million dollars in debt. How could that be? Evidently there were those who were willing to extend credit to him and his operation on the basis of his ability to pay that debt at some point in the future. Or maybe his celebrity prompted others to extend him significant credit.
The average person or family normally wouldn't have that much credibility to attract such beneficent creditors.
Well, the Federal Government has a similar situation to Michael Jackson. There is sufficient credibility and trust in the United States Government that others (including countries such as China) are willing to lend the money to continue operating. However, as has been the case, the government must increase the interest rate paid in order to continue to entice others to lend them the money.
At what point does a person or family realize that it can't cover all the debt they incur? When their expenses exceed their income. At that point, perhaps after a period of hiding from the creditors, they have to declare bankruptcy or place their finances in the hands of an agent who will reduce their finance charges and allocate limited financial resources to them.
At what point does the Government realize that it can't cover all the debt they incur? As we see, the creditors of the United States Government are willing to accept an appreciation on their investment. The Government only pays the interest on the debt because they roll over the debt every so often. As long as the government revenues cover the debt service--or interest--it is able to stay afloat.
However, there may come a time when creditors will not be willing to lend the United States Government any more money at any interest rate--same as families and individuals. It may be a ways off, but if the government continues to rack up the debt at the rate it is going, there must come a time when the Government truly will go bankrupt.
So, the family budget (and debt) is no different than the Federal Government debt.
Household budget help - Everything You Need To Survive These Hard Economic Times - Learn To Create A Household Budget With This EBook Manual
Money Tree Software - Unique, Quality Budgeting Software That Almost Every Person Needs, Check Out Money Tree.
Recently Viewed Sites:
make a budget and stay out of debt
inventory tracking
sagittarius compatibility
www.newfloridarefi.com
