What if the U.S. Government Goes Broke?
August 10th, 2009A few days ago a client called who had been rattled by a doomsday friend of his. From what I remember, his friend’s primary concern was that the U.S. government is going broke and that the market will go to zero as a result, or something very near that.
No, I’m not a blind optimist and I do agree that it may not be good for the U.S. government to go broke, as it is ~20 percent of the U.S. economy. And no, I don’t want to trivialize the possibility.
However, we just need to look around at the states to see what would happen if the U.S. government “goes broke”. In California (CA), is Apple Computer going broke along with the CA government? No, quite the opposite. Apple is turning in record profits.
What about in Pennsylvania (PA), where 77,000 state workers have been over a month without a pay check because the politicians are at loggerheads because they can’t agree on a budget? Well, Pam and the girls are in PA now, and when I asked Pam how Friday night was at a regional family owned amusement park Pam replied: “It was more packed than I’ve ever seen it…” I know that’s pretty unscientific, but it’s a valid anecdote that the people of central PA are definitely not starving. To the contrary, everyone but the government workers are probably relieved that one element of the state government finally stood up and said: “No New Taxes!”
Even more in support of the marginal impact of the U.S. government is an article in today’s Wall Street Journal by Zachary Karabell. Mr. Karabell argued that because the world economy is so intertwined that fewer and fewer American companies need a strong domestic economy for their earnings to grow. Yes, that’s bad for the U.S. citizens looking for a job and it’s bad for the out-of-control tax hungry U.S. government, but it’s great news for the global investor.
Yes, the U.S. government may get desperate and may print too many dollars and drive U.S. inflation through the roof. However, as we witnessed in the 1980s, at some point the currency will come under control and the market will regain its losses, either through U.S. business or through business from abroad. Yes, the American citizen will feel the pain from the situation, but the global investor will survive, and ultimately, thrive.
We don’t sail around the world in wood ships any more, and with or without the U.S. government, the world economy will march forward.
Thanks,
Rod
PS: Pam is on vacation for two weeks, ending this Wednesday, and she’ll be commenting on everyone’s site again regularly after she returns.
PS 2: Let me know if anyone is interested in our web guy’s services. He’s a good kid (30 something), easy to work with, knows his SEO stuff and as you can see, does good work.
11 Responses to “What if the U.S. Government Goes Broke?”
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Hi Rod,
Welcome back to your blogging world!
Having any government going broke or the mere thought of it is unsettling enough!
John Ho
Numerology Expert Helps Understanding Personality for Better Influence & Persuasion
Numerology Expert Birthday Numeroscope
Numerology Expert Helps Understanding Personality for Better Influence & Persuasion
Great to have you back. Frightening thought!
Anthony
http://www.anthonylemme.com
Rod,
I hope the government never goes broke. I remember the late 70s and early 80s, what a time that was and we came back.
I agree we will see and feel the pain for a time before we see the light at the end of the tunnel. Good thing we have you to project more light on our investment dollar.
Lynn Lane
PS: Tell Pam hello.
http://www.Warriorofsuccess.com
Lynn,
You’re right, what a time the 70s and 80s were. Do I think the U.S. government will go broke? No, but who would have predicted CA would be in the mess it’s in now. However, it’s reassuring to know that capitalism marches on.
Thanks,
Rod
Anthony & John,
Thank you for your kind words, as it’s GREAT to be back on line. You folks are all GREAT.
Thanks,
Rod
Awesome to have you back.
The new website looks great.
You might want to ask yor web guy if he could make the “Submit Comment” button a bit more buttonlike. Might just be me, but I had trouble finding it and clicking on it.
Yeah, it’s probably just me.
JJ,
Thank you for your kind words, as I’ve had Josh make a change. Does it look better now?
Thanks,
Rod
Hey, Rod,
Awesome post! You answered a question I had been curious about for some time. Now, after reading your article, my feeling is, “who cares if the government goes broke!” Well, ok, maybe I’m not that nonchalant about it, but I am much less concerned. As you stated, it would be painful, but life would go on.
Health, Fitness — Darryl Pace
Fitness Product Review
Hi Rod,
What a great post. I can see when I’m more settled again I will definitely want to resubscribe to the WSJ. Just I found as an entrepreneur it was so very geared towards the business and wealth of large corporations or VC backed start-up, aka heroin pushers.
I particularly like how your tone and financial wisdom displayed a like oil on raging waters, rather than what is so often in the media to grab attention and fan the flames of wide scale panic. Which would not serve, at least, my life purposes.
Glad to hear Pam had some time off this summer!
Happy Dating and Relationships,
April Braswell
Single Baby Boomer Dating Success Expert
I hope the US government doesn’t go broke! What a disaster that would be.
Keri Eagan
AlternativeHealing*Insight
Keri,
Fortunately, one doesn’t have to (yet) get government approval to buy a Diet Coke. Hence, while the U.S. government is headed for fiscal insolvency, the U.S. consumers will continue to do their best to maximize their personal lifestyles, with or without the U.S. government.
Do I believe the U.S. government will become fiscally insolvent? Look at CA “paying” off debt with IOUs. Just as the California people and their politicians don’t have the will to make the necessary decisions, the U.S. citizens and their elected officials haven’t shown the will to do anything about the problem.
So what will happen? If something doesn’t change, a train wreck is coming. Am I a doom sayer? No, the stock market and the global economy will continue to move forward, with or without the U.S. government. Throughout the history of civilization, empires have risen and then fallen by the way side. However, technology and the human desire to make tomorrow better than today march onward.
Thanks,
Rod