October 19th, 2009

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#109 – Dick Bernard: $1,420,000,000,000

Monday, October 19th, 2009

The Saturday, October 17, 2009, Minneapolis Star Tribune had a front page headline: “Deficit Surges to New Record“.  The subhead helpfully fleshed out the number: “2009’s deficit soared to $1.42 trillion – more than three times the most red ink ever amassed in a single year.”  In the early part of the article – the part people read – it emphasized that this was the federal budget deficit, and it included a number I’ll comment on a bit later.

Indeed, $1.42 trillion – $1,420,000,000,000 – is a lot of red ink.

It’s also the mother’s milk of unfettered Capitalism….  Somebody, after all, got all that loose change.

And there are those inconvenient truths, like the fact that our cost of “War on a Word” since 2001 will exceed $1 trillion by the end of this fiscal year #mce_temp_url# – and much of that is off-budget and relies on borrowed money from places like China.  Another excellent resource: #mce_temp_url#.  War is an unproductive use of increasingly scarce resources.

The article got me to thinking back to when my parents bought their first house.  It was in 1947.  I was seven years old; my parents were 39 and 36 respectively.  We were living out in Sykeston ND.  There were already four of us kids, and #5 was to come the following year.

I was old enough to have vivid memories of this momentous purchase.

Bernard's North House, 1947

Bernard's North House, 1947

My Dad was a school teacher, and Mom was stay at home, and the first few years they rented.  But by 1947 it seemed like they had a relatively stable work situation, and the family size was such that they needed a house.

They bought a deserted farm house that had doubled for a grain bin somewhere out in the countryside, and moved it to the north end of tiny Sykeston, ND, perching it on a foundation over a minimal basement with dirt walls.  If memory serves, their investment was $700 total.

It was the sweat equity that brought the mouse-infested place back to life.  If you look closely at the photo above, you can see a very tired looking man sitting on the stoop of the then-front door.  That would be my Dad.  Basically behind and to the right of the photographer (my mother?) would be the outhouse…no sewer or running water in those years: they had to go down to the town pump for the water supply.  No bathroom.  Minimal baths….  No garage for the one already old car.

Life went on, and expectations increased for all Americans.

Time went on and someone came up with the idea that people could borrow money and get stuff that they wanted.  Business thought this was a fine idea.  Debt is good.  It helps to promote consumption, and consumption is good.  As business took over government, slow but sure, government debt was okay too.  Who better to own than the government, especially when you could blame the politicians?

So, we sit here with this huge federal debt.  The paper helpfully pointed out that it amounts to “more than $4,700 for every man, woman and child in the United States.”

A lot of money, yes.

But comparing it against the massive consumer debt held by persons with mortgages, car loans, etc., etc., etc., etc.  it’s really pretty small change.

The calculation for the big business types now has to be: how far can they leverage this debt until we all go busted.  Sooner or later the debt becomes intolerable, even for those with a lust for profit.  The peasants need to be able to pay the bills.  If they can’t, the bubble bursts.

As noted, there are many reasons for that big federal deficit.

A bit of prudence, like my parents had to exercise back in the 1940s, would go a long way today.

Don’t expect it from the money changers in the temple that is Wall Street.