Thursday, July 14, 2011

Countdown to Catastrophe

This is a very serious post, so I'm going to make this as short, direct, and to the point as I can. 

As many of you know, the United States has until August 2nd to reach a compromise over the national debt and agree to raise our debt ceiling.

As many of you know, these negotiations aren't going so well, and (surprise surprise) it seems like a compromise isn't going to happen in time to prevent this default. Our government has about 2 and a half weeks to figure out anywhere between 2 to 4 trillion dollars worth of spending cuts and tax increases (which, as we know, will almost entirely be on the backs of social programs)... Let's recall back to a few short months ago, when our government was literally hours away from a shut-down because of a lack of comprise on a budget of just a few -billion- dollars. Keeping that recent event in mind, it doesn't look like we have much reason to believe that our government will be able to pull it together in time, and if you're following daily progression of these negotiations, things actually seem to be getting -worse- as we run out of time, not better.

Now, I'm not saying that we -will- fail to compromise and raise the debt ceiling in time. I'm not saying that we -will- default. However, there is a very real possibility that that -could- happen, and this event is literally right around the corner.

What does this mean for you? Well, to be honest, nobody really knows. It's sort of like one of those 'if we don't bail out the banks...' type deals... It's never happened before, and we simply don't -know- what will happen. However, the bank bailout, as anyone with half a brain realizes, was a complete sham, and though some things might have been bad had we not bailed them out, we -would- have survived, and in all reality probably would have been better off. This debt ceiling thing, however, is -far- more serious than people realize.

If we fail to raise the debt ceiling, we have two options: Stop paying our bills within the country (social security, medicare/medicade, pensions, military benefits, national parks, post office, education, etc etc), or stop paying our creditors. In effect, it's like the US is a business, and it's run out of money. It can either pay its workers, or pay the bankers that lent it the capital, but it can't do both.

If we choose to pay the workers (the american people) and keep our social services and domestic government operational, we -will- default on our debt. What does this mean? Well, look at Greece as an example. Interest rates in Greece are now as high as 33-40%. Imagine how bad our debt crisis will be when we have to pay that kind of interest on our national debt instead of the 2-5% that we've been paying for the last several years. If that doesn't scare you, think about this... Interest rates will almost certainly rise across the board. EVERYWHERE, for EVERYONE. Now imagine that 250,000 homeloan you have at a nice 3% interest on. Imagine that going up to 30%. Imagine the interest on your credit cards, car loans, and everything else rising double digits, in what could be anywhere from a few weeks to literally a few hours. Imagine how bad this will hurt consumers -and- business, and lets not even get started on how badly it will piss of the Chinese and the rest of the world...

If we choose to pay the bankers and continue to pay the interest on our debts, we will keep our global creditors happy, and we won't default, but we'll -have- to stop paying for domestic expenses. And this is very different from cutting them. 10's, if not 100's of workers could loose their jobs overnight. No social security, pension, or unemployment checks will be cut. There will be no medicare and medicade, and depending on how long it takes us to raise the ceiling, we could literally see the federal government (primarily the services and jobs of the federal government that we -actually need-) wither up and die right before our eyes. Imagine what -this- will do to our economy, not to mention our standard of living, and our safety.

Now, if the US does fail to raise the ceiling in time, it is likely that we will choose to pay the bankers instead of the public (again, surprise surprise). If it gets to this point, I don't think that it will last very long before people and politicians start realizing how serious this actually is, and then I think they'll do something about it and raise the ceiling so that we can try to pathetically putter along again, lick the wounds that we sustained, and live to die another day. However, the days between when we run out of money and when we decide to raise the debt ceiling could be very ugly, and I strongly recommend you prepare.

This is what I would (and am) doing, in order of priority:

1) Take as much money out of your bank as you can. Your cash is much safer 'under your matress' than it is in a bank, and if there is a panic, you might not be able to get it out. Only leave as much in a bank as you absolutely HAVE to.

2) For the same reason, I would have at least 2 weeks worth of food and water in storage. I don't think we're looking at the Apocalypse or anything, and that's -not- what I'm saying, but panic is a funny, unpredictable thing. It's better to be safe than sorry.

3) Have other emergency supplies on hand. It's not likely that power, water, and gas are going to stop, but it won't hurt. Again, when people panic funny things can happen. Fill up your gas tanks before the 2nd, and, if possible, have a few extra gallons lying around encase there's a run on the gas stations (it's happened before).

Once again, I'm not saying that I know what will happen, or that we're definitely heading for some horrible times, but I do think this is a very serious ordeal that could have some very serious consequences, and unlike many of the other things that are going on right now that are worthy of concern, this has a hard and fast deadline that is right around the corner.

Please, take this seriously.

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