01-06-2013 04:57 PM
So how much is the Fiscal Cliff deal that was recently worked out actually worth? I know this isn't a complete & fair comparison -- for example, your family can't just print money like Bernake is doing, but it is an interesting perspective on the US debt situation. The deal is a drop in the bucket and not a solution at all. Tell the governement to get real and go back to work! What woud a financial advisor tell this family to manage their situation? Get another job? Cut back on your spending by a 1/3? That wouldn't even begin to make a dent in the debt, it would only cancel the deficeit and you still wouldn't be able to save for the kid's college fund or retire. Heaven help you if you get sick and you don't have insurance!
|Fiscal Cliff put in perspective:|
|* U.S. Fed Revenue||$ 2,469,000,000,000|
|* Fed budget||$ 3,793,000,000,000|
|* New debt||$ 1,324,000,000,000|
|* National debt||$ 16,429,000,000,000|
|* Long term entitlement debt||$ 62,000,000,000,000|
|* Recent budget cuts||$ 38,500,000,000|
|Let's now remove 8 zeros and pretend it's a household budget:|
|* Annual family income||$ 24,690|
|* Money the family spent||$ 37,930|
|* New debt on the credit card||$ 13,240|
|* Outstanding balance on the credit card||$ 164,290|
|* Long term entitlement debt (college fund, retirement fund, future health care)||$ 620,000|
|* Total budget cuts so far||$ 385|
01-08-2013 11:01 AM
What kind of credit score would you give to this particular "family"? Obviously they would score very poorly for their extreme credit limit and indebteness. They are paying debts on time (for now) but what happens when the US hits the debt ceiling and stops paying their bills? Current credit rating by S&P AA+. Obviously there are limits to carrying this metaphor to all the details as a credit score does not have the same meaning as a credit rating.
01-10-2013 06:37 AM
Oh, well...the "trillion dollar coin" will solve all of that, right?
Never thought the feds could come up with an epic version of "check kiting", but if you live long enough, I guess you see it all.
01-11-2013 10:50 AM
The idea behind the trillion dollar coin is not to actually pay with the coin but it would be a monetary slight-of-hand to sidestep the artificial debt ceiling limit law. It doesn't actually create or pay down debt in and of itself. If it did it would exactly the same as printing money which would devalue the dollar. This is just a mechanism to get past another mechanism akin to passing another law to eliminate the first law. At least that's my take on it.
01-12-2013 04:18 AM
I definitely understand the concept that, as long as the government does it, it's not "check kiting", it's just creative accounting. Those other pesky laws need to be circumvented to attain proper fiscal management, don'tcha know.
01-13-2013 05:08 AM
Potential solution - float the currency, print more money, and allow for short term inflation. Pay our creditors in less valued dollars. Historically, this has worked amazingly well for nations who have gone into steep debt.
01-15-2013 07:53 PM
Yep. Then your credit rating goes into the dumpster and the next thing you have is double digit interest rates and rapid inflation. Devaluation of the dollar comes with issues of its own. Zimbabwe, Argentina, Poland, Mexico, Weimar Germany....
Forums posts are not provided or commissioned by FICO. Forums posts have not been reviewed, approved or otherwise endorsed by FICO. It is not FICO's responsibility to ensure all posts and/or questions are answered.† Advertiser Disclosure: The listings that appear on myFICO are from companies from which myFICO receives compensation, which may impact how and where products appear on myFICO (including, for example, the order in which they appear). myFICO does not review or include all companies or all available products.
* For complete information, see the terms and conditions on the credit card issuer’s website. Once you click apply for this card, you will be directed to the issuer’s website where you may review the terms and conditions of the card before applying. While myFICO always strives to present the most accurate information, we show a summary to help you choose a product, not the full legal terms - and before applying you should understand the full terms of products as stated by the issuer itself.
IMPORTANT INFORMATION: All FICO® Score products made available on myFICO.com include a FICO® Score 8, along with additional FICO® Score versions. Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more
FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Score and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.