The ss USA is sinking

Warren Edward Buffett (born August 30, 1930) is a U.S. investor, businessman, and philanthropist.
He is one of the most successful investors in history, the largest shareholder and C.E.O. of insurance and investment company Berkshire Hathaway and in 2008 was ranked by Forbes as the richest person in the world with an estimated net worth of approximately $62 billion.
A guy who knows everything about money and the ways it flows.
If he says something about the economy, we better listen carefully.

Today he has said that the United States is spending 85 % more money than is coming in.
What does that mean?

Imagine, you make $ 3,000 a month.
But you spend $ 5,550 a month.
That's no good, right?
You may get the extra $ 2,550 by using credit cards.
Borrowing the money from the bank.
That's expensive and some day you need to repay the money you borrowed.
Hence, in fact, of the $ 2,550 extra you borrow, part has to be used to pay the interest on the loan.
And the question is, with this extra amount you borrow and that you can spend, are you making more money than if you would simply live of your income of $ 3,000 a month?
You better do otherwise it is like sinking deeper and deeper in the drift sand.

Of course no fervent and loyal blog readers is earning $ 3,000 a month and spending $ 5,550 a month.
That would be really stupid and asking for fatal trouble.
Besides, no bank or credit card company will borrow 85 % of the monthly income.

However, currently the United States as a country, as an economic mammoth, according to Warren Buffet, is just doing that.
Spending 85 % more than is coming in.

How can this happen?
By borrowing.
From Japan and China.
And anyone who believes that the American economy in the future will be able to generate enough money to pay back the loans and pay the interests.

Warren Buffett said today that a revived American economy will not be able to generate enough revenues to bridge the gap between outlays and receipts, so changes in taxes and spending will be required.

Now, that is something no American citizen is prepared to accept.
Change in spending?
Paying higher taxes?
No way, José.

So, any politician who wants to be elected will never have a policy to increase taxes in order to pay off the national deficit that is now reaching almost 2 trillion dollars.
The politician will simply not get enough votes to be elected.
So, according to Warren Buffet, politicians may opt to quietly let inflation increase, a move that will "confiscate" wealth and allow the United States to evolve into a "banana republic economy".

It is easy to see what will be the economic future of the United States.
Either taxes will go up dramatically to pay off the national debt and consequently the American citizen will be forced to seriously limit the life of luxury and comfort.
Or, and this is the most likely scenario, inflation will lower the value of the US Dollar so much, that it will have not much buying power anymore.
Resulting in an American citizen having dollars that buy not much more than the local apples and carrots.
Everything else that comes from outside the USA will be too expensive to buy.
And that includes oil.

Warren Buffet is painting this picture of the USA today.
And nobody will be alarmed, shocked and start taking drastic measures to avoid these horror scenarios.
The ship will continue to sail while the holes in the hull let the water in more and more.
It will sink but on the deck they dance.

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To read in detail what Warren Buffet has to say about the US economy, click on:
http://www.rttnews.com/Content/TopStories.aspx?Node=B1&Id=1044505&Category=Top Stories






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