American is Broke - Find out Why

When you pay out more money than you take in, it is considered a loss. When it happens for an extended period of time, it is considered insolvency. America is insolvent. We spend more than we make. Your taxes are not enough to cover the money that the United States of American spends each year.

Therefore, the government prints bonds and sells them to foreign creditors. The foreign creditors buy our T-Bills and Treasury notes and hold them for a payoff at a later date.

It is called deficit spending. Even a balanced budget isn't enough to deal with our debt!

After WWII, America was the biggest creditor nation. We loaned money to countries around the world. In 2009, America was the biggest debtor nation in the world. We owe everyone!

Consider what you would do in your situation. You are on this site because you are considering filing for bankruptcy. You know that you are spending more than you are bringing in. This is the classic definition of insolvency. You know that you can't spend your way out of the hole by borrowing more. You can only refinance the house so many times, and if you have ever taken out a payday loan, you know that bankruptcy is the solution to get your fresh start.

The government, however, has not reached the same conclusion yet. Or perhaps they have, but since the U.S. can't declare bankruptcy, the only thing they can do it default, and they will put that event off at all costs.

Which, in the end, only means spiraling further down into the hole.

Unless you were living under a rock, you know that the government bailed out Wall Street last year and the banking system to the tune of $700 billion dollars. Truthfully, we can't even get our minds around how much money that really is. One Billion = 1000 x 1 million. 700 billion = 700 x 1000 million dollars.

That fact aside, the government didn't have 700 billion just laying around, so they sold T-Bills to anyone who would buy them. T-Bills, treasury bonds, U.S. Savings Bonds, call them what you want. There was a time when they were sold to the American consumer. We used to get them when we were kids for birthdays and christmas presents from that stingy Aunt who was trying to give you money - but not for now, in the future. Nothing like a $50.00 U.S. Savings Bond that you couldn't cash until you were 18!

Now, the numbers are so large, the government sells those bonds to foreign creditors. Which means they have to be paid back. You the taxpayer are responsible for ponying up the cash to pay back those bonds. Given the record amount of spending we have been doing in the past several years, you are going to have to pay more in taxes to pay down that debt. Or we sell more bonds, which perpetuates the entire chirade over again. Now you have to wonder what will happen when no one will buy our T-Bills anymore?

That's right, you, the American Consumer will pay higher taxes.

Now, consider this. The money that was lent to the banks at 0% interest was the same money that the banks are allowed to lend to you at 29.9% interest on your credit card. That means the banks are forcing you to pay for their bad investments through higher interest rates, fees, and costs. Seems like a good deal for the banks.

So not only do you have to pay for the money that was lent to the banks, you also have to pay back the banks at a super high interest rate! In essence, you pay twice for money that you lent to the banks and they lent to you!

Thats a burden on you, the American Taxpayer, and the last time we checked, there wasn't a bailout program coming your way.

The programs such as cash for clunkers and the first time homebuyer tax credit are what are called - demand accelerators. They draw people, who otherwise would not consider purchasing a car or home for awhile, into the market now, so that we get a temporary increase in economic activity. We recently heard it described as a 'sugar high'. If you have ever had a sugar high, you know that the crash that follows can be debilitating.

Bank, Wall Street, Foreign Governments, and CEO's have been lining up at the American Federal Bank Bailout window for over a year now.

Your consumer touted programs of 'Cash For Clunkers' and the 'Home Buyer Credit' really helped out the banks in their time of need. While it was touted as a consumer program, the truth is, to take advantage of the program, you had to borrow a lot of money, from the banks. The same banks who were bailed out earlier in the year.

We all watch the news. We see the stories about the TEA parties, the loss of the middle class, and the frustration that grows every day. Some extremists talk about a revolution and the overthrow of the government. But a revolution isn't the solution either. Revolution leads to chaos and chaos leads to a vacuum and a vacuum leads to someone in charge who is far worse than our original system of government.

And our system of government may not be perfect, but it works and by and large, middle class America is happy with our system of government. Revolution is not the answer.

But that anger has to go somewhere. It is frustrating to see us on this course in our country. It is frustrating to watch the weathiest people and corporations in this nation get hand out after hand out from the federal government. The CEO of Bank of America drags the bank into bankrupt status, retires, and gets 53 million dollars. Where is the justice in that?

In the end, the government is not going to give you a bailout. You are responsible for yourself and your own bailout. That is where bankruptcy comes in. You get rid of your debt, you do it legally, and you are no longer beholden to the big corporations who got you into debt. It is your own legal revolution with no bloodshed.

And your credit score? That was an invention of the banks as well to determine your worthiness. You can learn how to turn that score on it's head as well and live without the approval of the banks. Imagine if you were living by your own rules instead of the corporations.

So, in the end, you are responsible for you. If you can't get yourself out of debt, consider bankruptcy. It's legal, there is no bloodshed, and you won't get arrested for treason. Yet you will have still sent a message to plutocracy. Imagine what would happen if we in the common class, were to unlaterally send such a message. If the voters are empowered, there is little to stop us!

Viva la Revolution!

The "Two Income" Trap Overview:
How America is Going Broke
Elizabeth Warren - Current Fed Bailout Watchdog

Two children, two incomes, a home with a white picket fence; it's the quintessential American Dream. However, this American Dream has morphed into a survival regimen that many families simply cannot endure. Parents are in worse economic shape than ever before. Married couples with children are twice as likely as childless couples to file bankruptcy. Having a child is the best indicator of whether someone will end up in financial collapse, according to the authors of recently published book, "The Two Income Trap," by Elizabeth Warren and Amelia Tyagi, a mother and daughter team (Harvard law professor and MBA) who did an extensive study on the nature of bankruptcy in America.

The authors maintain that the introduction of mothers into the workforce, rather than easing the financial strain of raising a family, sets their families up for financial disaster as the cost of raising children spirals out of control. More children will go through their parents' bankruptcy than their parents' divorce. One in seven middle-class families will file bankruptcy by 2010 . These figures are staggering for middle class families.

At first glance, that argument seems counterintuitive. Two incomes ought to create a larger financial cushion than a single income. The modern two-earner family brings in 75% more inflation-adjusted income than the traditional one-income family. Yet, families today have less discretionary income than the traditional one-income families for a variety of reasons.

The decline of public education has raised housing costs in good school districts, prompting parents to overextend on mortgages. Couples with children are spending more on housing than ever before. At the same time, the free-wheeling, unregulated lending industry resembles a carnival sideshow with lenders assuming the role of "carnival barkers;" step-right-up folks we'll finance 120% of the purchase price of that home for 3% down. Families are spending themselves into financial collapse. The lending has industry has buried American mailboxes in a tsunami of 5 billion pre-approved credit card offers in 2003.

This perilous situation is compounded by the fact that married couples with children work in an era of unprecedented job insecurity, where employers regularly slash salaries and insurance benefits. The rates of the medically uninsured are increasing, the cost of healthcare is through the roof and families are more likely to be caring for elderly parents. In fact, nearly 90% of families with children who file bankruptcy cite three reasons: job loss, medical problems, or divorce, according to the Harvard University Consumer Bankruptcy Project.

Having children is a leap of faith, rather than a cold, hard economic calculation. However, many families may not have the financial capacity to land safely on the other side. Some Cold Hard Facts: In 2004, more women will file for bankruptcy than will graduate from college. In 2004, more children will live through their parents' bankruptcy than their parents' divorce. Seventy percent (70%) of all Americans say they are carrying so much debt that it is making their home lives unhappy.

So What Can You Do? Here is a quick summary of the information and advice contained in the book (with some additional information and advice sprinkled in).

How most people get into financial trouble through no fault of their own:

They have kids, and try to provide a safe environment for them to grow up in where they can also get a good education. This usually means buying a house in the suburbs, but suburban housing prices have gone up so fast that families have to send both parents to work in order to be able to afford a good house. Even then, their salaries are stretched thin. Some sort of crisis usually pushes a family over the edge into debt.

Medical emergencies that result in large medical bills or force one working parent to quit and provide home care are a common trigger. The layoff of one parent is another common trigger. Divorce and the increased cost it necessitates are a third common reason for families to fall behind on debt payments.

Rather than shying away from families in financial trouble, financial institutions descend on them like vultures, offering second mortgages and credit cards with extremely high interest rates and late fee schedules. The high interest rates and excessive fees more than make up for high collection costs and default rates. For most big banks and retailers, high-risk customers are their biggest source of profits.

Distressed families tend to accept these offers as a short-term solution for what often ends up becoming long-term problems. Before they know it, families end up buried under a mountain of debt, and constantly dealing with harassment from repo men and bill collectors.