We have some lessons to learn…from countries like Greece.
News reports indicate that Greece’s unemployment rate is 25 percent and climbing (a rate that is approaching that of the world’s unemployment rate during the Great Depression of over 35 percent). Its banks have lost 99 percent of all values as depositors grab their money and flee to Switzerland and other more stable places. Interest rates have soared to 28 percent. The Greek government has cash available to last but a few months and leaders have had to search all public accounts like hospitals, city governments and the like to find enough money to pay retired people and their public employees salaries that were due on July 1.
Many countries in Europe are arguing that Greece has not cut back spending like it agreed to do. Greece’s newly elected prime minister is saying the country cannot cut any more. Members of the European Monetary Union say they are done helping Greece. Greece is calling attention to the fact that it was the first country to establish a democracy a couple of thousand years ago, so it’s arguing that if it goes from a first-class nation to something less overnight, it will take all of Europe into a huge depression with it.
I will not argue either side of this financial disaster in this blog. I am asking that we all watch and see what Greece has done to get into this horrible situation and learn what it will take for the United States to avoid doing the same thing to itself.
Observe that the major debt Greece has is in retiree pension plans. Can you recall the amount of money Detroit filed bankruptcy against? Nearly 84 percent was for pensions to retired employees. And did you know that all the huge debt the state of California owes is in pensions — to the tune of 74 percent!? Go online and check out why Stockton and San Bernardino filed bankruptcy, as I noted in my recent blog Pensions Are Creating a Huge Financial Risks for City, County, and State Governments and you’ll find that it’s because of retiree pensions.
What Could Happen to the U.S.
The “Long-term Budget Outlook” for 2015 by the Congressional Budget Office has recently reported that the Federal Reserve Bank is on the brink of folding. You can read about it here: http://www.cbo.gov/sites/default/files/114th-congress-2015-2016/reports/50250-LongTermBudgetOutlook.pdf. According to the report, if interest rates go up slightly in the coming years, the United States will be forced into insolvency. Consider the unfunded liabilities of our own Social Security program. Much has been said about the current national debt reaching $18,000,000,000,000 ($18 trillion). But when the Congressional Budget Office calculates the unfunded liabilities of Social Security benefits, it tops out at a whopping $115 trillion!
What are the lessons to be learned from why Greece can’t limit their spending to their national income? Why have they over-spent their revenues for over 100 years? And what might this mean for the citizens of the United States? When can we control our spending and balance our budget? As Greece goes, so goes the United States. We should know that country’s fate before the end of 2015. We need to learn from Greece. And if it is not too late, we need to determine what we must do on an individual basis to survive a complete currency meltdown. Greece could become a mirror image of what will happen here in the United States.
Principles Will Save People, Families, Corporations, and Governments
The Money Mastery Principles can solve all this financial foolishness. Building a spending plan, as taught by Principle 1, that must make expenses and income balance and then track that plan as taught by Principle 2, is basic to sound personal money management (and works well with corporations and governments as well!). Then, ALL debt must be eliminated as taught by Principle 4. Debts bind you down and take away all your options. When a person doesn’t have debt, they are free to decide what to do with their life and build better relationships, give money to the poor, travel to interesting places, help a child through college, relax on a beach somewhere, or just enjoy reading a book and not worrying about paying next month’s bills. For more information about all 10 of the Money Mastery Principles, go here.