Now that the election is over we can go back to cat food and automobile commercials. After all, we need to get you consumers out of your house to blow money on Black Friday after you blow out your intestines on Thanksgiving. The fiscal cliff is the given name of the impending fiscal collapse of our government. Okay, that might be a bit extreme but we do have some gigantic challenges ahead. The country is in deep debt. I mean we have over $16 trillion in our national debt and are looking at trillion dollar deficits (that is, spending more than we make for many years to come). So what options are on the table? Given the massive costs in programs like Medicare that will see a big boost in costs courtesy of the fiscal wave of baby boomers, a perfect storm is arising. Ultimately we are going to have to cross this bridge very carefully.
Taxes and cuts are in the future. Unless we can get GDP to increase and create household income growth then we are destined to muddle through. Over half of the S&P 500 companies make a sizeable portion of their profits abroad (and many have increased abroad in other countries). As a mature economy, it is hard to expect massive GDP growth. This is typical. With an older population and a younger less affluent population, some hard decisions will need to be made.
The tension between Japan and China is taking a big toll on Japan’s industrial production. There is underlying problems inherent in Japan courtesy of massive debt but also the unfavorable demographics that Japan will be experiencing. So of course the solution from Japan’s central bank is simply to go into more quantitative easing as if this has improved their economy over the last two decades. “WSJ: – The central bank’s policy board decided Tuesday to increase the BOJ’s asset purchases to ¥91 trillion ($1.14 trillion) from ¥80 trillion, and to introduce a new lending facility designed to stimulate loans by banks. The fresh measures marked the first time since May 2003 that the BOJ has taken easing steps two months in a row. The bank said it took action to keep Japan’s economic policy on the path “to sustainable growth with price stability.”
The BOJ also downgraded its assessment of the economy, noting declines in both exports and output, key drivers of the country’s economic growth. “Japan’s economy has been weakening somewhat,” it said in a statement, compared with its previous description of economic activity as “leveling off more or less.”
Not exactly a positive looking trend.
Last year the story of a lottery winner that was using food stamps made nationwide headlines. Police say that the Detroit-area woman that collected welfare despite winning $735,000 (after taxes from the $1 million win) died of a possible drug overdose. Amanda Clayton who was 25-years had pleaded no contest to fraud in June and was sentenced to nine months probation back in July. Her attorney stated that Clayton repaid roughly $5,500 in food aid and medical benefits. Overall this is a troubling story but more to the core of it all it highlights how money is unable to solve other of life’s challenges. You think of all the NFL Players that go bankrupt shortly after their career. It is sad and apparent that even winning $1 million is not enough to solve some deeper rooted problems. The challenge for many that come into sudden money is that they have little ability to manage the funds.
“(Detroit News) In her 25 short years, she not only was convicted for collecting state welfare money after winning the Michigan Lottery, she was engaged in a child custody battle, fought with neighbors, and was forced to buy a second house to escape pressure from a former boyfriend, according to a neighbor.
Sheryl Schonfeld lived across the street from the home where Clayton grew up, where her parents still live on Hanford Avenue, and said she knew her for at least 17 years.
“We moved in here around the same time, so I’ve know her since she was a little girl,” said Schonfeld. “She was a nice, pleasant girl who never got in trouble, until she won the lottery,” she said.
A person who answered a call placed to Clayton’s home Sunday, said, “No comment,” and hung up the phone.
Schonfeld, 59, said she noticed some new purchases after Clayton’s win, including a new car for her father and one for herself. She said Clayton also purchased a home nearby on Anne Avenue in Lincoln Park.”