Tuesday, August 30, 2011

The Daily Note - An Elementary Budget Lesson

I was really surprised by the good news aspect of the report that the USA consumer spending was better than expected in July while the housing market was worse. At the same time, it is still amazes me that credit card spending is up and the reason given is that people are somehow feeling better about the economy. Added on is the report about small businesses still not hiring at a robust pace and the people they hire are working less hours. Somehow it all adds up to be a good sign for the economy.

OK then if spending and credit card debt is good for us and our economy, why don't we all just apply for 10 credit cards each and charge it to the hilt to save ourselves from disaster? I don't get it but maybe I need to go back to school to get this new math.

At the same time, another lesson seems to elude many, including those exalted officers of Congress and the Administration. Therefore the ongoing debate about why the USA was downgraded, the debt ceiling and what needs to be done about our debt. They just can't seem to agree about whether more debt is good math or less debt is good math.

So for those still in quandary, let's put it in simple math terms :

• U.S. Tax revenue: $2,170,000,000,000
• Fed budget: $3,820,000,000,000
• New debt: $ 1,650,000,000,000
• National debt: $14,271,000,000,000
• Recent budget cut: $ 38,500,000,000

Too many zeros for you? Let's remove 8 zeros and pretend it's a household budget:

• Annual family income: $21,700
• Money the family spent: $38,200
• New debt on the credit card: $16,500
• Outstandingg balance on the credit card: $142,710
• Total budget cuts: $385.

Still think credit card spending is good for your economy?
Never mind, because if you still don't get it, nothing will help; and therein lies the problem with Congress.

Happy Trading, Living and Dancing

The Daily Pick - DIA

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