Before we jump into what the national deficit and debt mean to you, let’s start by defining or drawing out the differences. There are many folks out there who think that these mean one in the same, however there is a difference. Once we get our arms around those concepts, we will talk about their impact upon your wallet or purse.
Deficit - basically it is the difference in the amount of money in a given fiscal year that the U.S. Government spends versus what it takes in. In this case, by the word deficit, we are talking about the Government taking-in an amount of taxes & revenue that does not cover the amount it spends.
Debt – (or total debt) would then be the running tallies of each fiscal year and the result would make the “account” go into the negative.
Let’s use the above as our assumptions or definitions. I imagine the whole debt and deficit thing is a little more complex than that, but I did not want to lose anyone before I began.
So if our government is running a deficit and in-turn causes for “us” to go into debt, how does this happen? Well, the U.S. Government does the same thing that you or I do when we don’t have the money to pay for something – they borrow it. The government has to borrow money and they pull this off by issuing things called Bonds and/or Treasuries. Think of it as an IOU from the U.S. Government to folks who invest their money by purchasing these bonds and treasuries. When I say folks, I mean entities like people from this country, companies, people from foreign countries and foreign governments. Yep, a large amount of our IOU’s are held by foriegn countries. Eventually, folks redeem their IOU’s and the Government coughs up the money. An ever flowing cycle…as long as there is money to cough up!!!
So we hear about the country going into further debt by these yearly budget “deficits”, why should you or me worry about it all? Some folks say they cannot feel all this pain that is going on in the current economy. They say, “I have not been laid-off and I am doing great financially.” However, they probably do not even really realize what is taking place all around them.
What’s it to you?
Click Here
So did you click on it yet? You better or your not going to “really” get the rest of the blog.
Is that not the coolest thing you have ever seen? Better yet, is that not the most frightening thing you have ever seen? If you did not get or understand “what’s it to you?” from that example, then I will break it down to what you may see happening in the months or years to come. (Inflation)
Inflation is the rise in prices of just about all goods and services and the value of the dollar or purchasing power of your money slowly fades. In other words, things are going to start getting more expensive and your income had better follow suite. In short, you will be able to buy less in the future than you can today with inflation.
If you want to act responsibly with your money and make good financial decisions, then you need to realize that the National Debt has a lot to do with you.
- Phillip
