Sunday, October 13, 2013

Daily Briefing For Sunday, October 13, 2013

Happy 25th!
This weekend, my classmates from Shelbyville Central High School gather celebrate the 25th anniversary of our graduation.  I wish them well.

"You don't want children going hungry tonight because of stupidity."

Just ask Barbara Colman of Saco, Maine.

As many of you are probably aware, the electronic benefits transfer (EBT) system which puts the money on the debit cards used for welfare benefits crashed Saturday.  For several hours, EBT users in 17 states could not access their benefits.

The cause of the crash, according to the AP story, "stemmed from a power failure at a data center."

While this glitch no doubt inconvenienced recipients, it stimulated much discussion among the preparedness community this weekend.  Some have speculated that in a situation where we are grid down - leaving tens of millions of Americans who rely upon public assistance without the means to acquire basic necessities - we should expect civil unrest within 72 hours.  London rioters from a couple of years ago gave us a glimpse of what austerity measures - which need not be the result of a grid problem - might look like:


We ignore things like glitches in the banking system and EBT system at our peril.  Currently, the big banks are freaking out over a possible default by the U.S. government if we hit the debt ceiling.  You can make up your own opinion as to what will happen, but we owe it to ourselves to know what the stakeholders are saying.

Speaking Of The Financial System, What IS Our Debt Situation, Anyway?

We owe it to ourselves to understand, to the best of our abilities, our nation's debt situation.

First, some news from Saturday: "American companies and consumers are....running up record amounts [of debt] in 2013."  You read that correctly.  In the four short years since we bottomed out from the greatest recession since the 1930s, individuals and companies are getting into debt to finance purchases and expansion at 2007 levels.  Meanwhile, our economy grew at a mere 2.5% last quarter; that's not a rate at which we'd call a barn burner.

So what's our debt situation?  I think it largely depends on what chart you want to use.  Here's a tour of a few:

The "It's Private Debt, Not Public Debt, That Got Us Into This Mess" Chart

The left loves this chart; sadly, they do so for the wrong reasons.  You'll note that private debt - credit cards, mortgages, corporate bonds - far exceeds public debt.  I should point out the chart is a bit dated, as public debt to GDP ratio is now at 73%, which is "higher than any point since around World War II, and twice the percentage it was at the end of 2007."

"The Atlantic Wouldn't Lie To Us" Chart

The Atlantic - which no one will confuse for the National Review - ran this piece illustrating the nation's debt from 1790 to November 2012.  Their analysis in this piece seems to be fairly objective.

The "America Is Not Drowning In Debt" Chart

The contrarian view is that all is well and that there's nothing to fear.  I suspect these are the same people who subscribe to the Paul-Krugman-Works-For-The-New-York-Times-And-So-He-Is-A-Genius school of economic thought.  You know, the one that says "Just Mint A Trillion Dollar Coin To Pay Off Our Debts" and that "Death Panels And Sales Taxes" are the way to go.  In short, the theory here goes something like this: since our assets far exceed our debts, everything is good. 

So what's the answer?  I think it largely depends on your political bent.  While I don't try to hide my own political leanings, they are not pertinent here.  I'm more concerned what we in the preparedness community should take away from the discussion, and what steps we should take as a result. 

From a preparedness perspective, let me share a few thoughts.  First, here's what one former U.S. statesman said about our national debt situation:

“[Our federal debt] undermines our capacity to act in our own interest, and it does constrain us where constraint may be undesirable. And it also sends a message of weakness internationally. It is very troubling to me that we are losing the ability not only to chart our own destiny, but to have the leverage that comes from having this enormously effective economic engine that has powered American values and interests over so many years. So I don’t think we have a choice – it is a question of how we decide to deal with this debt and deficit…. There is no free lunch, and we cannot pretend that there is without doing grave harm to our country and our future generations.”

And who said this, you ask?  That would be former Secretary of State Hillary Clinton.  And she's not alone.  Other key leaders have called our national debt situation the biggest threat to our national security.  Let that sink in for a moment.  The biggest thing that threatens our country's security right now isn't Syria or Al Qaeda or an EMP attack from the Russians.  It's our own balance sheet.

Second, there are collateral issues surrounding our debt situation.  For those of us who think our government spends too much money on the war on drugs, the war on terror, entitlement programs that are not means tested, corporate welfare, corporate bailouts and the militarization of our police forces, the best way to reign much of that in is to stop spending money on it.  Less government spending yields less government.  And for those of us who think more government isn't a sound plan for the future viability of the nation, it's paramount that we manage not only our nation's debt, but also its spending.

Third, the debt will drag down the economy.  Here's how.

My final thought: be aware, do your own homework, and prepare for the possibility of an economic emergency.  That's not being paranoid; it's simply good stewardship.

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