Drowning in Debt

The national debt as of Nov. 23 was $9.1 trillion, up from $5.7 trillion in 2001.  To put some perspective on one trillion, David Hunnicutt (blog) sheds some light on this.

If you counted to a trillion out loud, one number per second, you'd have to clear your calendar for the next 31,688 years just to complete the task.

Now, let's put a trillion in financial terms.

Let's say it's the year 1, the beginning of the first millennium.  You have a trillion dollars to spend-at the rate of one million dollars a day.  At just before three years, you've reached a billion dollars.  So you keep spending. Now you are in the year 2,000.  Would you believe you'd still have 737 years to go before you exhaust your trillion dollar pile.

The moral of the story is a trillion is a gigantic, unfathomable number, and we collectively have over 9 of them staring us in the face.  According to a Dallas Morning News article by Jim Landers, this debt has been flamed by both parties over the years as foreign countries have been increasingly willing to lend money.  Landers says the biggest lender, China, holds more than $1.2 trillion in U.S. assets as reserves and if they were to move from the dollar to euros the value of the U.S. dollar would be severely weakened and most likely force the Federal Reserve to raise interest rates to continue attracting the $4 billion a day in borrowing we get from abroad.  The problem is that foreign investments have now surpassed our gross domestic product, which should be a red flag for Americans.

With national debt being such a seemingly insurmountable number, its easy to look to politicians for mismanagement of funds, but I'd be remiss to not look back to the constituents that these politicians serve.  Our nation is operating on another credit bubble that will only grow exponentially this Christmas.

Reuters reported today that U.S. online shoppers set a record on "Cyber Monday". Online shoppers spent $733 million on Monday which was 21% up from last year according to comScore.  With some reports claiming that the average American has over $9,000 in credit card debt, it's scary to think about the number of people that will be paying for this Christmas' presents for the next year or two.

As you're starting to think about getting gifts this year, review these tips from Salve Duplito to avoid the post-Christmas debt hangover and take another step towards eliminating unnecessary debt.

1. Set a budget
2. Make a gift list.  Create three lists: family, friends and work contacts.  See which ones you would like to give a gift to, and which ones can benefit from a simple yet sincere Christmas card.
3. Consider giving group gifts
4. Go homemade. Give gifts a personal touch by making them yourself.
5. Try shopping online.
6. Buy supplies in bulk. Gift wrapping paper, tape, ribbons, boxes and gift cards should be bought in bulk to save money.
7. Choose affordable party venues
8. Look out for sales
9. Pay your bills on time.
10. Keep it simple.  You don't have to overspend to impress.

Overall, remember that most likely whatever you buy this year will be in a trash can in less than 10 years so focus on the reason why you want to give and not how much money you can spend on the gift. - John Herrington

Photo courtesy of k9ine.

Comments

[Cam Beck]

Asking consumers to spend less at Christmas? What kind of marketer are you, anyway? ;)

[John Herrington]

I knew there would be some comments in jest, so thanks, Cam.

[brian]

That's some truly, truly scary stuff.

On the federal level, I have little hope that anything will change, because for it to change, pork barrel politics would have to end, and suddenly you're at the local level where people want their federally-funded bridge to nowhere, thankyouverymuch.

On the personal level (and borrowing liberally from Jimmy Buffett), "I used to have money one time." For a few years there, we were 100% debt free. Owned our house, our cars, everything.

A reversal of fortune combined with stupid spending ("hey, this cash will last forever, right? I need that new PowerBook, right?") put us back in the debt trap, and we're trying to snowball our way out again.

Having been debt free, I can attest that there are few feelings that surpass knowing you don't owe anyone anything (financially).

It feels quite a bit better than any instant gratification one gets from buying a new pair of shoes on credit.