Cash is King | So where does that leave the U.S.?

All signs point to rising interest rates for the foreseeable future…

National Debt at all-time highs, a deep and growing current account deficit – the U.S. may find itself in an extremely sticky situation in a very short time. Just today we saw producer prices up more than expected. The Fed loathes inflation and the pressure is mounting on them to continue with their interest rate hikes.

The stock market has gone into a tailspin due to this realization and a global equity meltdown has cost investors $2 trillion of wealth.

As political instability, vulnerable emerging markets and a worldwide push toward socialism all grow, the economy seems to be in for a long and rough ride. At the same time, congress is pushing for further tax cuts and increased spending.

In a rising rate environment, cash is always king
Companies with ample supplies of reserves will fair far better than those without. Debt is becoming ever more expensive and those who have over-leveraged themselves will have to eventually pay the piper. These effects will also be seen in the housing market, and even more worrisome, in the U.S. government. As our national debt becomes more expensive to pay back to foreign lenders, the government will have no choice but to finally tighten those purse strings..

Bush to public: “You’re gonna have to fend for yourselves”
This was never actually said…well, at least in so many words – In fact, the same message was heard after FEMA’s botched response to hurricane Katrina. I suspect (regretfully) we’ll be hearing more of this in the not too distant future. Although this time, it will be reflected in the loss of many cherished public services that we have become so familiar with and now take for granted. It’s the middle and lower classes of America who will truly suffer for the failure of the current administration and congress to act with more frugality and to reign in spending.

Elected Officials Are the CEO & Board Members of a Giant Corporation, We Like to Call it: The United States of America
This is a thought I hope we keep in mind the next time we are faced with national elections. Any company’s leaders with a performance like the one we now see in the government would be out the door in a second – the shareholders (public citizens) would never stand for it. We, the shareholders, need competent managers in charge of this company…We must demand it!

Always remember: You reap what you sow.

NOTE: I’m not advocating a particular party here; only a responsible leadership.

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