Reporting from: Santiago, Chile
There’s a funny take on the Fiscal Cliff floating around the Internet that several of our keen subscribers have passed along.
Like most things floating around the Internet, though, the details are inaccurate. So I’ve gone back and modified the parody with accurate numbers, and a bit more plot. What follows is 100% accurate based on 2012/2013 data:
- 2012 US Tax Revenue: $2,469,000,000,000
- 2012 Federal budget: $3,796,000,000,000
- 2012 Budget deficit: $1,327,000,000,000
- US Federal Debt as of January 18, 2013: $16,432,620,067,491
- Total interest paid on the debt in 2012: $359,796,008,919
- Budget increase/decrease between 2012 and 2013: $38,500,000,000 INCREASE
Now… chop off eight zeros and imagine the same numbers for the Jones family:
- Annual Jones family income: $24,690
- Annual Jones family expenses: $37,960
- Annual Jones family shortfall borrowed from friends and neighbors: $13,270
- Total interest the Jones family paid last year: $3,598 (at practically 0% interest)
- Total Jones family debt (mortgage, auto, credit card): $164,326
- Change in Jones family spending this year: ++ $385
Not to mention, Aunt Bertha, Uncle Ned, and Grandpa are all coming to live with the Jones family this year… which is only going to increase household spending. And little Johnny, who is about to graduate from university, has no job prospects.
Further, the Jones family hasn’t made any substantial changes to their lives… no jobs training, no skill development, no investment in education. Yet somehow they feel confident that their income levels will rise much faster than the debt.
Friends and neighbors who have loaned them money are starting to get nervous. But Papa Jones has put a plan together. He aims to cut the family’s annual shortfall… so that, five years from now, they’ll -only- be short $8,000 per year instead of $13,000.
He also insists that, because his great-grandfather was a hardworking professional with an excellent reputation, that the neighbors should just cut him some slack.
The extended family is also getting nervous… but Papa Jones tells them not to worry. They believe him because he is very charismatic and has a great jump shot.
A few projections:
- The Jones family is obvious too ignorant to know that they’re bankrupt. This ignorance is even more dangerous than their insolvency.
- The kids are going to inherit all of this debt, and if they’re lucky enough to find work, will spend the rest of their lives paying interest and supporting the rest of the family.
- Friends and neighbors who have loaned money to the Jones family have had enough, and they are slowly beginning to reduce their exposure to this disaster.
- Papa Jones is going to deal with this by grounding his children, raiding their piggy banks, and sending them next door to fight the neighbor’s kids.
When you look at it this way, it really seems absurd. Yet it’s true… a slow motion train wreck that you can see coming miles away.
This is why the principles of international diversification are so important– you live in one country, your money lives in another, your business lives in another, you have an escape hatch in another, etc.
This ‘multiple flags‘ lifestyle is a strategy that anyone can adopt. And it’s one of the best ways to avoid ending up like the Jones kids.