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The US Lawmakers Have Turned Into The California Legislature

July 31, 2011

The Washington lawmakers have suddenly decided to follow California’s lead in getting along and passing legislation. No matter the difference or what happens to the stock market your 401k or whether or not you get you Social Security check. As long as they win the argument then it’s all worth it. Unfortunately I believe the damage is done to our ability to say that our credit is rock solid and our bonds are backed by the full faith of the US Treasury. So China who funds all the fun stuff we like to do on our credit cards like I don’t know what. Say two wars a prescription drug benefit that we can’t afford. Housing subsidies so people take longer to lose their houses etc. Well, China may just decide to take their ball and go somewhere else. Or more likely take their ball of cash to purchase debt and buy it somewhere else.

Will China abandon buying US debt

I dont’ think China will abandon buying US debt but what if they diversified. You know like your financial advisor is telling you to do. Say they diversified 50%. They didn’t sell any Treasuries they own but just started buying half of what they usually buy to buy debt from other places. As an investor it makes sense to me. But what happens to our credit cards. Well they get cut in half. We can only afford one war at a time. We can’t afford to let everyone buy a house even if they can’t afford it. This whole thing goes across both aisles all the way down to Wall St. and Main St. all the way down to you and me. We are the ones who want more services but no taxes. We are the ones that say cut programs but oh not mine.

The California Legislature

You may ask yourself how does this all relate to the California Legislature? Well, the California Legislature has perpetually missed budget deadlines due to not being able to compromise with each other and get along across the aisle. Here in California we are looking at about a 15 billion dollar deficit in this years budget to be made up I don’t know how. Some of the problems in California are that the minority group in the legislature has the power at budget time because it takes a two-thirds vote to pass a budget. That was recently changed. So this is basically what has happened in Washington you have a large majority and the minority is using this one item to fight to get what it wants to hell with the rest of us. Don’t let the Dems off the hook either because I believe they would do the same they just didn’t think of it when they were in the minority.

So where does that leave us? Are you doing anything different now in expectations that the deal will not get done and we will default on our debt. So Are you pulling your money out of the market and going to cash? Or are you trying to refinance and trying to speed up the process so it will be cheaper or maybe are you just spending less this month thinking you won’t get paid next month if you are getting some kind of government check like social security.

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