Micro Economics

May be this will help Greece. It might even help the U.S. if any of those enlightened government spenders see it.

Going broke. If your monthly income is $2,000.00 and you spend $2,000.00 you are broke. If you are broke and have not met your basic needs, you at this point are worse than broke you are stupid.

Getting by. If your monthly income is $2,000.00 and you spend $2,000.00 you are broke. If you are broke and have met your basic needs you are still broke but you are not stupid, stupid. You could still be stupid in the instance there was any of that $2,000.00 left over and you wasted it.

Saving for “a rainy day”. If your monthly income is $2,000.00 and you only spend $1,900.00 you have now $100.00 you could save for that rainy day aka emergency. If you are successful at doing this for one year you will have saved $1,200.00, a pretty nice rainy day fund.

Coming up short aka deficit spending. If your monthly income is $2,000.00 and you spend $2,100.00 you have spent more than you took in. Now, if you had a rainy day fund the overage could be covered from that, but that fund would have decreased from $1,200.00 to $1,100.00. You could decrease your spending by $100.00 the next month thereby replacing the $100.00 you borrowed from yourself because you went over for that one month. But at some point you would need to decrease you monthly spending again by $100.00 because you did not make a monthly contribution to the rainy day fund. If you do not replace the $100.00 you borrowed your rainy day fund is actually short $200.00, the $100.00 you borrowed and the $100.00 you did not put in.
You in actuality could do this eleven more times before you went broke, spending $2,100.00 and only taking in $2,000.00. But if you did this for an entire year your rainy day fund would be wiped completely out and be $2,400.00 dollars short, the $1,200.00 you borrowed and the $1,200.00 you failed to put in. This again makes you broke and stupid.

The path to bankruptcy. Deficit spending with no reserve aka rainy day fund. If your monthly income is $2000.00 and you go over by as much as a penny with no reserve you are forced to borrow enough to cover the shortage. The next month rolls around and you get the same $2,000.00 but now you not only have to pay for the necessities you now have a debt to pay. If you are still short you find yourself in the awkward position of choosing what does not get paid or borrowing more to pay the debt. If you do not find a way to get control of this soon you will find yourself borrowing just to pay the interest. If left un-checked soon you will find yourself only paying interest, but the debt never goes down. At some point in time you will not even be able to make the interest payments. All it takes is one month when you do not get the $2,000.00, or you do get it and you misuse it. Sooner or later the debtor will demand payment in full.

Actually this post is not about Greece, you are already a financial basket-case looking for someone to bail you out of the mess you have gotten yourselves into. This post is intended for the spend happy politicians and bureaucrats in Washington, D.C. before the U.S. becomes a financial basket-case.

I doubt that the big government spenders will read this and even if they do it will be viewed as meaningless as I do not have a PhD in economics and I only used small numbers.

Just wondering what is the collateral on that over 18 trillion dollars of debt? Or is it 19 trillion dollars by now? If the debt is still increasing it is either interest that is not being paid, or more is being borrowed to pay the interest. What would be the payment on that much debt be? Just asking

And by the way, what will become of the 40,000 military personnel you plan to cut over the next two years? I was just asking because the release said the military would be cut, but the 17,000 civilians would be laid off. Which one will get un-employment? Just asking.

The government rainy day fund must be getting close to the end if it has not already been spent. The government seems to be cutting necessities to pay interest, or can you even pay the interest. Still wondering about that collateral issue.


3 thoughts on “Micro Economics

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