$2 Trillion Dollars

It just keeps adding up and will not stop. Today figures were released on our 2009 budget deficit and $1.1 Trillion dollars is the new figure in debt. Americans can't hide from this anymore. You may think you can, but everything is affected with numbers like this. How you may ask? Well, your government has to either borrow or print the money in order to sustain its spending policies. Right now, the US pays around $458 Billion dollars a year in interest payments for money already borrowed. Failed tax programs will be implemented and interest rates are due to go up. The deficit for this years budget may now end up being an astounding $2 Trillion dollars.

Two other financial stories that is spurring my interest that has great priority in how it will play out:

-The mortgage situation in defaults are only getting worse. Some economists are now saying the sub-prime market is done with, but now we enter a phase of traditional 30 year mortgages going into default. This creating more pressure for politicians to act in ways that will not be beneficial to our economy. The new talk is to help delay the crash by letting borrowers stay in their homes without paying. This creates great distortion in our markets because it doesn't let true correction to happen. Here is one quote:

"All these numbers keep going up. We are not anywhere near the bottom," said Jay Brinkmann, chief economist for the Mortgage Bankers Association.

We are just now starting to see the defaults on commercial property. The true affects of this will not be seen until early fall. I am sure as your drive around, the empty store fronts are not a pleasant sight.

-Second item of concern is that minimum wage is set to increase this July 24th. I for one am not a fan of minimum wage because of two reasons: 1. It distorts actual wage of a job and 2. It is usually tied into union contracts that inflates their hourly wages.

Employers are in no position to pay their workers more with invetories shrinking because no one is buying. Most retailers have seen their inventories shrink up to 30%. This means sales are stagnant or still decreasing. Add on top a wage increase, which means payroll taxes go up and more jobs will be cut and/or other cuts will be pursued. Bottomline, lower skilled workers get forced out of the market.

Good article by Ron Paul financial advisor, Peter Schiff explaining minimum wage:
http://seekingalpha.com/article/148209-employment-minimum-wage-maxi...

Overall, we are doing the wrong policies in order to fix our "economic mess". We should be deflating right now in order to set true values on employment, property and government spending. Inviting market capital into our economy with corporate taxes being cut dramatically and government spending being capped. Instead we are scaring them off with more taxes, dramatic borrowing and regulation schemes. But don't worry, with our current course, our 2010 deficits predicted by this current Presidential administration is only estimated at $1.26 Trillion dollars.

Change you can believe in.