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outoffocus (23.65)

The best Yahoo Finance Commentary I've ever read

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June 24, 2009 – Comments (7) | RELATED TICKERS: YHOO

I know I'm two days late but I just read the most recent article by Charles Wheelen on Yahoo Finance.  His commentary is the best commentary I've ever read on Yahoo.  Its clear, simple, non-partisan and straight to the point.  Its the kind of reality check that our political system (and the majority of this country) is severely lacking.  I like the entire article but I'll highlight some key points: 

 Ben Franklin supposedly said that it's better to skip supper and go to bed hungry than it is to wake up in debt. Ben would be quite disappointed in us. We Americans didn't skip dinner; instead, we opted over the past decade to gorge at the buffet and then charge it.

Big debt means big interest payments. The Chinese haven't loaned us a trillion dollars because we're good-looking; they've loaned us a trillion dollars because we pay for the privilege of using that capital. Interest payments now make up more than 8 percent of the federal budget -- meaning that nearly one of every 10 of your tax dollars gets you absolutely nothing in return. No schools, no bridges, no domestic wiretaps.

We need to stop bickering about who got us here. Was it the Bush tax cuts (yes) or the Obama stimulus (yes) or profligate Congressional spending (yes) or voters who continually reward pork more than parsimony (yes)? But analyzing just overcomplicates things. We are deeply in debt because we have routinely spent more than we collect in taxes. That's just a mathematical reality that has become needlessly confounded with politics.

An economic recovery will help. But we can't pretend that will be enough. We need to raise taxes, cut spending, and/or reform our entitlement programs. Probably all three, and in a serious way.

Will that dampen economic growth in the short run? Yes. Will it jeopardize important social programs? Yes. Will it compromise our ability to make important public investments? Yes. Does it limit what we can spend on healthcare reform? Yes.

But as Ben Franklin would have pointed out, we should have thought about that before ordering room service and then charging it to a credit card.

He also touches on a few other subjects like the malinvestment of our borrowed funds, how our creditors are worried about our debt and how inflation is the wrong answer to this crisis.  Overall I think he hit the nail on the head.

To me this is the best commentary I've read on Yahoo Finance.  Half the Yahoo columnists cater to the "Suze Orman" crowd it who need to be told how to pay their credit card debt or clip coupons for groceries.  The other half just post overly general commentary on some arbitrary subject.  Then there’s Ben Stein and Robert Kiyosaki who in general have their moments.  But more often than not I read their articles and shake my head. I often find the comments to the articles more informative and entertaining than the actual articles themselves.  

7 Comments – Post Your Own

#1) On June 24, 2009 at 4:34 PM, binve (< 20) wrote:

outoffocus, Thanks for the post. Yeah that is nice well-balanced article (the blame can be equally distibuted to a large number of parties). But the point is that borrow and spend does not work anymore (and it is highly questionable that it ever worked to begin with). All it does is push problems off to the right. And doing that has serious consquences (mostly inflationary). Thanks!

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#2) On June 24, 2009 at 5:09 PM, mistertero (< 20) wrote:

I totally agree.  I read it two days ago and he is right on.  I can't say this was a brilliant article, because the conclusions are so blindingly obvious, but at least someone is saying it out loud. 

I'm not wanting to wade into the Keynes/Austrian debate, here, but I think everyone can agree on the following definitions:  Deficit spending during periods of economic contraction makes you a Keynesian.  Enormous deficit spending for multiple decades through several economic cycles makes you a moron.  A poor moron.

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#3) On June 24, 2009 at 8:52 PM, djkumquat (40.54) wrote:

he's the best on yahoo by far.

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#4) On June 24, 2009 at 9:30 PM, outoffocus (23.65) wrote:

jahbu

I'm assuming you are in favor of inflation because all of you money is tied up in hard assets. Because if not then you are a fool (little f). 

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#5) On June 25, 2009 at 10:14 PM, outoffocus (23.65) wrote:

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#6) On June 25, 2009 at 10:16 PM, outoffocus (23.65) wrote:

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#7) On June 25, 2009 at 10:25 PM, outoffocus (23.65) wrote:

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