Tuesday, May 20, 2008

As The Government Deficit Keeps Rising...

In a letter written to congressman Paul Ryan, CBO concluded that
The United States faces serious long-run budgetary challenges. If action is not taken to curb the projected growth of budget deficits in coming decades, the economy will eventually suffer serious damage. The issue facing policymakers is not whether to address rising deficits, but when and how to address them. At some point, policymakers will have to increase taxes, reduce spending, or both.
This gives another reason why one should consider a Roth IRA rather than a traditional one. But as the deficit keeps climbing up, we may have a much gloomier future as put by the CBO in the letter,
If foreign investors began to expect a crisis, they might significantly reduce their purchases of U.S. securities, causing the exchange value of the dollar to plunge, interest rates to climb, consumer prices to shoot up, and the economy to contract sharply. Amid the anticipation of declining profits and rising inflation and interest rates, stock prices might fall and consumers might sharply reduce their purchases. In such circumstances, the economic problems in this country would probably spill over to the rest of the world and seriously weaken the economies of the United States’ trading partners.
This makes me wonder whether it would be wise to put my money in the U.S. stock market at all. But we knew the inflation is going to shoot up, and putting money in the market seems to be a good if not the only way to provide an aegis. Maybe a good solution would be to quit my job and live on the money I saved up so far, and at the mean time, really concentrate on personal investment such as studying Economics, and that will certainly get you a job when the Economy goes bad in the future. Well, maybe not. But the idea of personal investment rather than monetary investment should be right.


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