Understanding Finance - The Debt Cycle
First Time Visitor? Welcome
FinancialLearn.com is dedicated to finding great deals, free stuff, and promote frugal living. We are delighted to have you here.
Sound Fun? Have our articles delivered to you via RSS Feed or E-mail to be reminded of new and upcoming contests and articles.
In order to make the transition from poverty consciousness to wealth awareness you need to educate yourself. You will find the one thing that puts the average person in a financial cage that forces him/her to struggle from month to month is debt. It seems that the whole system conspires to encourage indebtedness. Here is the picture.
1910: In 1910, almost 100 years ago, the total debt of the United States added up to $1 billion. That meant that if the debt was divided up equally amongst all citizens everybody at the time owed $12.40.
Federal Reserve: In 1913 a private corporation of bankers was created, its job was to act as banker to the US government. Like all corporations the Fed was in business to make a profit. If the Government needed money it had like so many others of us, to go to the Bank. In this case the Bank was the Federal Reserve. It then borrows money from its Bank. Just like you street corner Bank, this one charges interest, too. It charges the government interest. In 1996 the United States government owed the Federal Reserve Bank $5,000,000,000,000. That translates to 5 trillion dollars.
Taxes: Purportedly the Government has the power to raise taxes through the IRS. A very large chunk of your tax dollar is used to pay the interest of the debt incurred to the Federal Reserve. It seems the government has got itself into the same pickle as everybody else!
World War 1: At the end of World War 1, after a mere 6 years of fiscal maneuvering by the Fed the government debt had risen to $25 billion. This doubles in the years between the wars to $49 billion at the start of WW 2. When Eisenhower became the 34th President in 1952 the debt had reached the staggering figure of $265 billion.
Coming off the gold standard: Richard Nixon definitively took the US off the gold standard in 1971. Previously money had to be backed up by something solid. In this case gold, because that’s how money had come into being. Paper currency was a promissory note that said the paper represented a notional value against gold. The system was created for convenience. People, found walking around, with pockets full of gold coins was a heavy and tedious business. It was lighter and slicker to have a few pieces of paper that could be exchanged for goods. In 1971 the US national debt had reached $409 billion. Five years later in 1976 the sum was $631 billion.
The Eighties: The 1980s was the period of the swiftest growth in debt during the history of mankind. The Reagan administration aided and abetted by the British Prime Minister believed they could create an affluent society through debt. If you gave individuals easy credit they would but things and thus stimulate the economy. The government played its own part by creating a massive arms build up. Mrs. Thatcher fought a war with Argentina and the US invaded a Caribbean island but the net result was, that this menacing display of military might caused the down fall of Communism.
Today: On September 17th 2007 the US national debt had attained the awesome figure of $9,021, 822,297, 522.58. Can you translate that incredible figure? The population of the US on that day was 303,010,655. If we divide the debt by the number of men, women and children in the US we will deduce that everybody owes $29,773.94. What can we do about it?
Related Posts
- How to Buy Government Bonds
- Buying EE Series Bonds
- Understanding Debt - Credit Cards Part 1
- FDIC - Who Needs It?
- Should I Get An Offshore Account?
- What’s Happening to the Price of Oil?
- EE Bond Terms
