Last week I posted a video with Dick Morris about the debt debate. The response was predictable, those who agreed thought Dick Morris was brilliant, those disagreed attacked his credibility, etc. It really was a microcosm of what is wrong with the process, NOBODY will open their ears long enough to hear the facts. Everybody is an ideologue, there is absolutely no thinking going on in the electorate.
So, here is another pretty smart guy's thought on a default. His name is Dave Ramsey and he isn't political at all, he agrees, there will be no default with or without a debt ceiling deal. If you believe there will be a default, you aren't listening and you fell for the scare.
The debt ceiling debate in Washington D.C. is just the kind of doomsday scenario the media loves. The story goes like this: Congress must raise the nation’s debt ceiling or the U.S. will, for the first time ever, default on its debt payments, possibly causing a downgrade in the U.S. credit rating, a stock market crash and skyrocketing interest rates. “Financial experts” are lined up, waiting for their chance to warn us of the coming “debt-pocalypse.”
Dave has some strong words for what’s going on too. But instead of filling you with fear of the unknown, he has some guarantees about what’s going to happen.
There Will Be NO Default
Even if Congress doesn’t raise the debt ceiling, the U.S. is not going to default on its debt payments. That’s not a hope. Not positive thinking. It’s a mathematical fact. The U.S. government takes in $2.6 trillion a year and its debt payments are $400 billion. That’s like a household that brings in $260,000 having to make a $40,000 payment.
And, without the default, there will be no downgrade in the U.S. credit rating. U.S. bonds will still be considered “safe” investments and interest rates will not shoot through the roof. The President and Congress know they must meet these obligations or face serious repercussions for the country. They aren’t stupid enough to bring about those consequences just to prove a political point.
There Will Be Uncertainty
The Stock Market doesn’t like uncertainty. That’s why it’s dropped slightly as the politicians play tug-of-war. But stupidity in Washington is a predictable variable in the marketplace.
So there is no reason to cash out your investments or jump in and out of your 401(k). That’s called market timing, and it’s a one of the best ways to ruin the returns on your investments. You cash out to try to avoid the bad days. But study after study shows, you’ll also miss the best days—reducing the value of your investments by thousands of dollars.
If you still have doubts about sticking with your investments, talk to an investing professional before you make any decisions. An experienced financial advisor will listen to your concerns and show you how market volatility can actually make you money in the long term.
The Solution Will Not Come From Washington
Our country is facing a bigger problem than the debt ceiling “crisis.” It is the idea that the government will solve our problems. The last few weeks are proof that politicians are incapable of solving anything.
You must take control of your life and solve your own problems. Stop waiting for a government program to help you take care of your family. Get on a budget, get debt-free, save up an emergency fund, and build your own wealth for your future.
I am anxiously awaiting how the partisans parse this. Leave a comment.