In our ongoing series we sit down with Financial Advisor Jason Scheurer again to take an Outside the BOX view of things.
Lou: Good to sit down with you again this month, Jason. Have any major items gone unnoticed of which we should be made aware?
Jason: Have you heard anything about Fukushima lately? Have you heard that JPMorgan has set aside close to $28 billion toward legal expenses? Did you know that CNBC’s ratings have dropped to 20-year lows?! How about what the risks of $17 trillion in national debt mean to you?
Lou: No, I haven’t heard much about these topics. I wonder why?
Jason: Well, Lou, the things that are really important are usually the items not on the front page, but instead buried somewhere in the middle. This is the way the media outlets can say they “covered the story,” while focusing more on the latest Bread and Circus. Can you say, Kim Kardashian?
Lou: Ah, yes, subterfuge. Lately, all of this debt talk has my head spinning. Is there anything in particular you can say to help me and our readers to better understand what’s going on?
Jason: Everyone should go to www.USDEBTCLOCK.org and see what their personal share of the debt load is. It isn’t pretty. The last time I checked, just the federal portion alone was $53,528 per citizen and $148,132 per taxpayer. Ask yourself, How can this amount be paid back in a sound currency? The math here is pretty easy to do, and we haven’t even included state and local governments in the total.
Lou: [After looking at the debt clock website] I don’t think it is possible to ever pay this off. The numbers are just too large and the average person isn’t making enough to pay the annual interest, let alone pay down the principal.
Jason: Now you can understand what concerns me from the big picture standpoint. The theatrics playing out on TV right now are all show. America’s debt has morphed from a political problem into an inescapable math problem. Large debts take on a life of their own, much like an unattended fire at a campsite. If you don’t pay attention, you’ll soon end up burning down the forest. What’s even more disturbing is that most of Europe and Japan are in even worse financial shape. This is what happens with most governments throughout history. The temptation to overspend is too powerful for most politicians to resist, and soon the math overwhelms the entire situation. Solutions such as limiting spending or raising taxes don’t get most people elected. As it stands now, the richer countries continue to go deeper into debt and will eventually have their day of reckoning. Alternatively, the poorer countries are having to face the music right now. Argentina, Greece, Poland, and Cyprus are all in a state of flux at this point. What your readers need to take away from this is that much of the recovery is just more debt, and not real growth.
Lou: Let’s go back to the Fukushima situation you mentioned earlier. What has been going on there?
Jason: An ecological nightmare of epic proportions. Tepco (Tokyo Electric Power Company) has no idea how to stop the radiation leaks. Scientists have NO IDEA where the cores are located. Radiation is pouring into the Pacific Ocean, entering the food chain. No fewer than 1,331 spent fuel rods in Unit 4 (which contains deadly plutonium)—if exposed to the air—could cause a spent fuel fire exceeding the radiation discharge of the Chernobyl accident. In my opinion, this should be part of nightly updates, especially for those on the West Coast because much of the contaminated debris is making its way across the ocean and could be washing ashore soon. You see, Lou, the governments in both the US and Japan don’t want the public to panic in any way. All I have to say is good luck, Japan, with those Olympic Games in 2020. Throughout this entire disaster there have been numerous lies from the Japanese government trying to downplay this catastrophe, which further proves what we have talked about in the past: most governments will choose to lie to their citizens rather than expose their incompetence or mistakes. Honesty seems to always take a back seat when a loss in confidence in elected leaders is at stake.
Lou: What is up with JPMorgan setting aside billions of dollars for possible legal expenses?
Jason: Well, since I am not privy to what is going on behind the scenes, I can only conclude that they are expecting some very large fines for some type of wrongdoing. You don’t set aside such large amounts for minor infractions. Over the last few years paying large fines has been a common occurrence for many firms. The rhetoric of “cleaning up Wall Street” will probably never have a real impact until more people actually do hard jail time. When wrongdoing only leads to fines, then the fines become part of doing business and the behavior itself does not change, at least judging by what we have seen recently. It is interesting that both Republicans and Democrats love to get tough on the blue collar crimes but the white collar crimes—which are orders of magnitude greater in both social cost and actual dollar amounts—are never prosecuted with a proportional application of resources. Jail times for these types of crimes are also disproportionate.
Lou: Thanks for the heads up, Jason.
Jason: You’re welcome, Lou. As always, please remind your readers to check these facts out for themselves.