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Time Ticks Away

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When I was growing up, the Rolling Stones sang a popular song called, “Time Is On My Side.”

I’m pretty sure Mick Jagger isn’t singing the same tune now that he’s old like me, and the US definitely isn’t singing the tune with the deadline to raise the Federal debt ceiling looming just weeks away.

“If not now, when?” President Obama asked on Monday morning. Good question Mr. President. Increasingly, it looks like the answer will just be, “Later.”

As The Wall Street Journal reports: “President Barack Obama pressed congressional leaders Monday to forge a $4 trillion, 10-year deal. But after another contentious meeting at the White House, the odds that Democrats and Republicans can bridge their differences over taxes and social programs to reach such a sweeping plan ahead of an Aug. 2 debt-limit deadline appeared to diminish.”

The problem, of course, is that later is simply too late.

I’ve warned about the brewing debt battle between Republicans and Democrats on this blog (“The Boiling Point”, “How I Use Inflation to Get Richer”, “The Showdown”, to name a few).

In six months, the disagreements have been the same—and time has steadily ticked away. Now we’re at the eleventh hour, and Republicans still want massive cuts to government spending with no tax increases, while Democrats still want a to continue spending and increase taxes. Neither side seems ready to concede. The result is a high-stakes game of economic chicken.

If a deal is not reached, the US will default on its debt. And if that happens, the threat of a downgrade to the US credit rating will stop becoming a threat and simply become a reality.

Naturally, you’re probably wondering what this all means for you and your money. As I’ve written before, the US is facing a damned-if-you-do-damned-if-you-don’t situation.

If the US defaults on its debt, the world will lose confidence in the US and the dollar. As the world’s economies race to exchange their dollars, the flood of dollars onto the market will drive down the value of the dollar and cause massive inflation as the purchase power of the dollar diminishes.

If the US reaches a debt ceiling deal without massive cuts to spending, they will have to either raise taxes or print money—or both. This will hurt the middle class by taking money out of their pocket or cause inflation as more and more dollars are pumped into the economy—or both.

The point is that no matter what happens, life is about to get more expensive.

There’s good news, however, for the financially intelligent. Those with a high financial IQ know how to use inflation and taxes to their advantage because they play by the rules of the rich.

I encourage you to invest in your financial education, discover which of the four asset classes you’re interested in, and to invest in assets that produce cash flow, provide tax benefits, and hedge against inflation. Now is the time to move, because time is still on your side—but only for a little while longer.

For more on the four asset classes, check out

Original publish date: July 12, 2011

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