The Federal Government Deficit is Huge, So Buy Stocks!

For those extremely worried about the U.S. federal deficit/debt, my advice is to “Buy Stocks & Enjoy a Healthy Economy”!

In the investment biz, large federal government deficits – particularly large peace-time deficits – are universally loathed. As everyone knows, if any private citizen was to incur huge debts like the U.S. government, they would soon go bankrupt and be out on the street. Big deficits mean big taxes. Ugh! Persistent deficits lead to huge debt service burdens which raises the risk of an American government default. The U.S. could lose its AAA rating or maybe even drop to a much lower rating. The U.S. could become Greece! Foreigners could stop buying our bonds and avoid the U.S. as it becomes too risky. Companies could leave the U.S. seeking out more stable markets. Bond vigilantes could demand higher yields forcing discipline on the government making the debt crisis even worse. Impaired U.S. finances could be exploited by our military adversaries – large government deficits are just exposing the U.S. to a war! And it’s common knowledge that huge government debts cause inflation and ultimately bring a recession or perhaps even a depression. Overall, unchecked financial abuse by the U.S. government will destroy the economy, cause yields to surge, and lead to a massive collapse in the stock market! Better keep some cash (or maybe foreign currencies) in your mattress and buy Gold!

Whew … Government deficits do sound frightening! However, if the “emotion” created by the words “government deficit/debt” can be set aside for a moment, and one examines the dispassionate cold historical data, you arrive at nearly the opposite conclusion. Indeed, for those extremely worried about the U.S. federal deficit/debt, my advice is to “Buy Stocks & Enjoy a Healthy Economy”!