The Kiss of Death

No, this is not a post about actual kissing. So put those teenage fantasies behind you and focus for a moment because this is something I have been thinking about for a while. First you need to understand what some financial analysts and accountants call the kiss of death. It has to do with cash flows. There are three different cash flows. Finance, Operating, and Investing. Finance principally moves by loans and interest, operating by the cash flow of day to day operating, and investing by the purchase of land, capital and the likes. That was a very simplified definition but it will suffice for the example.

Some will argue that our government is ruining our country with their free spending ways and egregious debt intake. They are mortgaging our future. They are selling the future of our children. They are putting us in bondage. The government is driving our attitudes some will say. The government is spending without constraint so what do you expect the everyday citizens to do? Start saving like crazy? Who affects the decisions of who? Where does it start. Is it the mindless spending of the people? Or the careless spending of the government?

Both are mired in the problem. Personal savings rates for American households are abysmally low. In the last couple of years they have even been in the negative. The current depression has forced Americans to start being more prudent, but to be honest there isn't extra money lying around for people to save. So Americans are spending and not saving, plundering their retirement accounts, and losing their #1 investment (their homes) while looking to the government to save them. The real problem is less with the current mindset and more with the mindset of the the pre-depression 2008 American whose savings rates were negative.

A perfect example about how the government is leading the bad behavior is our beloved government of Arizona. In the financing category it would be hard to believe you didn't know we were mired in debt and threatening to shut down almost every stinking year. This year's propositions noted several moves to plunder other account kept separate from the general state account for other spending initiatives. This is much like Americans moves to pilfer their retirement savings. So let us go ahead and put a + for cash flow for financing. Operating..... Really? Is it a real question about whether or not tax income is greater than spending? Not even close. I have a definite - for operating. And in the most amusing and interesting section we even have a plus in investing. Now before we start to say that is a good thing think of this. When you purchase equipment that signifies on outflow of cash, therefore a negative. When you need money for spending you sell assets. Our state actually sold the state capitol building and are now leasing it in order to keep up with spending. This triggers a positive in the current account. Now that wasn't this year, but if you do the addition of the + for financing, to the - for operating, and + for investing you have.... +_+ The kiss of death.

So we clamor as Americans. What a horrible example they are setting for us, and we once again begin the chicken or the egg argument. The government is making us act like this, no it is the people that are making our government bail them out! When are we going to quit switching sides of the fence? First we claim the government is of and for the people, then claim the government is not of the people at all. It is a separate entity that should be held to a higher standard than we hold ourselves. If we as individuals are debt ridden and going through the perils of foreclosure, wouldn't our government be as well. Isn't it made up OF the people? It is OF the people, and elected BY the PEOPLE, I am not surprised they are reflecting our individuals attitudes and habits. If our attitudes and habits were grossly different, we wouldn't stand for this at all and neither would our elected politicians. So until we start being prudent, the change really still starts with us. Save more than you spend, put aside for a rainy day, and don't wait for other people to take care of others and make a difference. If we start doing it, and not stand for our government not doing it, that will make all the difference.