Personal vs. Government Borrowing

If we borrow money, the results of our failure to make our payments are well controlled by law.  Government borrowing is not so tightly controlled, but it should be.

For regular Borrowers, Lenders usually limit the amounts they will lend based on the Borrower’s income.  Home loans have been limited so that the monthly payment does not exceed 28% of the borrower’s disposable income, the borrowers’ net income minus other loan payments.

Homeowners can borrow from banks using a 2^nd mortgage or Home Equity Line of Credit.  The Borrower’s home equity is the collateral and the bank can file a Lien on the home that shows on the Title if there is a balance. The Borrower cannot sell the home until they clear the Lien.

With regular loans, borrowers needed to show that they have assets in excess of the loans they apply for.  Lenders then propose terms that protect their investment. There is always a limit on the amount of the loan and an interest rate that is higher if the risk is higher.

With other loans, the borrower adds up the equity they have in all their assets, usually a home. They put the home up as collateral for a loan to start or buy a business, or to pay death taxes.  The lender checks the value of the assets and makes the loan.  The borrower must repay the loan on time, or risk losing their home.

In a regular bankruptcy, a court freezes the debtor’s asset and arranges for their disposal. Creditors line up to get part of their losses paid to them by the court following asset sales.  If the debtor’s assets are worth more than the loans they need to pay, they sell the assets and pay off the loans.

Governments write looser laws for themselves that make you go hmmmmm…

In Georgia, cities and counties can borrow up to 10% of the value of all the assets on their tax register. In Dunwoody, all the property on the tax register is about $2 billion. So the City of Dunwoody can borrow up to $200 million.  The annual revenue is about $25 million.  The Assets are about $100 million.  If Dunwoody had the same borrowing limits we have their debt service limit would be 28% of $25 million.

In addition, Dunwoody can have their Development Authority, Redevelopment Authority or Special Tax District borrow more money.

If they had to follow the same rules we follow they would not be able to use property they didn’t own (the entire tax register) as collateral. If Dunwoody voters had voted no on Redevelopment Powers, Dunwoody wouldn’t have a Redevelopment Authority.  If the Georgia Legislature had not approved the Special Tax District, Dunwoody wouldn’t be able to borrow through that.

The city can sell Bonds and take out loans and incur these debts and interest and fee charges without Ballot voter approval.

The US Federal government has its own printing press and it has created overspending in States with grants to States.  Georgia will receive an additional $22 billion this year.

The Federal Reserve is responsible for all the financial meltdowns and wars we’ve had since 1913. The current stock market bubble is being caused by excess liquidity in banks. The Federal Reserve lends this money to the banks for zero interest.  The banks use this printed money to gamble in the hedge funds and the stock market.

The US National Debt and unfunded liabilities are so high, investors are refusing to invest in the US and other countries are no longer using the US dollar to buy and sell between countries. The combination of printing $14 trillion more dollars and increasing the money supply by 450% AND the decline in US dollar use is creating a US dollar glut that will reduce its value.  If we can reduce federal spending now, we could avoid this crash.

Norb Leahy, Dunwoody GA Tea Party Leader