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Let's face it. The Bay Area is absolutely booming. I see it among my client base where everyone is running on all cylinders, and business managers tell me they are unable to hire the additional help they need.

I have found that a help-wanted ad on the Internet or in the papers generates no worthwhile responses. Apparently, everyone who wants to work is as happy as a clam at his or her current job. Please call me if you're not.

In the middle of this paradise, why should I worry about the fact that, 3,500 miles away, the fastest-growing expense of our federal government is the ballooning interest cost we taxpayers have to pay?

In a New York Times article, Daniel Gross reports that our government debt has gone from $5.8 trillion in 2001 to $8.5 trillion today. We borrow short-term money to fund that loan, and the interest rate on short-term money has grown from about 2 percent to 5 percent. Combine a 46 percent increase in the loan amount with a 150 percent increase in the interest rate and the image of Mount Saint Helens comes to mind.

It might not be so bad if the 5 percent on federal money market funds all came back into the economy as earnings that people spend. That extra money would even increase tax revenue.

However, according to Gross, foreign governments purchase 40 percent of the borrowing in the bond market and that total is $2 trillion. This means that we citizens loan the other 60 percent, or $3 trillion. This accounts for $5 trillion of the $8.5 trillion.

What is not borrowed through the bond market would have to be money from resources such as the Social Security Administration loaning the balance of $3.5 trillion to the government to make up the total of $8.5 trillion. The scale of this borrowing, with no end in sight, is so overwhelming that Social Security is certainly threatened.

Meanwhile, earmarked pet projects of legislators, mostly corporate welfare such as sugar subsidies, total $26 billion. By comparison, this year's increase in the interest cost was $36 billion.

Congress had to quietly vote to raise the cap on government debt beyond the $8 trillion that had been set by law a few years ago.

If foreign governments begin loaning elsewhere, and they will if the dollar sags, the only way to replace their money will be to further raise interest rates in an effort to attract what we will need to fund the debt.

Rising interest rates are the single biggest influence depressing stock prices. So where does smart money go in times like this?

What I have noticed is the extent to which smart money has been acting out of desperation to find alternatives to conventional investments. Big pension funds and college endowments have been attracted to hedge funds and so-called private equity investments in what strikes me as an effort to avoid the question mark of the stock and bond markets.

I describe the hedge fund phenomenon as "thieves selling guano to idiots." In the aggregate, this investment approach amounts to a "riddle wrapped in an enigma" paying 20 percent of any profits to the managers. It has earned far less for investors than broad market averages over the years. Therefore, we're not missing anything.

Private equity involves the use of large sums of money to buy companies that are not publicly traded. We peons can forget about that option even though it can be profitable during down markets.

Constructive thinking, then, starts by forgetting how much money we had in March 2000. That number was a fluke -- the result of four years in a row when the markets gained more than 20 percent per year. All the recent hoopla about the Dow approaching that number again is just making us all feel bad about having treaded water for six years. It's affecting our judgment.

Forget about the past and focus on the present. We have a dysfunctional government that threatens to roil the investment markets. Large companies that pay dividends along with some short-term cash and bond funds earning 5 percent might amount to a safe port in a storm until we see what happens next.

In the meantime, if our local employer is offering raises and paying out bonuses, the smart money move is to stuff it into retirement plans whenever possible. Filling our "loophole for the little guy" is the smartest thing we can do in today's turbulent atmosphere.

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