Debt binge reversal

Over the last 3 years, I’ve seen many explanations for our on-going economic malaise.

One of the worst–and most popular–is the greed of bankers.  This is wonderful stuff for those who believe in Marx’s class struggle, but it fails when confronted with the facts.  What?  Did bankers suddenly become greedy in 2006?  I don’t think so!  No, they were greedy all along and were simply reaping increasing rewards from a poorly designed system until the balloon popped.  They may have ridden the wave with aplomb, but they didn’t create it.

Is it the fault of the rich?  This is another popular target for Marxists.  People love to blame whoever emerges unscathed from a tight spot.  These blamers are the same folks who held the Jews responsible for the Black Death.  According to such rocket scientists, anyone who doesn’t perish must be the cause.  They pay little attention to cause and effect, like the fact that Jewish hygiene prevented them from getting the plague as much.  Such accusers just love to blame, blame, blame.  No, the rich didn’t cause the crisis.  They may have been smart enough to go into the crisis prepared, or may have ridden the wave with skill like the bankers, but they weren’t the cause.

Perhaps the fault lies with immigration, some say.  Yes, in the greatest country on earth, absolutely filled to the gills with immigrants, some morons think immigration is to blame.  If we hadn’t opened up our borders to Mexicans and Islamic terrorists–they seem to say–we’d all be in the Garden of Eden right now.  People who get someplace first always seem to say stuff like this, but it never holds up to the facts.  If immigration were to blame, this country would have been stillborn in 1600.  On the contrary, one element likely to help solve our problem, as is the case in Japan and Europe, is more, not less, immigration.

Okay Mr. Smarty Pants, if it wasn’t bankers, the rich or immigrants, what was it?  I may take a lot of flak for saying this, but the fault, dear readers, lies not in our stars, but in ourselves.  The wave we rode from boom to bust was debt.  It wasn’t just individuals, or private companies, or local, state and federal governments, it was all three.  We did this to ourselves with too much debt. 

Instead of saving to buy stuff, we borrowed to spend today.  We did it collectively.  A democracy only requires 51% of the vote, but we had a stronger majority than that.  Only a very small minority–minute really–said you can’t spend what you don’t have without consequences.  Voters spoke, and politicians listened.  Then, we spent and promised money we didn’t have.  We borrowed from those who had saved.  Now, we’re in deep doo-doo (sorry for the highly technical use of economic jargon).

When you’re digging yourself a hole, the first step to getting out is to stop digging.  But, to do that, you need to recognize that you’re digging a hole and stop digging.  Pointing fingers at other people will not solve the problem.  It has to start with a recognition of each of our role in the problem. 

We decided to promise benefits we couldn’t possibly pay for.  We decided to borrow money to pay for goodies today–whether vacations, or gadgets, or homes, or whatever–instead of saving up to pay with cash.  We decided to spend all the money we made and then some, and now that a rainy day has come along, we’re dreadfully unprepared. 

We did this to ourselves–our wonderful democracy shot itself in the foot! 

Now, we need to cut spending and save more, but no one wants to look in the mirror and admit that fact.  Even now, we don’t want to give up our promises or reduce our spending.  Even with the mathematical facts staring us in the face, we still want to have our cake and it it, too. 

We won’t get to.  And, putting off that day of reckoning just makes getting out of the hole harder and harder as each day goes by.  It’s time to stop blaming someone else, and recognize we did this to ourselves.  Only then will our debt binge be reversed and our future prosperity assured.

Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.

Debt binge reversal