Posted by: endithinks | October 15, 2008

On why money tossing doesn’t work

Today the Dow Jones fell another 700 points as the traders feared recession.  It is another example of why I am so angry at the world leaders and even Presidential candidates about their tossing money here and there type of attitude. 

The fall of the Stocks was based on the fact that we are already in a recession.  Retail sales are down as to be expected when costs are up, unemployment is up and the cost of living is up.  Also Americans are starting to show some fiscal responsibility not buying every thing they think looks pretty in the store window. 

So what have I learned?  I’ve learned what I’ve already known that money dumped into banks and markets does not make a lick of difference.  The only way we are going to come out of this crisis is to do the unthinkable, be responsible.

We need to stop buying everything we see on credit.  We need to tone down our materialism and we need to live in places that we can actually afford.  The average American spends 50% of their wages on their housing costs, not total costs, just mortgage or rent.  That is way too high.  (You should be spending no more than 33%.)

We will see our economy shrink in the short term since here in the states 70% of the economy is based on consumer spending.  I think as more and more people become more responsible we will see a hit to our GDP…I say bring it on.

If we are not as economically powerful (even though deficit spending and being beholden to other countries is not really a strength at all) then so be it.  We have been getting to big for our britches and it is about time we reeled it in a bit.  I think that it is an opportunity to re prioritize and get people educated, working and saving. 

We need to reinvest here in the country not in the markets. The markets respond to reality.  If we can shore up our education, our credit problems (not getting credit for Pete’s sake but using too much credit) then the markets will respond.

Trickled down economics does not work.  The Federal Government has been trying to throw water on a fire from above when everyone knows you need to aim the fire extinguisher at the base.

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Responses

  1. I like the fire analogy. Born and raised in a small “developing” country I came to the United State from a place where there was no credit. People either owned their homes and other property or they rented them. I’m not sure whether that was what shaped my personal money habits, but I find it odd that so many of my U.S. friends got into credit card debt through college and on. I’m not a fiscal star, my spending has always gone up with salary raises, rendering me powerless to save more. But, I’ve also always paid off my credit cards entirely at every payment cycle. I know I have a lot to work on myself, but the credit & mortgage craze seems to be something that’s become second nature, or even blood-stream given, for too many.


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