Amazon.com Widgets There has been a lot of talk lately about the economy. We have heard about the collapse of huge financial firms and foreign-sounding finance terms such as mortgage-backed securities and credit default swaps . We have even begun to hear about dramatic decreases in retail sales and how all the stores are slashing prices drastically just to move merchandise. All of this is now leading to talk of “deflation ,” which is made out to be an awfully scary term. Yep: there’s a lot going on and everyone has an opinion. I am no different in that regard.
I am not an economist. Though I’m good with math, I’m not so great with textbook economics because it’s a lot more theory than math to me. But, all the same, here’s my take on the whole process. Our economy was NEVER that great to begin with. Ever! Think about it: the mortgage-backed securities and credit default swaps were all based off of giving credit to people who clearly were never going to pay it back and banks betting money they really didn’t have to bet. The details are hard to explain as to what these things are, but that’s the gist of it anyhow. However, because this is so hard for the “Average Joe” to grasp, all most of the public hears is that the economy is tanking, so everyone is battening the hatches and closing their wallets.
When we stop spending money, the retail part of the economy hurts. Here is the thing though: we didn’t have the money to spend to begin with! We all know that consumer debt is a big problem in the United States economy we’ve been experiencing in recent years has all been a façade. There was never any money backing it up.
A lot of people blinded by greed created the problem we’re in now. Not only the CEOs of AIG and Lehman Brothers, but also the folks on Main Street trying to keep up with the Jones’; even though the Jones’ were doing the same thing. While the CEOs of these big financial firms were trying to make sure that they had very healthy pension plans, the Jones’ were making sure they had the newest SUV and Blackberry. The fact that they had the money for a Geo and cheap home phone service with a phone from a garage sale was irrelevant.
In the end, all products and services are priced at market value. Ultimately, when people stop buying, it’s because the price is too high for the product or service being offered and/or the people just don’t need or want it. We control the price of the stuff we buy. Don’t take their word that that is the price it must be. With most products, you simply have to say “no.” If you go out their paying anything for anything to make you look good and posh, then that gives retailers and banks the prerogative to charge way more for a product or service. Of course, if you are independently wealthy with a never-ending pot of gold somewhere, then you can do that. But if you only make so much a year like most of us, then you simply have to back off and say “no.”
A true economy involves the exchange of money for goods and services. You don’t “make” money; you earn it. That’s a little golden nugget from Larry Winget and it’s absolutely true. Unless you earn your money, you shouldn’t get paid. If you work the counter at McDonald's and stand their texting rather than taking people’s orders, then you don’t deserve your pay. And the same should go for big bank executives: if you run a 100+ year old financial institution into the ground, the extent of your severance pay should be about a quarter to go and call someone who gives a you-know-what. If we all, from the bottom to the top, take responsibility for our own actions and work to reverse them, then the economy will be just fine. It may not be as “booming” as it once looked, but it will be upward-moving and, more importantly, a reflection of the world’s economic reality. When you return the mountain back to a mole-hill, all the economy really needs is a little bit of reality.
No comments:
Post a Comment
Please keep responses clean, fairly tasteful, and on topic. Also, no solicitations or SPAM. All comments are reviewed before posting to prevent SPAM or distasteful responses, as well as responding to thoughts and ideas in future articles. Thank you for your input.