BAD NEWS BEARS?

Maybe A Recession Would Be Good

The “bears” are in control of Wall Street. Stock prices have been plummeting or extremely volatile since August. The US dollar is weak against foreign currency benchmarks and the price of oil is at an all-time high. Do you feel like you are spinning out of control?

Well here’s a shot of reality: the US economy has been weak since 2000. It had been artificially propped up since then by over-spending consumers and the wars in Iraq and Afghanistan. We were putting band-aids on a hemorrhage. It was a false economy.

Credit was easy to get. It helped fuel grotesque spending sprees by consumers and the US government. Now, the “bills are due” and people (and our government) can’t pay. So the housing market collapses (a tragedy as people do need a place to live) and the dollar is weak (thanks to ignorant politicians who keep printing more worth-less money).

The fear on Wall Street (and in Washington) is that people are going to stop spending money, or more precisely, using their credit. They are going to stop being consumers and tighten control over their discretionary income. Well isn’t that what we tell people they need to do to be financially successful?

If credit had remained tight during the early part of this century, people would have sacrificed and not spent money on worthless consumer items. The average family would not have $10,000 in credit card debt and the housing market would have accommodated people respective to their incomes and not to some whimsical credit wizardry.

So maybe a recession will be good for the American psyche. It will take away the notion that a high standard of living is a US citizen entitlement. Any standard of living is earned through hard work and dedication and paid for with diligence and reasonable expectations, not magical, hard to understand credit.

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