Friday, November 07, 2008

The Bright Side, by Fareed Zakaria

I haven't written much about the economic problems that have struck our country since last summer. So many people have been covering the news so well, and I knew that people who are already into voluntary simplicity wouldn't be as affected as people who finance things they can't afford. However, I would like to call your attention to some facts and articles about this phenomenon, so here's a quote from "The Bright Side," by Fareed Zakaria, published in the October 20, 2008 issue of Newsweek:

Two decades of easy money and innovative financial products meant that virtually anyone could borrow any amount of money for any purpose. If we wanted a bigger house, a better TV or a faster car, and we didn't actually have the money to pay for it, no problem. We put it on a credit card, took out a massive mortgage and financed our fantasies. As the fantasies grew, so did household debt, from $680 billion in 1974 to $14 trillion today. The total has doubled in just the past seven years. The average household owns 13 credit cards, and 40 percent of them carry a balance, up from 6 percent in 1970.

Zakaria goes on to compare how the government has been even less restrained with its spending habits than the American consumer. He suggests that increased regulation of our financial system, rather than stagnating growth, will give our country the discipline, stability, and security that we so desperately need. He doesn't make that comparison to individual spending as well, but it makes sense. The more people regulate their spending, by creating a budget and having the discipline to stick to it, the more secure and stable their financial houses will be. As evidenced on the news, people are indeed cutting consumer spending and increasing savings. The news reports this as gloom and doom for the economy. Can't they see the brighter side?

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