Ben Bernanke said, last week, that it was hard to put a finger on why the economy isn't "turning around" as quickly as they would like. "We don't have a precise read on why this slower pace of growth is persisting", he said.
I have a theory as to why the Fed doesn't have a grasp on why the economy is slow to rebound. I think it could be because the members of the Federal Reserve Board, while they may know a lot about money, know little about the people who spend it.
The U.S. economy isn't money. It's people... people spending money. If they understood the real cause of this crisis we are in, not that I've heard anyone else get it right, perhaps their previously optimistic growth projections would be tempered a bit, by reality.
I said I haven't heard anyone else get it right. That's a bold statement, coming from a high school dropout. It implies that I think I know something the "really smart" people have missed. I'm willing to admit that I may be wrong, but hear me out. See if this doesn't make a bit of sense.
According to the "talking heads", the thing that precipitated the tanking of our economy was the decline of the housing market. I submit that what precipitated the fall of our economy was the unprecedented, and unexpected rise in the price of gasoline, combined with an unprecedented, and embarrassing level of saving by "We the People".
Before you get defensive, let me acknowledge that my own level of saving is not merely embarrassingly low, it borders on nonexistent. That's a large part of the reason nobody has heard from me for the past year (More on that later).
"We the People" have been transformed from a nation of self-reliant savers, willing to delay gratification until we could afford things, to dependent debtors, bent on instant gratification. If we get a raise at work, we go out and buy something new, on credit, because now we can afford another 50 dollar per month payment. Again, I've been as guilty as anyone.
For me, the light came on in 2007, when an unexpected catastrophe with the truck forced me to see the necessity of creating my own "safety net" for my personal economy. I vowed to work myself out of debt in as little time as was reasonable. Unfortunately, everything had already begun to come unglued in our national economy, making it extremely difficult to carry out my plan. (I AM still working on it).
So, how do these elements combine to crash our economy?
I would like to suggest that when the price of gas nearly doubled in 18 months, from a little more than 2 bucks a gallon, in early 2007, to more than 4 by mid 2008, Americans were forced to use money they didn't have to fill their tanks to get to work each day. Because we had no savings to speak of, the only option was to get out the plastic. After all, it was only temporary, RIGHT? That worked for a while, but then those pesky credit card bills started getting higher, and the cards were maxed out anyway, so since getting to work is more important than paying the rent, (or the house payment, as the case may be), many found themselves putting the mortgage payment into the gas tank. After a while, the higher credit card bills, the mortgage payment "in the tank", so to speak, and prices rising on everything else that's energy related (like the utility bills and groceries), some people throw in the towel and file for bankruptcy. Others allow their mortgages to be foreclosed. Then the banks are in trouble, because after all, they borrowed the money they loaned to you, so they are forced to take what they can get for the foreclosed properties, which in turn, caused the bottom to drop out of the housing market, and the rest, as they say, is history.
What everyone except the Fed... and our leaders on Capitol Hill, have learned from all this is that it's pretty important to have something to fall back on. The reason the economy isn't moving as quickly as some would like is because those of us who are fortunate enough to still have an income are doing our best to save some of it. "We the people" have more than doubled our savings, as a percentage of income, from a dismal 2.3 percent, in 2003, to somewhere between 5 and 7 percent today. Regardless of what the Federal Reserve would like me to believe, I see this as a good thing. If only our leaders in Washington thought the way the rest of us are thinking, America could be well on her way to a strong and truly "healthy" economy.
I mentioned that my own savings account was woefully inadequate, and that it was the reason for my apparent lack of enthusiasm for the Me the People blog, and by extension, the Rupert for Senate campaign. I assure you, my desire has not waned. On the contrary, I've determined that the greatest obstacle to success is debt. The reason I have no nest egg is because I have debt. Because I have debt, I have to work... a lot... More than I should. More than I can log, if I'm honest with you. Debt is what keeps me from being politically productive. Debt keeps each of us from realizing our full potential. I am doing all I can to retire my debt, so I can devote myself entirely to "changing the way politics is done". May I suggest, to each of you, that you do the same?
It has occurred to me that it's our government that has encouraged us to incur so much personal debt, with a good deal of help from corporate advertising. Perhaps because if we are in debt to someone, for things we would like to keep, we are forced to work to repay it. The more we work, the higher our income. The higher our income, the higher our tax. Because we owe others, a tax increase forces us to work even harder to maintain the same net income, when what we would really like to do is throw down our picks and shovels and say, "If this is all I get to keep, I'm not doing it anymore".
If "We the People" ever hope to force our government to control spending, we have to start by controlling our own. If we can't make them stop with our vote, maybe we can starve them into submission. We may have to actually lay down our picks and shovels and earn only what we need, instead of all we can. By lowering our income, to a level that decreases our tax burden, something we used to do by borrowing and writing off the interest, perhaps we can force our leaders to exercise control over spending. It will be better for all of us if it never comes to that. Well, easier anyhow. I don't think that being out of debt can ever be anything other than good. But desperate times call for desperate measures. The real benefit will come when the savings account begins to grow. The peace of mind that comes from knowing you can ride out a bad patch is empowering. Borrowed money is not wealth, it's debt. Do you know what you have when you don't have debt?
MONEY!
I'll get back to ya...
Scott A. Rupert
No comments:
Post a Comment