We have a big financial crisis in America.
It’s not the weak housing market, rising unemployment, inflation, the collapse of Bear Stearns or Lehman Brothers, fallout from the subprime mortgage fiasco, declining home prices, stock market volatility or geopolitical unrest in the Middle East. Sure they have made front page news; however they’re not the real issue. They are symptoms of the “spending crisis” in America. They are symptoms of the real issue – that we are a country of financially illiterate people.
In the June 2008 issue of the Journal of Financial Planning, Elisabeth Donati, founder of Creative Wealth International said, “The statistics on financial well-being and young people are alarming. There’s a rise in college suicides because of credit card and student loan debt, young adults under 25 are now the fastest-growing age group filing bankruptcies, and more kids now see their parents file for bankruptcy than file for divorce. Less than 10 percent of our high school graduates take any courses on money management or wealth creation. Most of our country’s social problems stem from financial problems.”
Some questions of Financial Crisis in America:
CEO Q > How Did We Get Here?
Med Yones > The U.S. economy got here due to spending money we do not have and not producing enough to pay back the credit. It’s like luxury-living on credit cards, at some point the lenders want their money back. Not to forget that in a new open global economy, the U.S. does not have a competitive monopoly on knowledge, technology, manufacturing, services or marketing anymore. Therefore, the growth rate of U.S. production (cars, airplanes, electronics, IT …) is not keeping up with the growth rate of the debt. The housing bubble, subprime mortgage defaults, and associated financial crisis are all symptoms of the core problem of too much debt-based spending and over-extended leverage (debt-based investing). We cannot sustain debt-driven economic growth forever.
CEO Q > When Do You Think the Economy Will Recover?
Med Yones > The timing of the economic recovery depends on several factors, the most important are the effectiveness of the new economic policies in establishing trust in the U.S. economy (such as reducing budget and trade deficits, etc.), and the performance of corporate America (profits, job creation, etc.) . The markets need at least 2 consecutive quarters of business growth and profits, so that CEOs, investors and consumers will establish the confidence to invest again and reverse the negative cycle. However, we will not see the hugely inflated stocks and real estate prices anytime soon.
Thomas Jefferson wrote “If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation,the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.”
The first has occurred now the question is whether we will get the predicted result..
We can weather this though it will be rough and stormy. More in my next article including how to prepare for hard days coming over the next few years. With luck we may have some extra time. With prayer plus a wake up of the American people to action, we might find the Leaders and together the ways to clean up the “mess”.and work together to rebuild, revitalize America … and I mean the United States of America and NOT the North American Union as our Country!
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