Archive for December, 2010

Well, we have all reluctantly survived another political campaign. The government has become the object of everyone’s scorn. They are at fault for everything that might be wrong in your life. Just two years ago everything wrong in America was the fault of banks, corporations, and Wall Street. It is always comforting to know who is responsible for all life’s ills, isn’t it?

In reality, we have transferred our debt problems from individuals and corporations to the government (this process is referred to by the dirty word “Bailout”). Why didn’t we ever blame individuals for any of these problems? That is simple. You don’t get many votes by informing the voters that they have made foolish decisions that are not sustainable. Nope, it is much better to blame “them” (the government or the corporations) for all of our woes. Ultimately, of course, we are the government and the corporations, but……..that is a small detail that can be easily overlooked.

The world of behavioral finance teaches us that a dollar is a dollar. We often ascribe different meaning to it (e.g. “government debt is worse than my personal debt”), but that is unrealistic thinking that leads us astray. We need to bring our books into better alignment. Our future cannot be one in which we continue to consume by spending money that we don’t have.

So, a simple idea. We must all admit it is pretty much an across the board problem that we have. People, corporations, and the government made bad decisions, spent money they didn’t have, believed that doing so was not a problem, and now the “chickens have come home to roost”. If all three conspired to cause this problem, then don’t all three have to be involved in the solution? By having a realistic discussion and a holistic solution, we could successfully address our long term issues. We can and must move forward together, learning to live within our means, deciding what that costs and how we will pay for it, etc. This means that we need to behave like…………….grownups!!!