Many people today are in a state of bewilderment when it comes to financial matters. They feel beaten, confused, and scared. They don’t know who to trust and they don’t know what to do. They hear talk of recessions, depressions, and credit freezes but how will any of it affect them? First, it should be noted that a depression, especially along the lines of the 1930’s is unlikely. The financial market today is far more developed than 80 years ago. Money is still safe in bank accounts and bonds are still valuable. The sky hasn’t fallen. The only safe place for our great-grandparents to hold money was under their mattress. The crisis is mostly confined to Wall Street; among investment banks, hedge funds, and insurance firms. What we face more than anything is a crisis of confidence. There’s always a possibility that the contagion could spread, but in a global capital market it’s never a sure thing like some have suggested. In the meantime everyone should reexamine their financial priorities. Get rid of the second, third, and fourth credit cards. Open a savings account for any and all disposable income. As a society we have had things far too easy. We don’t save and we finance everything. Where else on earth is it possible to rent chrome wheels for a car or companies like Aaron’s to survive? In Europe it’s fairly common that a credit card is not accepted at restaurants and hotels. We need to move away from such a heavy reliance on credit and instead return to the values that brought us to prosperity: saving, thriftiness, and discernment. Yes, this market downturn hurts. Yes, things are a bit bleak. No, you shouldn’t become a hermit and hoard money. However, it is circumstances like these that allow for real, substantial corrections to be made and we’ve been handed a wonderful learning opportunity. If only our government would look in the mirror and learn something also.
- Consensus is no substitute for thought.
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