Don’t Forget: USA Was Built on Financial Discipline
By Shailesh Ghimire, June 10, 2008 at 6:55 pmDavid Brooks wrote a thought provoking column today on money and debt. I think he makes a great point about “The Great Seduction” of debt and the impact on todays society. He makes some interesting observations on how powerful a role financial discipline played as the United States became the wealthiest nation on earth:
The United States has been an affluent nation since its founding. But the country was, by an large, not corrupted by wealth. For centuries, it remained industrious, ambitious and frugal.
Over the past 30 years, much of that has been shredded. The social norms and institutions that encouraged frugality and spending what you earn have been undermined. The institutions that encourage debt and living for the moment have been strengthened. The country’s moral guardians are forever looking for decadence out of Hollywood and reality TV. But the most rampant decadence today is financial decadence, the trampling of decent norms about how to use and harness money.
I think the bubble economy we’ve seen the past few years bears this point out beautifully. To consider that the US economy has been through two huge bubbles since I graduated from college in 1997 is quite staggering. The first being the dot com bubble and the second is of course the housing (mortgage) one.
The explosion in personal consumer debt and the growing economic disparity cannot be good things for the long term health of the economy. I also think that the borrow and spend mentality that has overtaken the entire country starting from the President all the way down to teenagers applying for credit cards must be rectified at some point if this country to continue to be a wealthy nation. Otherwise it will go the way of Argentina in the late 1990s.
I found Brooks column very thoughtful and
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Tags: debt, economy, financial prudence
Categories: Congress and Government, Debt, Economics
2 Responses to “Don’t Forget: USA Was Built on Financial Discipline”
Sobering.
If an individual lives beyond hisr means, eventually he’ll reach his credit limit and the cash flow dries up. Overnight he goes from being “leveraged” to being bankrupt.
If a company has more expenses then revenue, the same thing happens. One day it has access to cash (via debt), and the next day it can’t make its payables, and the doors close.
Why would it be any different when we have millions of people, a national government, and plenty of local & state governments, who are having a hard time balancing their budgets?
Things need to change..
I discovered MS Money for tracking finances when it first came out, and thought it was a pretty cool tool for tracking income and expenses. Managing and watching our net worth became a game to me, and a way to set goals.
Now having a teenager who thinks that money grows on trees (omg, my dad used this phrase, too), I’m finding myself more conscious of my financial habits again, as I teach him about income vs. expenses. Since he is in Special Education, he also has received focused life skills training on budgeting and the like, so the topics aren’t foreign to him. What I’m not so sure of, is how much of the general high school population is exposed to financial management.
I think that creating a focus on financial education would be a step in the right direction, much as the focus on health and nutrition has created more awareness and changes in our grocery stores and restaurants.
Like Chris says, “things need to change.”
Care to comment?