Could you imagine driving by a bad car wreck without looking? Could you imagine other drivers whizzing by without gawking at the carnage? Neither can I. Yet, that is exactly what seems to be happening with the economy. Sure, everyone knows about the foreclosure mess and mortgage crisis because the news outlets feast on these stories. But what about the other things that are going on?
Bear Stearns was one of the major players in the mortgage and credit debacle. At one point the company’s stock was selling for over $170 per share. On March 12th the stock was at $57 per share. The following weekend the government agreed to make $2.4 billion in loan guarantees to keep the company afloat. That Sunday it announced that it had arranged a takeover by JP Morgan Chase for $2 per share. This economic news was absolutely stunning.
Looking for the latest on the situation that night, I tuned in the local 10 O’clock news. I was sure that this would be the lead story. Not a word. It was just the usual drivel about car accidents, robberies and a murder or two. Granted, those are serious happenings if it involves you or a loved one, but the economic news affects us all. I surfed through the other channels and could find nothing. It was news on CNN and Fox News, but nothing at all on the local networks. It was as if this had no significance whatsoever.
Ignorance Is Bliss
Most people seem to walk around with blinders on. If something doesn’t affect them directly they ignore it. Politicians know this and that is why they make ridiculous promises that they can’t possibly keep. People just want to know what they are getting, not what it is going to cost. I hear people talking about the stimulus check and when they are going to get them. You don’t hear any talk about the long-term consequences of the Government taking on more debt to pay for those checks.
The light at the end of the tunnel is an oncoming train. The National Debt keeps getting larger. Most people are unaware of the biggest Government scam of all. The Social Security Trust Fund is nothing more than a stack of IOUs. Social Security runs a surplus every year, which is used to fund the Government’s insatiable need for cash. That house of cards is due to come crashing down sooner rather than later. With all of the baby boomers retiring, Social Security is expected to go from an annual surplus to an annual deficit in about ten years. This means that not only will the money no longer be available to feed the Government’s spending machine, more money will be needed to pay for the retirement checks.
Where Will The Money Come From?
I clearly recall my grandmother telling me stories of living in Germany after World War One. When Germany lost the war they were required to pay an enormous amount of money to the victorious nations. The German economy couldn’t come close to raising the capital needed for the payments. The solution? The German Government just printed more money. It reached the point where the currency was practically worthless. My grandmother told me how the workers were paid twice a day because the currency was devaluing so fast. The women would collect the money and rush to the food stores where a loaf of bread would cost a bag full of money. This rampant inflation caused political unrest, which ultimately caused the Government to collapse.
Here in the United States we are nearing another Presidential Election. The candidates all talk about change. My fear is that it will just be more of the same. We can’t keep robbing Peter to pay Paul. Some hard choices need to be made. As individuals we need to pay more attention to what is happening around us. I am reminded of the saying that states “there are those who make it happen, some who watch it happen, and others who wonder what happened.”
“The current financial crisis in the US is …the most wrenching since the end of the Second World War.” – Alan Greenspan