At this time of year many corporations are announcing their profits and governments are handing down their budgets. On the one hand, the economy seems to be forging ahead. On the other hand, governments are preaching restraint. In the meantime the media loves nothing better than doom and gloom and uses fear tactics that cause viewers to over-react.
Plenty of economists believe we need to get the consumer confident and spending again and people who don’t spend money contribute to the recession. Poor spending got us into this mess. The hyper-consumerism of the last few decades has wreaked havoc on our economy, the environment and our way of life.
I see a lot of finger pointing and blaming everyone else, but we each have to take responsibility. The average North American is carrying a huge debt load and saving very little money, while contemplating a future with fewer entitlements, longer working lives and smaller pension cheques.
Developers borrowed money to build office and apartment complexes when there was no market for them. Confident consumers bought electronics and snowmobiles on their credit cards, overspending and borrowing more while refusing to deal with the consequences of their actions
We’re fortunate that we are not experiencing severe austerity measures and food riots.
It’s time to turn the economy around
By trying to accelerate a recovery artificially, by going into debt on a personal, business and government level we lose economic efficiency because a larger and larger percentage of our money has to be siphoned off to pay interest on our debts.
Our governments need to reverse reckless fiscal and monetary policies. They can’t “create” jobs through military buildup and expanding their own bureaucracy. Instead they need to eliminate the percentage of government that is useless and dead weight. They need to stop bailing out poorly managed companies and devising artificial stimulus programs.
They need to stop printing money to maintain social entitlements.
Can we fix the economy?
In August, 2011 the United States was forced to raise its debt ceiling. Standard and Poor questioned the fiscal capacity of the world most powerful and wealthy nation and reduced the country’s credit rating.
Canada also lost it’s Triple A rating in the mid 1990’s. Then finance minister, Paul Martin, initiated a two-part plan. First, reduce the deficit to 3% of the GDP from 8-9% and, secondly, balance the federal budget within 5 years.
We were regularly updated on the progress and there was nationwide satisfaction when the targets were achieved and the federal budget was balanced in 4 years, not 5.
Canada went on to record 10 successive debt reducing annual surpluses, each of which was applied to paying down the national debt. These actions stood us in excellent stead when the global credit crisis struck in 2008 and 2009.
If in Canada, why not the U.S.? Their finances could surely be salvaged if they put their mind to it.
The time is now
Clearly, some spending is essential for the economy. We all enjoy a higher standard of living because we understand the benefits of trading goods and services. But it has to be sustainable over the long term.
Our elected representatives need to step up to the plate and consider how their policies will affect the long term instead of cozying up to special interest groups and thinking of how to get re-elected. If they are not doing the job, we need to get off our butts and vote in people that will. A voter turnout of less than 50% does not give us fair, honest representation.
A strong economy is made up to economically healthy citizens who know how to invest and save. A healthy, efficient economy is better positioned for more competitive and long-term growth and the accompanying job and wealth creation. Funds always flow to areas of best opportunity.
If you make choices that are financially sound for you they will probably be financially sound for the economy in the long run.
The question is – are we up for it?