Economics 101

I don't know about anyone else but I am really getting sick of all the talk about the bad economy. Everyone from news correspondents to wall street experts to the President are projecting gloom and doom for this country. I just wanted to go over some of the things that have put us in this crisis.

First, the sub prime mortgages are responsible for a major chunk of the this mess. So many people opened fake companies and got on this bandwagon in order to make a quick buck and many vulnerable Americans who had the American dream of owning a home with a yard and a white picket fence fell for it. Most of them knew that they did not have the credit score nor the savings to afford a home but clever loan sharks made them believe that they could own a home for next to nothing. I blame these greedy people but hold the buyers equally responsible.

Another reason for this crisis is the American culture of spending. We love to spend the money we don't have. Let's say you have ten credit cards with a combined limit of $100,000. Does that mean that you have $100,000 to spend? NO! That money is not yours. That money comes with a million strings attached because each credit card comes with very high finance charges. If you charge a $2000 TV today and pay the minimum balance every month, that TV can end up costing you more than $10,000 before you can own it and chances are that by the time you finish paying it off it's time to buy a new TV!

My favorite financial advisor Suze Orman does not mince words when she gives financial advice to people and I love her for it. She tells it like it is and does not show mercy. One thing she said that really stuck with me is that, "You do not have savings when you have debt" Most people in America do not consider credit card balance as debt because they continue to pay on it, but any balance on that card is a debt even if you have money in your savings account. She points out that the number one priority of people in these economic times is to pay off your credit card debt.

Finally, we are in this situation because there are many big executives who only thought about fattening their pocket books at the expense of hard working taxpaying people. In my opinion there should be a salary cap for every professional out there. If our President can only make $400,000 a year, is it fair for the CEO of FEDEX to make $9,000,000 in salary and bonuses a year? I would even propose to cap salaries of athletes and movie stars who make ridiculous amounts of money. They say that California is 400 billion dollars in debt. I say that if every actor in Hollywood pooled their money together they can certainly get California out of debt.

My goal is not to preach but to make people aware that we are responsible for getting where we are today and we alone can make small changes to get us out of this situation.

R