Money in the bank

A sure thing that may no longer apply.  As the dollar continues to devalue and the Fed continues to print more, the piles of money we have stored away in emergency funds, savings plans, and even in precious metals is worth less and less.  This is definitely a frustrating situation.

For the past several years, counter to the rest of the nation, a small but dedicated group of bloggers have been posting about the trials and tribulations of teaching themselves and their readers about how to be frugal in a consumer economy.  101 ways to save at the grocery store, 21 ways to use your vehicle less, 15 steps to budgeting your income, 10 reasons to invest in index funds, and 20 baby steps to getting out of debt – those are the types of posts that have piqued reader’s comments and led the charge towards spending less and earning more.

So, secure in the thought that we have done things right and have avoided the danger of the bubble pops that have hurt so many people in recent months, we wake up this morning to the news of Bear Stearns and begin to wonder, if an individual or even a group of individuals working collectively can avoid the credit trap, why did this financial giant get caught short?

When an individual is in a credit crisis, there are documented ways to begin to deal with it.  But when a financial institution is in a similar situation, it represents a much larger problem than just poor financial planning.  In Bear Stearns we are seeing a reverse collapse of an economic system which has been under increasing attack in the last year.  The so-called Free Market economy that so many of our neoliberal political and business leaders, and corporations are so proud of is at the heart of the problem. 

Seen through the eyes of an individual, we can not help but notice that our economy has been taken over by credit junkies.  Borrowing today to fix yesterday over and over again until the debt load is so deep that they can’t look up and see a way out.  An individual can choose a bail out loan, pay off the creditors and then stick to a budget.  But anyone who has been there will tell you, fixing things is a life time process.  It’s so easy to take out that new credit card, or buy that new car, or invest in the new stock,  or . . ., and there you are right back where you started.  As long as the economic world we live in is invested (yes, there’s that word again) in consumerism, advertising its many wares thousands of times daily and pressing us to be engaged constantly in the same process through our jobs and our lives, we will be in danger of falling back into the hole.

Now we are seeing that this is not just an individual problem.  We have been taught that a free market will fix it all.  That a market place without regulation is self-correcting.  But in personal finance you learn that the first step in dealing with an addiction is accepting the fact that you are addicted.  Sometimes it takes a crisis, sometimes it takes an intervention to help you see the light.  What is happening with Bear Stearns today may just be that crisis.

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