Our economy is 70% consumerism. That means it is mostly based on individuals buying stuff. So the current setup of our economy holds two basic facts:
- Individuals buying more stuff than they can afford to buy (based on their income) has a net effect that is good for the economy.
- When individuals lower their spending and save and invest money, the net effect is bad for the U.S. economy.
That said, should we even care about “the economy” in its current setup? If individuals were really doing what is good for themselves (saving and investing), it would be terrible for the economy.
So could Obama’s stimulus really work? Absolutely not. Not if you consider “it really working” to mean more than just temporarily. We don’t need a stimulus. We don’t need a boosted economy. We need a changed economy. There are only three ways out of this mess.
- The financial and economic system of the U.S. (and much of the world) is not repaired and we enter a very long, long, long depression that includes unprecented levels of poverty in the U.S.
- The U.S. merges with one or more countries. In the same way Merrill Lynch had to be bought by Bank of America… the United States might have to be bought by one or more financially sound countries.
- We redefine the rules of our economy to be healthy and sustainable. Rather than require individual consumers to jump on the grenade of “just spend, spend, spend for our country’s sake”, we completely rethink our economy to measure its health in a way that it is parallel to the financial health of the individuals who live here.
It all starts with the individual. And for the individual, it all starts with the basics of financial statements: the balance sheet and the income statement. Individuals’ income statements need to be in the positive. If we can figure out a way to measure “the economy” in a way that would celebrate individual financial health, that would be great. If we can’t, then we should be building and spreading individual financial health anyway, despite its terrible effects on “the economy”.
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