What Will We Learn From the State Of This Economy

The economy is in the toilet.

If you are at least 40 years old and grew up in a middle or lower income family, more than likely you know that your parents and grandparents did more with less.  They had less income and less credit.  They knew the value of a dollar and they knew how to save.  They understood delayed gratification.

I grew up in West Philly and lived with my god-parents.  My god-mother was from Alabama and moved to Philadelphia when she was a young wife.  I remember being around my Big Momma, Big Daddy, Aunt Emma and Uncle Charles.  None of them believed in credit and none of them graduated high school.  The men worked odd jobs:  handy man, janitor, Watkins salesman.  The women were house wives who baby sat, sold home made cakes and pies. They made their clothes and canned fruits and vegetables. They owned their own homes and cars.  They believed in saving but never put all of their money in the bank.

Their motto was “never put all your eggs in one basket.”  They were adults who lived through the Great Depression and children born during the Great Depression.

There are so many of us who want our children to have more than we had.  We want them to look good, ride good and have the latest toys and gadgets.  Instead of making our children work for what they want, we give it to them.  They have no idea what delayed gratification means.  They don’t know how to save and they think they are entitled to whatever they ask for.

This downward spiral that our economy finds itself in seems to have started with the housing market.  Banks began making creative loans to people who really couldn’t afford to buy a home.  Some people who did qualify for conventional loans, used creative loans to buy bigger homes than they could afford.  So who’s the blame for the housing mess?  Everyone who participated in it.  Banks and mortgage companies are responsible for making loans that people couldn’t manage.  The people who accepted the loans are responsible for biting off more than they could chew.  There were some people, however, who didn’t understand mortgages and how they work – whose fault is that?

Wall Street is a mess.  Besides the housing market we have investment scams, the biggest of them all being Bernie Madoff’s Ponzi scheme. The automobile industry is in a shambles.  Banks are closing across the country and the retail industry is bleak.  The government is trying to bail us out of this mess and things seem to be looking up.  It’s going to take time for things to get back to normal.  Not the old normal, but a new normal.

So, what will we learn from the state of this economy?   Will we save more and spend less?  Will we handle credit better?  Will we be more frugal?  Will we eat more meals at home?  Will we learn to live within our means?

One of the things that we should learn is how each part of our economic system is tied to the other.  No one thing stands alone.  When the housing industry fell, it started a domino effect and the dominos are still falling.  The government can only do so much to get us back on track.  To get the economy out of the toilet, each of us must do our part.  Becoming more frugal and living within our means is a start.