There is no Such Thing as Personal Finance

Our individual financial decisions, as personal as they may seem, have global implications.

To operate efficiently and grow, an economy needs consistent sources of capital. Unless we don’t mind hyperinflation, this capital can’t come out of thin air. It must come from savings (primarily from bank deposits, the stock market, and bonds).

Economic growth is achieved when those with growth opportunities who need more capital successfully acquire it from savers. Normally, an economy will rely heavily upon domestic savings for this process. The United States is a glaring exception.

For many, many years now, investment in this country has far exceed our domestic savings. Foreign nations, who have been attracted to the investment opportunities within our borders, have provided us with the means to grow our businesses, consume more goods, and generally improve our economic well-being with a cheap supply of money. This works fine…indefinitely.

We are essentially living on borrowed time; outsiders have been providing us with the ability to live the materially-crazed lives that we have, but that doesn’t mean they will forever. Our party will quickly come to a halt when the bill arrives, and by this time it will be too late to avoid deep economic hardship.

Let’s say that foreign nations decided to stop buying (or even begin to sell off) the massive amount of Treasury debt they hold.  Interest rates would rise as the value of the dollar falls, and our government will be essentially broke with few takers willing to finace more deficit spending. The Fed would probably buy Treasuries to prevent the government from bankrupting, effectively flooding the money supply and wreaking even more havoc on the dollar. It’s not a pretty scenario, but what other result can be expected when you actually consider the madness of our unsustainable ways? We’ve been leading ourselves to the economic grim reaper.

Unless we Americans drastically change our heavily consuming, instant-gratification ways, we are in for a serious wake-up call (even bigger than the financial mess that began to unfold last year). The current state of affairs has many Americans changing their habits, but this needs to be a part of a bigger shift, not just a temporary response to the economic downturn. By living beyond our means, we’re jeopardizing not only our own futures, but the future of our country as a whole, of both current and future generations.

Every dollar that we save in domestic banks, stocks, or bonds is a dollar invested in the future of our nation. Collective change begins with individual change, so we all need to examine our ways as part of a bigger picture. When you forgo some needless little gizmo and save the money instead, you’re making a positive investment in the future.

I know that there is a darn good reason for objecting to my reasoning- what’s the use? Those who do save will only have it robbed by our government to give to the foolish ones who didn’t (including our government itself). We’re seeing this already, and it figures to happen even more in the future. It’s simply an unfortunate fact though. We must lead by example and help convince others to join the fight to create a far more rewarding, sustainable economy that doesn’t borrow (or should I say steal?) against the future.

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