The recent volatility in the stock markets around the world has put me on an emotional roller-coaster. The governments are doing what they can to prevent a global recession/depression but are they solving any fundamental issues? Absolutely not!
I think of every country as a family. The United States family has an enormous working potential and earns a lot of value for all the good that it creates every day. Every morning it wakes up, goes to work, creates new value, earns a salary and puts that into its “bank account” from which it pays its bills. Because of its hard work, this family has earned a lot and has invested a lot over the years. It is a generous family and provides significant aid to others. It invests in different initiatives to help the kids get better education and to provide decent health-care for most. It even provides some benefits for its senior members. This family also likes to live well and because it has a solid reputation, everyone lends it money. In the recent decades, the lifestyle of this family has required it to accumulate an amazing amount of debt. In the past few months, some of the family members have acted irresponsibly and this family is helping them out. However, since it already has a huge amount of debt, it must borrow more to help them out. This is how I see our current situation (in very simplistic terms). As long as we have major national initiatives with hefty price tags (Iraq war, Social Security, Medicare, MANY MORE….), as long as we spend as much as we spend, and as long as everything we buy is made outside the family, we’re perpetuating the situation.
The main question is how can this family get on a stronger financial foundation with a system that can withstand high levels of shocks and uncertainty in foreign countries?
First, we need to produce innovative new products, services, and technologies to be exported. These must be produced here in America. We need to produce new energy sources cheaply, new medical technologies cheaply, new drugs, new computers, new knowledge, and everything else that we can innovate and sell. We must produce these competitively here in the US! You ask how can we make something cheaper than in Asia/Africa where labor is much cheaper? We do not need to make it cheaper. We need to make it better. Let’s invent even better machines that can do the work. Then let us produce many things China, India, Russia and every other country wants to buy, let us buy less from them and more from our internal producers, let us innovate so we can be the cheapest producer in the world with the highest paid workforce, let us create jobs in research so we can invent the new energy sources, let us get rich as a family!
Second, we need to cut wasteful spending of our governments. This is a long-term issue. Outdated programs should be replaced with new innovative interesting programs that people need. Let’s make it an initiative to run the programs as effectively as possible with objectives and achievement bonuses.
Third, let us create incentives for people to OWN rather than pretend to own. Most people have a mortgage against their homes. Instead of having a tax incentive to have a mortgage (the home mortgage deduction) why not have a tax incentive to not have a mortgage? Instead of giving businesses advantages to go overseas for labor needs, let us reward those who have all-American teams. Instead of taxing people’s estates, let us come up with creative incentives for people to build estates. Let us fund financial education and discipline from middle school to graduate school, so people will not borrow when they cannot repay. Instead of promoting sales of cheap Chinese made products, let us have sales of American made products.
If you agree or disagree with anything I have said, feel free to comment. These are my humble thoughts and I know it would take an act of God for the government to agree. So, I will pray…