The "Financial" Crisis - Who is responsible?

Here is my take,

Decades ago and since then, Congress and the Presidents (every president) kept lowering consumer lending expectations for borrowing. This was for the most part due to pressure from Americans who love spending who vote for them. The rules used to be you needed a 20% down payment in order to get a mortgage. As the bar was continually lowered to include more Americans, we were mortgaging houses we couldn't afford. Fannie Mae and Freddie Mac took on that bet and then insured it through, go figure, Lehman Brothers and AIG(the 13th largest business on the NYSE and the largest ins co in the WORLD).

So as Americans, who were probably at the same time - purchasing furniture, etc for that home they now have with "no payment, no interest for 5 years" gimmicks. Well, eventually it caught up with us. First taking down Freddie Mac and Fannie Mae as foreclosures piled up. Then, through insuring all these companies on Wall Street, companies like AIG and Lehman Brothers are now falling flat on their face. The "now" CEO of AIG has agreed to pay back 100 million to help out.

So to me, the main problem lies with us the American consumers who love buying things and love buying things we don't have to pay for until it is time to replace them. Sure, shame on the past elected officials of every party for lowering the bar of standards on Wall Street and as to how we can borrow.

McCain can't save the economy, neither can Obama, neither can congress. Well, they can help put the fence around the yard, Americans need to grow and maintain the grass.

If Americans don't become more responsible with their spending habits, we will be in this boat again. Stop buying without having the cash. Go back to the Biblical principles on spending.

"In the house of the wise, there are stores of choices grains and oils. Only a fool consumes all he has." God actually tells us we should have savings! Another interesting line in the book of proverbs says that "The borrower is slave to the lender" (Proverbs 22:7a). In the bible, God never used debt once to bless his people, and many Christians are starting to realize that God has a plan for us which does not involve borrowing money.Of course being in debt is not a salvation issue by any means, but God wants what's best for us and all of us who are Christians would like to follow His ways as best as we can. Many of us believe that getting out of any debts that we may have is the way to go, but how does one accomplish this?There are three areas that need to be addressed. The first is that of having the wrong priorities. God tells us in Proverbs 6 that when you are in debt you should escape it like a gazelle does with a lion. This does not mean you should kind of sort of maybe thinking about paying some bills, it means you should run as fast as you can until you are done with debt. Work very much and very hard until you are out of debt. Spending too much money is another area that God mentions in the bible. He tells us that "only a fool devours all he has." Who would have thought that God is not in favor of us living paycheck to paycheck? We need to quit spending as much money on ourselves so that we have money to pay off debt. The freed-up income will do wonders in helping pay down any liabilities that you might have. God also tells us that we should work. We are told in the New Testament that "The man who does not work does not eat." God wants us to be productive. He wants us to work hard so we can have resources to do his work. The crazy thing is, is that if you follow God's principles when it comes to money, he'll give you a lot more of it. This can never be proven mathematically, but it's true. If God can trust us with the little things, surely He will give us more of His wealth to manage.

Read, listen, and buy in to sound financial advise from people like; Dave Ramsey, Ric Edelman, and the queen of "don't buy it", Suzy Orman.

*disclaimer - Aaron is not perfect at his finances, but at least making better financial decisions than he used to.

1 comment:

Dave said...

Suze Orman was on CNN the other day talking about the crisis. She actually blamed US for the problem. I dunno, it just seemed a little weird that somebody who is from the "mainstream media" actually used the term "personal responsibility" several times in the interview. I would have thought the she would be all about blaming the Republicans and complaining how the government is not doing enough to help people.

I agree with you that this whole thing is our own fault. I am a prime example (on a small scale, thank God) of how easy it was to be lent money only to pay for it dearly later in life. Of my four credit cards, three of them were opened up when I was maxed out of my other cards.

I was a young and dumb college student when all that happened, but I am stiall paying for it ten years later.

My kids will NEVER open a credit card, so help me.