Depending on where you are at in life, income, we all have a different opinion on the recession, but one thing we SHOULD all have in common, is to realize that the recession is necessary and is a sign that problems CAN still be fixed (and should!).

All we hear on the news every day is bank failures, corporate bankruptcy, foreclosure and bailout plans. A natural reaction would be “save us please, government and banks!”. What we should understand is that the recession of depreciating housing prices, failing banks and bankrupt corporations is a GOOD THING.

Why, you ask? Because most of our economy is artificially built on credit and debt, like a sandcastle. People profited from housing because banks were over lending, people took out unnecessary loans for cars and consumer goods because credit card companies allowed it, now it’s “payback time”.

So you’re still asking, why should we allow companies and banks to lose the money they invested? The simple answer is “Because it was never their money to begin with” Or “because it was not an honest and responsible investment”. What banks and Wall Street have done with money was no different than gambling, if they made the mistakes, they should pay. So then you cry again “But my retirement funds are managed by them!”, and the harsh answer is “You should not have, but it’s not too late”. While it’s no time to blame and point fingers, it’s a good time to know that it’s NOT too late to correct our habits and change our philosophy of spending. We may not change our system, but we owe ourselves the best of it, and we need to start taking responsibility.

How did we get into the mess we are in today? It’s like an assembly line, banks lend from the Federal Reserve, banks lend to more people, people take the opportunity to borrow money to buy houses as long as they think their paycheck will keep coming and interest is low. Because supply of money and buyers increased, prices increased also. Now people are losing jobs and money, so housing cannot be paid what was expected.

What would have been the better path to prevent this disconnection? If consumers understood that buying while it’s hot was immoral and mathematically harmful to themselves. If banks realized that people don’t buy what they can’t afford, if only people with high confidence bought houses, houses would still be at a stable price and plentiful for hard working people.

So how can we reverse the trend from today on? Do the exact opposite of most bad habits we had. If you had a habit of using your credit card, STOP and pay it off. If you have debt, pay it off before you get deeper. If you have a habit of buying snacks, alcohol, cigarettes, cut back. If you were thinking about buying a house, WAIT. If you were saving for retirement in IRA, 401K managed by stock brokers, GET OUT. The idea is simple, don’t buy what you don’t need, don’t spend what you don’t have, don’t let other people manage your money, and don’t feed the monster.

This is not karma talk, but once you realize that an economic system turns in cycles (intentional or natural), you will see that those who benefited the most in the boom, will also be the ones who pay the most in a bust (ask yourself, where can you invest a million dollars outside of housing and stocks?) . Overall, in the long run, the system always rewards the responsible people who save, hard working people who don’t mess around, and people who are not pawned around by hypes.

Why should you embrace the recession? Because it can benefit you against the rest of ignorant Americans. Because it’s an opportunity for those who know how to manage money.





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