The future: Lessons learned from financial crisis should apply everywhere
The stock market rose nearly 500 points Monday on the heels of the announcement that Treasury Secretary Timothy Geithner had come up with a plan to rid the banks of their "toxic debt" and to open up credit markets again.
And while that is reason for some relief, this is not the time to relax. The worst of this financial conundrum is not over -- even if the market continues to climb even after the latest financial fix is implemented or there is another announcement of some faux pas on the part of the banks who are receiving taxpayer aid.
"What's the reason?" you might ask.
Because we have not really solved the problem yet.
The reason that the financial institutions in this country became so clogged with debt -- and why so many Americans found themselves in situations where they could not manage their own balance sheets -- is that the fundamentals were bad.
Too many people were given mortgages for inflated property values that they could not afford or for misreported income. So, when it came time to pay the piper, they couldn't -- and the banks, who also did their own job of pretending everything was OK -- were stuck with bad loans and overpriced properties they could not sell.
So what does that mean for the rest of us?
The way the financial system has been run is really a much larger version of what is going on in many American families.
Rather than waiting to save for luxuries and managing their debt appropriately, many people have simply taken on too much and are unable to handle all their bills.
The bright side of this recession is that it has slowed down the consumerism that seems to have swallowed this country. People are thinking more before they buy and weighing need vs. want.
And those lessons can be transferred elsewhere as well.
While the idea of trillions of dollars of debt might seem like something that can be worried about tomorrow, the reality is that this nation has to think -- now -- about what it will mean for the children and grandchildren who will inherit it.
That means that government officials will have to learn not only how to spend money, but how to save some -- just like the millions of families who are struggling with that task now.
If that happens, this recession will be a wakeup call and the future will hold the promise of better days.
Published in Editorials on March 24, 2009 10:28 AM