March 10, 2008A financial educationI was struck by an insightful comment to an interesting post over at TPM Cafe. The post was discussing the impact of the collapse of the $8 trillion housing bubble on the economy. The commenter laid out a vicious cycle: A debt-supported spending frenzy by consumers led to inflated prices for certain goods, including homes. Inflated home prices allowed homeowners to borrow more against equity, given them more borrowed money to spend. As the poster summed it up: "The financial services and consumer products industries both encouraged this bad behavior and many economists and government officials blessed it. But still, at the heart of the problem, are ordinary Americans who, in large numbers, demonstrated remarkable ignorance of basic finance and also a surprising lack of self-control. Ultimately, I think the best thing that could come out of this recession is a new push to educate Americans about the basics of finance. The collapse of the housing bubble is bad, but there are looming crises in retirement savings and health care that will be much worse than our current problem if Americans don't start making better financial decisions." (emphasis mine) I think the poster, a self-described "fiscally conservative liberal" who goes by Purple State, makes an excellent point. American consumers desperately need an education in basic finance. But even those who are supposed to be experts help make the housing fiasco worse. |
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Comments
[March 10, 2008 3:23 PM]
HenryWhy should people worry about making proper financial decision if the government is going to bail them out when they get in trouble? That's what we are seeing today. Politicians are pandering to the financial naive.
The only education we need is the knowledge of which candidate is going to promise to get us out of this mess.
[March 11, 2008 6:46 AM]
BUDInteresting you guys favor financial self control but back increased spending on preK so we have have smarter kinderkids and the raiding of the rainy day fund.
[March 11, 2008 7:09 AM]
Dan Radmacher : →http://blogs.roanoke.com/roundtable/Bud,
I favor financial self control, but I also pay to send my son to quality day care. And, I've been known to occasionally dip into my savings when the situation warranted.
I see nothing contradictory there. Pre-k is an excellent investment in the future. And the rainy day fund is meant for circumstances just like this.
[March 11, 2008 8:43 AM]
Henry" And, I've been known to occasionally dip into my savings when the situation warranted"
What you are, Dan? Some kind of financial freak? Put that on a credit card. It's the American way.
We heard the same "investment" justification for government kindergarten. Obviously, that didn't work because now we need pre-school. Pretty soon, we are going to be birthing kids in school buildings.
[March 11, 2008 11:14 AM]
BUDDAN EXCELLENT---you dip into YOUR savings not OUR savings, not somebody ele's savings...there is NEW spending in the budget EXPANSION of current programs- the RAINY day fund is NOT to be used in this capacity..Finally, to say increased funding for pre K is a good investment given our current public school system is a hoot. If you have a production process that results in a 40% failure rate- do you increase the cost of your raw materials?
[March 14, 2008 1:27 PM]
Josh"Fiscally conservative liberal"
That's like saying "A smart Homer Simpson"