Our standard of living will go down

by Ginosar  

For decades I told my friends and family that we are spending beyond our means and we will pay for it, both nationally and individually. All my life I was "rich" because my desire for material things were lower than my income, so I did not face drastic economic situations even when I resigned to work for social causes some 30 years ago.

I also knew well the meaning of playing with the stock market; I did everything in the market for a decade, from puts and calls to leverage bonds ten to one, trying to do it the American way-- to get income without working for it. I dropped off the Market almost 40 years ago to live with less economic ups and downs, but with more peace. I recommend that to all of you - the stock market is a game that only some professionals* can win. The ups and downs are not worth it, not economically and not emotionally.

Assuming that you have been following the dire economic situation the US and most of the rest of the developed world is now facing, borrowing to the hilt to shore the troubled economies, I strongly suggest that you rethink how to spend your money wisely. That is not a short term blip! We are now paying for our bubbles and will continue to do so for many years to come. Something in the order of 10 to 15 TRILLION DOLLARS disappeared in this recent economic game. You simply can not spend what you do not have for too long, even a big country like the USA. Our national obligations are way beyond our ability to pay them if we do not change course drastically after a hopeful economic recovery.

Here is what Stanford professor of International Peace, Jeffry Friedman, stated: "We are going to have to produce more than we consume, save more than we invest, and the government will have to take in more than it spends. That translates into austerity; a lower standard of living...Every country that has gone through the crisis successfully has done so by imposing fairly stringent austerity measures. That means real wages are stagnant or declining, you have to increase export, decrease imports, increase savings, and reduce consumption. That is the macroeconomic of dealing with a debt crisis."

[Harvard magazine July- Aug 2010]

Add to this that the foundation of advanced economies is cheap energy sources, from coal to oil and natural gas; these sources will increase in price with time due to higher international demand, by China and India especially, and some replacement by low greenhouse energy sources. Electricity will cost more and so transportation fuels. All of these forces will increase the cost of most of our material things, from houses to foods.

That will impact each and every one of us to a different degree.

Choose your own path to a sensible life.

*" Wall Street is populated by a bunch of people whose primary goal is to make money, and the rules are pretty much caveat emptor. You'd be a fool or a deluded idealist to think ethics would be prominent on Wall Street. That is not a statement against people in the money business, just a fact."

Steven Levitt, Univ. of Chicago economist and best selling author:  Freakonomics and SuperFreakonomics. [Money - July 2010]

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