Europe’s Economic Woes

First off, the guys over at LPC Survival have updated their website.  Head on over and check them out!  They have a lot of cool survival stuff over there including Berkey Water filters (I have one of the Royal Berkeys myself.)

On to the post….

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If you’ve been watching the news lately it looks like Greece is getting ready to default on their debt.  No big surprise really, a lot of people have been saying it’s been coming for awhile now.  This of course could cause Spain and some of the other more indebted countries to go under as well, which could theoretically lead to the fall of the Eurozone.

This may or may not have a direct impact on the United States – depends on who you listen to – but one thing’s for sure, they haven’t been able to spend their way rich. CIMG4824

Debt is rampant for most of the large economies.  Here in the US we’re spending money we don’t have and we need to stop before it’s too late.

I read an analogy in the blog the other day that went something like this (and I paraphrase:) “It’s like a pilot on an airplane.  He doesn’t want the plane to crash any more than you do.”  I really like that analogy.  Who in their right mind wants to do down with the plane?

Then I thought a little more, and if this sounds like conspiracy thinking please bear with me.  When your airplane is at 35,000 feet and is sputtering because you didn’t put fuel in it and you’re the pilot, you want to make damned sure you can do everything you can to get that plane safely on the ground.  You’ll try anything.  But if you’re out of gas, you’re out of gas.  I think the pilot (at least he would if he were a banker) is going to grab one of the few parachutes and jump leaving everybody else to their fate and then show up later to help pick up the pieces – for a price of course.

That’s where I think the economy is right now.  We’re sputtering along and I don’t see a way clear of this mess.  We’ve tried printing money, which I’m sure we’ll do again in the form of some kind of rescue or bail out, but it hasn’t done much for the economy except float us along a little while longer.  I wouldn’t be surprised if some of the smarter bankers are checking their parachutes over while watching the European saga unfold.

Let’s Build a Model

Now, I’m not a banker and I don’t have an MBA.  I’m not a world class economist, although from I’ve seen lately it wouldn’t be hard to pretend and nobody would be likely to notice.  If anything I’m a science guy, so when there’s something huge – like the economy – I try to break it down into something much simpler that I can understand.

So here’s my model.  I look at my checkbook and see that it now balances, but that wasn’t always the case!  Oh no, not at all.  Ten years ago I was a financial wreck.  I owed everybody and my mother money.  Credit card companies, a couple of local banks, a car payment, and utilities, and on an on.  Everybody wanted a piece of my ass and not in a good way, which is where I see the economy being right now.

Eventually I paid off most everything that I owed.  How did I do it?  Well, I didn’t go out and get more credit cards and move balances from card to card.  I didn’t write checks that didn’t have anything behind them.

So Jarhead!  What did you do?

I did the only thing I could do at that time to get out of debt:  I instituted my own austerity program.

Yep, I tightened up my belt a couple of notches, cut up my credit cards, stopped spending more than I was making, and started paying my bills down as fast as I could with every spare nickel I made.  I cut out things like cell phones, movies, eating out, cable, television, trips, and pretty much anything that didn’t have to do with paying down my bills. I had to have a vehicle because I live in the country in Maine, but that old beat up truck was paid for.

And you know what?  It really sucked.  A lot.  But I was able to pay off all that debt in about five years.

These days I don’t spend more than I make.  I live comfortably, but not above my means like I used to.  I set aside a little here and there for a rainy day.  My truck is more than fifteen years old with over 260,000 miles on it, but still runs good and I don’t have any plans on trading it in any time soon.

So now I look at the government and their debt and try to compare.  Are they deep in debt like I was?  Yep.  Are they spending more than they’re making like I was?  Yep.  So far it all lines up.  Oh sure, it’s a couple of orders of magnitude larger and more complex than my checking account, but it’s really the same thing:  they owe a pile of money and they’re spending more than they make.  How can they fix it?

Our approach to solving this problem is radically different.  Following their logic instead of an austerity program I would have gone out and applied for more loans, bought myself a new Beamer with all the accessories, and moved in to an apartment that was way more than I could afford simply because I knew the banks would give me more money or I could write checks out of my checking account (even though it was empty) in the hopes that all this excess spending would somehow cause money to start flowing back into my bank account.

Of course if I had really done that I’d be writing this from a jail cell in Maine State Prison, which I understand has less than luxurious accommodations.  I’m happy to say I’m not writing from there.

Conclusion

Sure, this is a vastly simplistic approach, but sometimes those are the best.  I really don’t think printing money is the way out of our current mess.  I look at Germany and think that their austerity program is a good idea simply because I did the same thing on a much smaller scale.  Austerity sucks and nobody likes it, but here’s how it works:  you cut back your spending to the bare necessities, get yourself out of debt which takes a certain amount of time and effort, and when you’re finally free and clear you can go back to living normally within your means.  Like I said, these days I live comfortably without spending anywhere near the money I used to in my personal pre-economic collapse days.

Unfortunately, most people are used to getting what they want and the thought of austerity is repugnant to them.  Just look at Greece’s population.  Not too long ago they were rioting in the streets because of it and the new government wannabes are saying that they won’t do it.

All I can say is that it’s going to be interesting watching the house of cards and seeing what it does in the coming months.

What about you?  How would you solve this mess?

Sound off below!

-Jarhead Survivor