The financial problems we all face are now bigger than the government alone can handle. For example, our financial challenges cannot be solved simply by the Federal Reserve raising or lowering interest rates, yet millions of people all over the world worship the wisdom from the Federal Reserve. Whenever former Federal Reserve Chairman Ben Bernanke and current Chair Janet Yellen speak, the world listens.
However, the problems have not been solved and now are becoming global problems, beyond the borders of our country and beyond the control of our political leaders.

Some Of The Problems And How They Are Related

1. A growing trade deficit: The U.S. trade deficit for 2006 is forecast to be $423 billion. This means the nation will consume $423 billion more than they produce. On a smaller scale, this would be the same as a family who earns $5,000 a month spending $6,000 a month. You and I know that this $5,000-a-month family is only making their problem bigger. This problem leads to the next problem.

2. A growing national debt: According to the Treasury Department, 42 presidents, from Washington (1789) to Clinton (2000), borrowed a combined total of $1.01 trillion from foreign governments and financial institutions. Between 2000 and 2005, the Bush White House borrowed $1.05 trillion - more than all the previous administrations combined. Getting back to the $5,OOO-a-month families, many of these families tried to solve their problem by taking out home equity loans. You have seen the ads on television telling you how smart it is to payoff all your credit card bills with a home equity loan. This is a smaller example of pushing the problem forward. The president and the government today are solving the problem in much the same way, taking out a home equity loan on our future. This problem leads to the next problem.

3. A falling dollar: As already mentioned, in 1971 the dollar was converted from real money to a currency. In 1971, President Nixon was trying to solve a problem - too much of our gold was leaving the country. Why was gold leaving the country? The answer is found by going back to problem number one - a growing trade deficit. Because we were buying too many Japanese and European goods, the difference between what we sold to them and what we purchased from them was collected in gold, because back then our dollar was backed by gold. To solve that problem, President Nixon simply changed our dollar from an asset to a liability - an IOU. Today,our trade deficit is higher than ever before and the IOU to the world is massive.
Instead of backing our dollar with gold, the United States can just print more money (just as we as individuals use credit cards or write checks without any money in the bank - the difference being that you and I can be arrested and thrown in jail for writing bad checks). While printing as much fake money as we wanted was intended to temporarily solve the problem in 1971, it did not solve the problem of over-consumption. As a result, the 1971 change created even more problems. Very big problems that we are beginning to pay for today.

Between 1996 and 2006, in just 10 years, the u.s. dollar has lost half of its value, when compared to gold. In 1996, gold was selling for approximately $250 an ounce. By 2006, just 10 years later, gold was selling for over $600 an ounce. As an example, in 1996, if you had put $1,000 in the bank, today it would be worth less than $500 in gold. Instead, if you had purchased four ounces of gold for $1,000, today that gold would be worth $2,400. This 1971 change in the rules meant that savers became losers. People who believed that their money was safe in the bank lost, simply because they did not really have money in the bank- they had a currency, an IOU from the government. People who live on fixed incomes will find life more expensive - their dollar will not go as far. What the government is telling these people is that the problem is inflation. What the government does not tell them is that the problem is really devaluation. The dollar is dropping in value simply because our government is printing more money to solve their problems. By the year 2020, a loaf of bread may cost $12, but pension checks, for those who get them, will stay the same. This problem leads to the next problems.

4. Baby boomers without money: We've emphasized the fact that in the next few years, the first of 75 million baby boomers will begin to retire. Many have inadequate funds to retire on. This lack of savings is caused partly by a law known as Gresham's Law. Gresham's Law states that when bad money enters the system, good money goes into hiding.

This has happened throughout history, as far back as the Roman Empire. In 1964, the United States took real silver coins and replaced them with fake silver coins. Immediately, real silver coins went into hiding. I believe that people may not be saving because, either consciously or subconsciously, they know the money they receive is not real money, so they spend it as fast as they can. We are a nation of debtors today simply because many people know their money is worth less and less- so why save it, since savers are losers. Most middle-class people have more money in their home equity and retirement accounts than dollars saved in their banks. For instance, Ghanaians have one of the lowest savings rates in the world. They are living longer with less money and less opportunity. This problem leads to the next problem.
problem leads to the next problem.

5. An entitlement mentality: Since millions of people lack financial resources, they now expect the government to solve their financial problems or to take care of them. If the government does not take care
of them, who will? With prices going up, who can afford to take care of them? The problem cannot be pushed forward much longer. With Social Security in debt $10 trillion and Medicare in debt $62 trillion, it seems the only way to solve this problem is to keep doing what we have always done - spend more than we earn, borrow more than we can afford, and print more money. It is a death loop caused by the inability to solve the problem - a problem caused by a lack of financial education. This problems leads to the next problem.

6. Higher oil prices: Higher oil prices are not caused by a lack of financial education; they are caused by greedy self-interests and a lack of financial vision. Although we have the technology and alternative energy resources to replace oil, we have not done so.

As a nation and a world, we will suffer financially because of this greed and lack of vision. High oil prices create the domino effect on the previous problems. As long as we are growing, other nations and lenders are very willing to lend us money as much as we wanted. The problem with higher energy prices is that the higher prices cause the economy to contract, not expand. If and
when the economy begins to contract, the people we have been borrowing from may be hesitant to accept more of our debt. If this happens, the economic problems cannot be solved by bigger promises and more debts. The house of cards may come down.

7. Tax breaks for the rich: Most of us know about the Golden Rule. Not the Golden Rule that reminds us about doing unto others. The Golden Rule I am talking about is the one that goes, "The person who has the gold makes the rules". It is a tragedy that in world the poor and middle class have lost their representation in government. Today, the rich make the rules, which is why the rich are getting richer.
For me, the best way to change the rules is to first get the gold. If you have the gold, then you have more power. When you have
the power, you are better able to enforce the real Golden Rule, the rule that states, "Do unto others as you would have them do unto you".

Photo Credits: Google