Credit crunch and crisis, solutions are just moving debt

In this time of the credit crunch and economic recession, people are looking to their government to solve the problems. The problems seems to have been caused by the massive debts we have all accumulated. Many people have been living on credit to finance their lifestyle, the same goes for companies and even countries to finance their activities.

Now loans or credit are given as a means to finance something that cannot be paid for by yourself in the moment. But by spreading the payments into the future you are able to afford it now. But because money is not free you pay interest on the money you borrowed as a fee to the lender. The lender of course needs to be reasonable sure that you can pay back the loan for him to give you the loan at all. This way a loan is like taking your future earnings and spending them now.

The problem now is that in recent years lenders or banks have given credit or loans so easily to people without checking if they could ever pay them back. On Oprah you see people with credit card debts of $100.000 dollars and huge houses and five cars. Of course everything on credit. You need to earn a lot of money to pay that back. And the problem is that probably those people would never earn enough to pay it back, but the banks didn’t check properly. The lenders just wanted their bonuses and fees and ignored the bottom line.

Now people massively cannot pay their debts anymore, banks are losing their income from the debts and have to write off the loans from their assets. The banks get in trouble and hang on to their money. Companies cannot get credit anymore for investments and growth and now we have an economic crisis. Governments are now trying to save the banks by giving them money and putting money into stimulation packages for the economy. But whose money is that?

Yeah right the tax payers money, our money. But the governments don’t have that money lying around, so they also take out credit in our name for these measures. So their are basically doing the same as what got us into trouble. They are taking future earnings (taxes) and spending them now. So all the individuals debts and companies debts are being moved to the government as a general debt as a country. Thus we are only moving the debts around and not really solving the problem that there are just too many debts. We took too much of our future earnings to spend them now and we can never earn enough as a people to pay back all that debt. The only sane thing to do seems to get rid off all the debt somehow and start again fresh. But how can we do that?