ThomasT said:
I think your points/directives make sense. Maybe easier said than done wrt some situations.
But here's part of the problem, imho. Maybe THE problem wrt collective stimulation of improvement. We have it really good here in the US. So good, I'm supposing, that there's little motivation on the part of the average person to do the sort of stuff that, collectively, would make a positive difference.
The only thing, wrt the financial sector, that I wonder and sometimes worry about is whether or not it's practices, left unmonitored and unregulated, could actually precipitate the economic downfall of the US. I really have no idea. At first glance, the total economy seems too big. But then, the percentage of the economy that is the financial sector seems to be inordinately high, and growing.
I would characterize our situation in Australia to be like what your situation in US was a bit before the housing boom.
Our major export of ours is the mineral industry which includes various kinds of mining for a wide range of minerals including uranium, copper and so on.
Some people think that we will be 'riding the wave' forever and I see a link between the thinking of 'we will ride the wave forever' in terms of high living standards, easy credit and so on with respect to our 'riding the mineral wave' statement. Also we have absolutely ridiculous house prices here and the economist Steve Keen is predicted a big housing bubble right here and I wouldn't be shocked in the slightest for this happening.
The thing though, and this is my point, is that things always revert back to the middle: the correction mechanism comes in one way or another. Having huge deficits and fiscal irresponsibility within a country is one thing, but it's a completely different thing when you have trade between different countries.
When other countries stop doing trade with you, that's nearly as bad as dropping bombs on you. If (I'm thinking more along the lines of when though) countries stop lending money and demand that trade only take place using something that is considered valuable, then it ultimately means that the US has to end up producing something the other side considers valuable.
If this happens and you guys don't produce anything that is valuable, then you're screwed. If you can produce everything you need in-house then OK that's great! But the reason I'm skeptical is because you don't do that: in fact not many people do that at all which is a good thing IMO.
When you need something from somewhere else and you can't pay for it in the currency 'they' expect, then it means nothing short of social breakdown in the end. In collapsing environments, things that 'really are valuable' become valuable like food, water, any kind of energy, medical supplies and so on, and money becomes worth the paper it is printed on (or even less).
The person that is out of debt and has a roof over their head, no matter how small is going to be in a far far better position than the person who has a mortgage they will struggle to pay off (or never pay off) for a few reasons:
The first one is that people in debt owe something: a bank could confiscate their house amongst other things as they have an obligation to meet the needs of the contract they entered into.
The second one though is more subtle: the person who saves has a different mindset to the person who needs to borrow. The person who saves has discipline, has better planning for the future, knows how to sacrifice, and thus will be in a lot better position when the proverbial hits the fan.
Also the saver will be able to take their wealth and convert it to something valuable when they need to, even if they lose some of the purchasing power. A person in debt is in a far more precarious situation.
So even if one person decides to get out of debt and the rest don't, that one person will be in a way better situation to deal with chaos than the people who just think la-la-land is never going to end.
People will see this: they will see themselves going down the toilet with debt and they will look to other examples where they have decided not to go this route, and the people that do this will be a tangible example and not some theoretical one which makes the change for those who need it a lot easier since they can 'taste' and 'touch' the results for themselves.
Also your last paragraph is something that people should be very concerned about.
Finance for all purposes should be a very boring business. Finance (I'm not talking about insurance, this is different) is concerned about managing resources and allocating to themselves the risk of allocating those resources in the way that the debt may not be paid and that they will lose not only the potential returns, but the initial investment itself.
The risk is two-way and it should be two-way: if the bank is stupid enough to defy basic credit-analysis and throw too much money at something that fails, then they should lose. This whole idea is why any kind of bank or investor should look for investments that work out usually transfers to having ones that produce what other people need.
The idea of trying to manage all the risks financially through ridiculous forms of insurance (gambling is better) and ruthless speculation does not fit into this normal functioning of finance which is to allocate resources and share the risk between the debtor and creditor. I'm not talking about the management of say an airline company getting oil options or a farmer getting futures for the delivery price of their goods but instead of the situations where people are trying to completely eliminate the risk as well as to use insurance for completely un-necessary speculation.
Specifically the speculation I am referring to can be seen in a way that corresponds with liquidity. Long-term investments do not require the kind of liquidity that speculation, especially short-term speculation requires.
Speculation is of course inherent to the risk involved in allocating resources and having both obligations met for debtor and creditor, this I do not doubt.
The problem is when you allow credit to get out too easily, and when you allow this in combination with speculation that is not properly balanced (higher risk in finance usually equates to a much higher interest rate traditionally), and when you have a liquidity situation where it's easy to 'buy and sell' almost instantaneously, then you combine all these elements together and you get absolute chaos.
If people want to speculate, then OK, but speculation needs to come at a price and that traditionally is done with interest rates, which is a good idea. However the other thing has to do with liquidity because speculators absolutely love lax or 'great' liquidity because they can make a transaction any-time they want like it was just normal cash. This breeds the situation we have and are seeing right now.
There's probably going to be a lot of financial types complaining about the liquidity issue and they might even say if I would live in a world where transactions didn't go through instantaneously on things like groceries, fuel, and how I would live in that kind of situation.
My response to them is that I already have the wealth and there is no form of speculation involved if the money is rightfully so in my bank account and because of this it does not apply.