Financial Illiteracy: Root of World Money Crisis


So here's the real problem: the core principle of "democracy"—a word invented by Greeks—is that an informed electorate makes choices about who will lead, presumably choosing those who will represent its best interests. Unfortunately, we now live in a world where no electorate is actually well informed about what's actually going on financially. We all know that numbers don't lie, but that liars use numbers. But REALLY BIG NUMBERS numb the brains of most Americans. They numb the meaning of money. And they blur the motives of the people using them. Every number coming out of Washington has become too large to really understand. Does anyone truly comprehend the difference between $10 billion and $1 trillion? Gee, it's a whole lot of money either way. Either one would pay for a great quantity of baby formula, or many, many college scholarships. We're going to need some new denominations soon. What about a terabyte or a "light year" of dollars?

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What is happening in Greece illustrates starkly how the people as a whole can lose sight of what is actually in their best interests, and how politicians—whose first duty is, after all, to get elected—either did not try or utterly failed to communicate the real state of fiscal affairs in that country for well over a decade. That lack of communication and lack of understanding is now coming home to roost in the form of violence in the streets, and the likely expulsion of Greece from the EU. In the U.S., the principal cause of economic weakness derives from the still gigantic and largely unaddressed crisis in mortgages, which was caused in significant part by complex financial products never fully understood by many borrowers. Efforts by governments, both state and federal, are well intended but ineffective, because no one really wants to deal with the entire problem principally because of its staggering magnitude. The new budget proposal, with all of its spending and deficits, doesn't really do much in terms of mortgage relief, but worse than that, it comes packaged with an advertised "$4 trillion in deficit reduction," when the deficit only INCREASES every year for the foreseeable future. The joys of baseline budgeting….

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