If you live in the U.S., no doubt you’re aware of being in the biggest financial crisis since the Great Depression. If you live outside the U.S., it will still spread to your part of the world if it hasn’t already. But is it really as bad as everyone says?

I think people are severely overreacting to the short term problem while severely underreacting to the long term problem.

The short term problem

The economy is obviously in trouble, but remember that for most people, nothing bad has actually happened yet.

Some people have lost their jobs, and I most likely will too. I’ve known for about 6 weeks that the company I work at is going to lose 80% of its revenue on October 3, and that date is finally here, so we’ll see what happens. But most people in this country haven’t lost their jobs.

Homes have dropped in value from their peak, but that doesn’t matter. You don’t feel it at all until you sell, and even then, you’re getting a better deal on the next place you buy. Some people have lost their homes, but that’s because they were counting on a miracle to be able to afford them. Failure of a miracle to materialize is not a crisis.

Stocks have dropped, a little. It amazes me how much people were freaking out about that tiny 4% dip in the Dow we recently had. 4% is nothing. It was back up more than 4% the next day. Now the 7% drop, yeah, that was big. They called it the biggest Dow plunge ever, but that’s only in terms of points. In terms of percentages, which is what matters, it was only the 17th biggest Dow plunge.

It dropped by a greater percentage as recently as September 17, 2001. 7% is really big, but not close to the record of 22.6% on October 19, 1987. Did anyone here survive 1987? Corrections happen once in a while, and we were about due for one.

Gas is up a little, they say. Actually, adjusted for inflation, gas prices have remained relatively flat in the U.S. since 1918.

What is this blood in the streets that everyone’s talking about? Maybe it’s not champagne, but it’s sure not blood. There will be some kind of bailout, and then everyone will forget all about this.

The long term problem

Don’t get me wrong, lots of bad things have happened lately. It’s just that we haven’t felt the effects yet. The tumors are growing, but we appear healthy on the outside.

Unfortunately, it’s possible to rack up an awful lot of financial problems before it all comes crashing down on you. But then, it’s too late. One good thing to come out of this mess is a wake up call.

This past Tuesday, the U.S. national debt passed $10 trillion. That’s 1 quadrillion pennies. How often do you get to measure things in quadrillions? When you include unfunded Social Security, Medicare, Medicaid, etc., the total debt is $59.1 trillion, or $516,348 per household.

We’ve been at a financial DEFCON 2 for a long time. For us to really see blood in the streets, all that has to happen is for the world to say, “You know what, America? We don’t want to lend you any more money.” Then we’ll see how helpless we are at paying our own bills.

Don’t think that the U.S. is invincible. The Holy Roman Empire had a nice run for 1,000 years. How are they doing today?

The day of reckoning is coming. I have no idea if it’s coming soon, or in 10, 20, or 50 years. But it doesn’t matter. The longer we wait, the harder it will be to avoid it. We need to start taking some drastic actions now.

So here are some basic ideas. You won’t like them, but you can’t get a shot without feeling a pinch. No sacrifices and the whole country goes under.

I’m going to take a risk and get slightly political here, but seeing as how I’m an independent, it’s probably relatively OK. (Interestingly, Breanne Potter posted some political statistics about the Myers-Briggs Type Indicator, which predict that I’d be an independent based on my type.)

Social Security

They say that Social Security can’t be saved. Really? Are you sure that cutting benefits by 90% and raising the retirement age to 100 wouldn’t do it?

Social Security was originally meant to provide some extra income in your golden years, not cover all your expenses. People would start collecting benefits at 65 (I assume), and maybe die at 68. They also probably had a pension. (Remember those?)

Now people are living much longer, there are fewer workers per retiree, and people expect Social Security to pay all their bills. And yet, we’ve made basically no changes to the system.

If you want to retire at 65 and live to 95, you need to save up a lot of money to pay for that. Social Security is just your ice cream money, but you’re responsible for the rest.

Let’s start raising the retirement age right now. We don’t even need to cut benefits for current retirees, but at least stop making cost of living adjustments. I know you think you’re entitled, but we’re in a crisis, and we need to do SOMETHING.

Wars

New rule: no more unnecessary wars. Even if a war would cost absolutely no lives and liberate these people and make us allies with those people, it doesn’t matter. We can’t afford it.

We used to be the country that thought Hitler was Europe’s problem. Now we’re the country that wants to send the military whenever someone looks at us wrong. Stop doing that. If there’s a problem, let the UN do something.

The bailout

The bailout might not end up being $700 billion, but there will probably be a bailout of some kind. Bail out who you absolutely must, but let some people go under. Don’t reward recklessness and encourage it to happen again. Go after the bad guys and make them pay. Let people lose their homes if they can’t afford them; it’s their own fault and we can’t afford to save them.

Personal debt

As for individual households, stop racking up so much debt. I recently got a letter saying my credit card limit had been increased to $20,000. If some disaster ever forced me to charge even a tenth of that, I’d cut my power and starve myself until I paid it off.

I know someone who makes considerably less money than me, who just bought a $27,000 car and financed most of it. Meanwhile, the car I paid about $14,000 cash for 6 years ago is holding up just fine. I know being cheap isn’t much fun, but neither is being in debt.

I have a friend of a friend who owes $25,000 on his credit cards, and he has no intention of ever paying it off. His plan is to just keep charging and making the minimum payments until he dies. A good plan, until he maxes out his credit and has to declare bankruptcy.

Stop thinking of debt as normal. The attitude that citizens and politicians can afford anything they can charge is killing this country.

An inspiring story

But I won’t end on such a grim note. Instead, I’ll share this story I heard years ago, which provides some much needed inspiration for these troubling times.

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A young man asked an old rich man how he made his money. The old guy fingered his worsted wool vest and said, “Well, son, it was 1932, the depth of the Great Depression. I was down to my last nickel.

I invested that nickel in an apple. I spent the entire day polishing the apple, and at the end of the day, I sold the apple for ten cents.

The next morning, I invested those ten cents in two apples. I spent the entire day polishing them and sold them at the end of the day for 20 cents.

I continued this system for a month, by the end of which I’d accumulated a fortune of $3.50.

Then my wife’s father died and left us ten million dollars.”

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My last post on how to slowly grow your subscriber count ironically brought in 20 new subscribers that day.

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