Here in the Land of the Free and the Home of the Brave, Americans are encouraged to be self motivated and creative in their pursuit of happiness.  For many this means entrepreneurship and taking risk along with the added reward from individual effort and work ethic.  Along with that freedom comes the responsibility to live with the results of such endeavors whether the results be beneficial or detrimental.   This idea of consequences, however, has become less popular with a population that assumes it is entitled to the “good life.”

As we look over the financial battlefield that is currently strewn with the wreckage of sub-prime mortgages, asset backed securities, and CDO’s, the natural question many are asking is “who is going to clean up this mess?”  Far too often we look to Uncle Sam to come in and offer help and most individuals look for someone to blame for the situation they find themselves in.  While its comforting to have someone to point a finger at, and helpful to have a partner like the government in cleaning up the overhanging issues, many are concerned that a quick fix to the mess we find ourselves in will eventually cause more harm than good.

When stuck in a mess, I’ve been taught that there are two important questions that wise individuals will ponder.  The first is “how did I get into this circumstance?”  and the second is “what did I learn from this experience?”  When asking the first question about the state of our economy (and specifically the financial sector that is feeling the most pain) one immediately can point to the sub-prime mortgage practices that created easy credit for those who were likely not qualified to take on the debt they so willingly applied for.

But the blame covers a much broader section of the population including those to took out credit card balances at zero percent financing (i’ve done it too) as well as the banks who enticed individuals to take advantage of these offers.  It rests on investment firms borrowing 10x the amount of capital they manage in order to magnify returns without adequately assessing the potential scenarios that would lead to loss, and it rests on those who chased returns by investing in these funds without truly understanding what they were putting their hard earned money into.

Attacking the second question is even harder as it appears the general population is not even willing to ask the question, not to mention act on any answer.  Do we really know what we should learn from this situation?  Or do we just want it to be cleaned up?  And if it gets cleaned up today, without answering the question, what are the ramifications?

I think we are in a dangerous time in that we as an economy (increasingly beyond the boarders of the United States)  are reaping the repercussions of an over-leveraged, greed based society.  In this context, I would define greed as the overarching desire to create wealth, with little heed to the consequences of the means to that acquisition.  Thats a wordy way to say we want wealth at whatever cost.  The problem is that now that the cost is evident, we are not willing to pay that cost.

My biggest concern is that if the government steps in to “fix” this situation either through fiscal or monetary policy, it will encourage the behavior that got us here by placing an artificial safety net under individuals and corporations alike causing us to continue a pattern on greed without truly understanding the pit we are digging.  At some point we will dig a hole deep enough that the government will not be able to bail us out without touching off the dangerous inflation scenario which could cripple our finance based economy.

While I’m not a doom and gloomer, I worry about the role the government plays in this scenario.  It would be my hope that we would have the chance to let the economic repercussions play their way through and wring the excesses out of the system. The government should step in to make sure that the basic human rights are being met (food, shelter, safety for all), but let the economic forces work their way through to set the foundation for a stronger, more stable, healthy resurgence of growth to take place.