US and world economy has crashed and we do not seem to comprehend what's going on. Let first analyze the situation and see what we can do to fix the economy.

Analyzing the Situation

1. We have too much borrowing. We had 10 trillion dollar national debt in Dec of 2008, $11.6 trillion in April of 2009 and growing.
2. Government is spending too much money.
3. Military spending is astronomical and keeps increasing the national debt.
4. We are bailing out failed companies.
5. US has too much consumption and too little production.
6. We the people do not save money and go out and buy stuff the first chance we get.
7. Even though we the people do not have money, we still go out and buy stuff on credit cards and loans.
8. Federal Reserve lowered interest rates.

Stop Borrowing

In order to pay our debts, we have to make money and then save it. This is not currently happening. We have a 10 trillion dollar debt. The interest alone on that debt for the year 2009 is $500 billion and we are paying for it by issuing bonds (more debt). The whole world is hurting because of the US Economic Crash because they lent us money and they are scared we cannot pay it back. If the world is hurting and does not have extra money to buy our bonds, guess what, we cannot pay our interest. One of my friend said, we need to fix the economy so that the world can buy our bonds again, and everything will be normal like before. Everything was not normal before; borrowing money by issuing bonds got us in trouble in the first place. So, why would we want to keep doing it? What needs to happened is that we have got to STOP borrowing money and stop issuing bonds and start buying them back. How do we do that? Cut expenses and spending and start SAVING!

Cut Government Spending

Our government is spending too much money. President Bush spent a great deal of money on War and bailing out banks and car companies. President Obama is spending money to reform US economy. Both of this will and is hurting the economy. The best things government can do to help the economy is reduce its size, cut spending, and get out of the way so that economy can function freely. The supply and demand in the economy will correct everything itself. We all know that just by covering up our mess, we cannot solve the problem, it will surface again but only this time it will be bigger. So, let's deal with it and clean it up for good rather than covering it up.

Bring Troops Home

We are spending millions of dollars everyday on the so called war. We were attacked on 9/11, so lets find those terrorists and bring them to justice but what are we doing in IRAQ. Iraq had nothing to do with 9/11 or terrorism. Iraq didn't have any weapons of mass destruction. We just spend all that money and lost thousands of lives just because we didn't like Saddam. Let's bring the troops home. We have troops stationed in Japan, Germany, Korea, Arabs and other parts of the world which is costing US tax payers billions of dollars every year. Let bring all of them home, let the world alone and they will leave us alone. The founding fathers of the United States of America led the world not by military might but by moral example.

Stop Bailing out Failed Banks

Why take money from real people making real hard earned money and give it to failed businesses? If businesses are failing, its their own fault. US tax payers should not have to pay for other's mistakes. If banks are failing, they should deal with it, they should not have lent money to people who couldn't pay it back in the first place. They made a bad choice. If someone asks me for $1000 dollar and I know they only make $1 per month, I will never lend them money because I know that person won't be able to pay it back and even if I do and the person cannot pay me back, its my fault for making that decision, the government is not going to bail me out, then why bailout the companies? If they fail, yea, we will losses some jobs but new businesses will take their place and create new jobs and those businesses will be better off because they will stand on their own two feet rather than relying on the government. Think of it like a forest, if you see an old weak tree beginning to fall, you do not help it and keep it to stay up by spending your time to hold onto it in a hope that some day it will stand by itself. You let it fall and other new young stronger trees will take its place. If you try to prop up the old weak tree, not only you are spending your hard work, time and money but you are also suppressing new young stronger trees from growing. LET THE BUSINESSES FAIL!

Stop Bailing out Failed Car Companies

If a car manufacturing company like GM, Ford or Chrysler is failing, that is because they do not have a viable business model. Let them fail rather than supporting them. After they fail, we will have new entrepreneurs with new viable business models pickup the pieces and create great American car companies of the future. And the best part, they will be self sufficient instead of relying on the government and our hard earned tax money.

Go Back to the Gold Standard

One of the biggest and worst decisions we made was to take off dollar from the Gold standard in 1971. Before 1971, dollar was based on Gold. That means if I had ten dollars, I could go and redeem those dollar bills in physical Gold. The money had real value and trust. Most importantly, the Federal Reserve could not print money because they had to have enough Gold to cover the dollar. If the Federal Reserve had 1000 ounces of Gold and one dollar equals 1 ounce of Gold, that means the Fed cannot print more than one thousand dollars. If they do, they will not have enough Gold to cover the dollars if the dollar is up for redemption. This is very helpful because if the government cannot print money or create money out of thin air, they cannot bail anyone out unless they use real money of their own.

I do not completely blame Nixon for taking dollar off of the Gold standard because many foreign countries were using dollar to redeem Gold and US Gold reserves were depleting.

However, Instead of taking dollar off of the Gold standard, we should have regulated redemption of Gold in a better way. Passing a law such as you have to a citizen of United States to redeem dollar is Gold would have saved US Gold reserves.

Start Producing and Minimize Consumption

US economy is 80% consumption and 20% production. This is the reason we have trade deficits every year. We have got to start making real products in America and start exporting them and selling them to the rest of the world and make money. This sounds like we are cutting off the world but it is not, this plan will help the world as well. The world will benefit from this plan as well because we will be able to pay the loans back and they can get back the money they loaned us.

Stop Spending too much Personally

Whenever we get our paycheck, we go out and spend it. We are not saving. Some Economists saying spending is good, it helps the economy. One of my friends said, yea, if you have the money, go out and buy that shirt, it will help the economy. But I think they are all wrong. Spending is what got us into trouble in the first place. Buying that shirt won't help the economy because that shirt is made in China or Thailand. So, if you go out and buy that shirt, not only you are spending your hard earning money for no reason but you are actually helping foreign businesses in China and Thailand. It would be a different story if the shirt was made in America, however, we do not make much in America anymore. During these tough times, we need money coming in to United States, not going out.

Don't Borrow if you can't pay it Back

We the Americans love borrowing money, whether it is for a new car, new house, or new clothes. We just can't get enough. It is not bad to want new stuff, however get it only and only if you can pay back the loan. If you default on your loan, the banks hurt and in turn everyone else hurts.

So, stop buying stuff we cannot afford. The credit cards and loans enable us to buy something we cannot afford. This was the whole reason for the real estate bubble, people kept buying $400,000 houses when they made only 30k to 40k a year and had no cash at all for down payments. They took out sub prime loans and went for it. When they realized they cannot pay for the houses, they defaulted on their loans, ruined their credit and filed bankruptcy. Banks also lost money because they didn't get the money back they loaned to the home buyers and the banks started to fail and in turn affected all of us.

From another perspective, banks should not loan money to people who cannot pay it back, this is actually currently happening. Banks are denying more people than ever. The real estate bubble wouldn't have formed in the first place if banks didn't give away loans like candy on Halloween.

Do not Lower Interest Rates

Lowering interest rates encourages spending and borrowing. At this time, we need to save money and pay off our debt rather than incurring more debt and spending it. We should increase interest rates. Federal Reserve lowered the interest rates to half a percent. I think it should be much much higher so that people do not borrow money and spend it away.

What's Currently Happening

I appreciate that President Bush and President Obama are trying to help the economy. The intentions are to do good for United States and US economy but the actions being taken to do so are quiet the opposite from what we need to do to solve the problem. We cannot just cover things up, we need to fix things for good. Raising the interest rates, saving money and cutting spending will do it. However, we are currently lowering interest rates, which encourages spending and borrowing and hurts savings. Quite the opposite.

This article was originally posted in April 2009, posting date is in Oct 2010 because of website upgrades and enhancements.