Commentary and Opinion

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Thursday, February 21, 2013

Spence: Rewarding Financial Illiteracy

Commentary by Jim Spence: There is a sad truth in 21st Century America. The United States is led by people who are financially illiterate. It is also terribly sad that the majority of the U.S. electorate is now also financially illiterate.
      Only widespread financial illiteracy can explain how a corrupt policy of forcing investors seeking safety, to loan their savings to the federal government for less than 1% goes virtually unchallenged. Illiteracy also explains how Americans can hear a proposal calling for the federal government to artificially inflate the value of unskilled labor to $9 per hour (plus all the other taxes and costs associated with making payrolls) without grasping the true consequences of such a childish plan.
      America’s president is portrayed as someone who “feels” deeply for low skill workers by an adoring and financially illiterate news media. His policy of paying near zero interest rates on federal borrowings is falsely portrayed as an effort to “help” the economy. His childish economic policies almost never draw any media scrutiny.
      Evidence of financial illiteracy is everywhere. We live in a popular culture where more people know the identity of reality television stars than the Chairman of the Federal Reserve Board.
      After decades of coddling self-serving teacher unions and wasteful bureaucrats, the public school system is now saddled with the enormous burden of babysitting the offspring of financial illiterates. And accordingly, not present in most teacher skill sets is the ability to explain why it is so foolish and non-competitive to artificially inflate the value of unskilled labor. Also far from the skills of those in charge of the learning processes in our nation is the idea that when the federal government insists on paying less than 1% for savings…..very few people will bother to save. The consequences of inadequate savings rates are never discussed either.
      How can all of this be taking place in America right under our noses? The answer is pretty simple. The majority of American voters have chosen to become financially illiterate. America has elected a majority of financial illiterates and we have allowed the majority of our children to become financially illiterate. Now the majority of our children’s children have no clue about rational financial behavior either.
      Worst of all, through the public policies put in place by all of these financial illiterates; we are now actively punishing all behaviors that reflect a reasonable level of financial literacy. In America, we now actively reward dysfunctional financial behaviors while punishing rational behaviors. This is not exactly a recipe for success, but it sells well to an illiterate electorate.  Happy President’s Day!