Who is to Blame for This Economic Mess?

By the end of 2009, do not be surprised if the U.S. unemployment rate is greater than 10%. Unfortunately, there are no simple solutions to solve this economic crisis. While the Obama Administration is trying to jumpstart the struggling U.S. economy, we might not see any significant improvements in the economy until 2011. However, who should we blame for this economic turmoil?

How Did We Get into this Economic Mess?

Many people want to blame irresponsible consumers for the current economic crisis. In reality, some of the blamed should fall upon consumers who spent above their means during the last two decades, but businesses and high gasoline prices probably deserve a greater share of the blame.

Keep in mind, American consumers by nature spend more and save less; however, this irrational spending behavior by Americans consumers has allowed the U.S. to maintain one the world’s strongest economies over the past two decades.

Unfortunately, during the last twenty years, American businesses behaved no differently than U.S. consumers. Some businesses bought private jets and helicopters to transport high-profile executives and board members around the country. Also, some of these same executives received bonuses of more than $500,000 per year. Could these companies really afford these extra expenses, including luxury jets and large bonuses? At the time, the businesses believed they could afford these extra costs, and unfortunately, the U.S. consumer shared the same belief.

But, the true culprit of this economic crisis is gasoline. During a period of 2008, gasoline prices went above $4 a gallon. So, you can infer that many American consumers were not financially ready to pay $3 to $4 per gallon, especially when they did not pay much more than $1.50 per gallon, earlier in this decade. Some people went from paying $45 per week to $110 per week on gasoline within less than a year. I doubt most people’s budgets included $110 per week for gasoline.

Analysis

Without the rise of gasoline prices over the last four years, our current economic crisis would not be so bad. People and businesses would have been less depended on using credit. Still, American consumers and businesses must share in the blame for the country’s economic woes. In many cases, citizens and businesses of the U.S. spent far more than their budget allowed.