There is no doubt that every student, from Wall Street Journal reading B-schoolers to RC Theater students, has heard of the recent economic troubles, but what can the average college student learn from the fall of investment banks?
It may not be a surprise that the credit spending of our generation, which we learned from our parents, has fueled the rise of these banks. As young people spend beyond their means, investment banks buy up our debt as "securities." While you can spend like this for a while, eventually you must, as they say, "pay the piper." As more people defaulted on loans, banks' asset columns went from black to red. Now, as the Federal Reserve is desperately trying to bail out the banks, which is akin to Ben Bernanke trying to bail out the Titanic with a children's sand pail, they're lowering interest rates in an attempt to spur spending. This brings us full circle, to ask: wasn't it our spending that got us in trouble in the first place?
My argument here is twofold. First, we must realize that this government intervention in the economy doesn't help any of us in the long run. If we have a system where a bad investment pays the same as a good one, what's the point of trying to find a good investment? As long as the Fed is unwilling to let banks lose obscene amounts of money, they will continue to make bad investments, and we will simply find ourselves in this position again. As your hard earned tax dollars are spent to protect investors' bottom lines on Wall Street, the government continues to debase our currency to pay for what they can't pull from our pockets. Read the classical economists and they could tell you more about how that works.
Second, as we graduate and move into the "real world," we have to rein in our spending. You get a paycheck at the end of the month or every couple of weeks, and every dollar over that paycheck you spend contributes to the problems we're having right now. If we cannot learn to live within our means, we can look forward to a future of economic ruin.
The lesson to the student is thus, while the Fed might be willing to bail out the big investment banks, there isn't any Fed to bail you out, and no, your parents don't count. In the end, we must learn to be responsible with our money, especially now that most students carry hefty loans. If we fail to heed the lessons, we will end up as the banks did-flat broke.
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