Of Toddler Tantrums and Bailout Bills…

Posted by Lorren on October 7, 2008

Q: What does a toddler having a tantrum have to do with the recent bailout bills passed by congress?

A: If you reward bad behavior, you can expect more of the same.

Many parenting books, and my own experience, tell you that if you give in to what a toddler demands during a tantrum, you can expect more of the same. They figure that they are being rewarded for bad behavior. Thousands of parents in grocery stores experience this every day. “I want a toy!” If you buy the toy, the child will ask for more. If you don’t buy the toys, eventually they stop asking. Even worse is bribing your ill-behaving child with promises to buy a toy if they behave for the rest of the trip at the grocery store. What will happen next time at the store? The child will likely misbehave so that you’ll bribe him or her again to behave.

So why do we reward bad behavior in the financial markets? If you read many books on financial advice, like that of Dave Ramsey, or the Millionaire Next Door, they will tell you that if you want to be financially well off, you should save your money and live below your means. Often they suggest paying cash for your cars, not buying more house than you can afford, and putting together a nice emergency fund.

In recent years, the government has been rewarding bad behavior. They have been keeping interest rates low, so it’s cheap to borrow and doesn’t pay as much to save. Then they bail out the banks and mortgage companies that make stupid loans to people in instruments that are the equivalent of junk bonds. Now California wants to be bailed out, after they made stupid mistakes in giving out too many entitlements and overspending because they can’t control the illegal immigrant population in their state.

What about the people that work hard? What about the people that did do what they were supposed to do? They’re seeing their hard-earned money erode in the stock market and due to inflation… and more than likely will lose more of it due to the increased taxation that will be needed for the bailouts. The hard working, saving people of this country are being punished for the deeds of the reckless, lazy, and stupid people of this country who spent beyond their means, or invested in risky securities that were difficult to understand.

What should we expect now? Unfortunately, like the toddler that knows that if he misbehaves at the grocery store, mommy will bribe him with a toy if he is good, there is no incentive for people in this country to behave with their money. Why should people refrain from investing in stupid securities if the government is willing to step in and bail you out? The people that are responsible for this reckless behavior should feel some pain. If they’re a politician that has voted for this stupidity, vote them out. If they’re in business, they shouldn’t get a golden parachute, they should lose money just like everyone else that entrusted their money to them. We shouldn’t reward people for this!

I think that Glenn Beck has the best idea, in that we should put our investments into things that we know that we’ll need in the future. Like food. Or clothes. Although my kids already get the majority of their clothes from relatives or Christmas presents. Perhaps it’s a good time to take up sewing clothes again. Perhaps we should learn to do more for ourselves… because the way I see it right now, our money is going the way of the confederate dollar, and we might need to start learning to live by bartering, and without money.