ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel
  • »
  • Personal Finance»
  • Understanding Finance

Understanding Finances, the Economy, & Staying out of Debt

Updated on October 21, 2011
The United States Treasury
The United States Treasury

Understanding Finances

One of the best ways to understand finances is to understand what is going on at the governmental level and in the economy in general. It can help one to make better decisions both for your own life and family but also to help in knowing how to vote in the future. If your country's finances are "broken", or if you are headed toward a depression, then what good are your own finances to you? Even if you can't stop it, knowledge is power in regards to helping yourself through a hard time should the country experience big financial problems.

Many people want to save, or invest their money for many reasons. Understanding that the economy has a direct bearing on what investments of ours do well, is critically important. So, we rightly want a healthy economy. Understanding how things were in the past that caused a country to thrive are things we will want to replicate. Watching how a country can make decisions that land it in more and more debt is something we will want to avoid as much as possible.

Government sometimes steps in, and we see things like farmers getting paid to not grow their crops.
Government sometimes steps in, and we see things like farmers getting paid to not grow their crops.

Before the 20th century, the US economy operated by a monetarist, or free market economic idea. This philosophy was a great one in many respects because if the government didn't run a lean and efficient "machine", then it simply would shut down! The short version of what a monetarist or free market theory means, is simply that the government plays no or a very little role in determining the direction of the economy. We have been coming away from this idea for a long time, and the increasing billions of dollars of debt in just these last few years should be alarming to us all.

Before this last century, if the economy slid into a recession, or a depression, the government didn't feel it necessary to bail it out, or really step in at all. On top of this, the average American didn't expect government intervention. The idea was, that if private businesses caused problems, then they were the ones responsible for helping to fix those problems. This makes logical sense.

You also didn't see Americans drawing welfare from the government. The idea of a farmer getting paid to not grow food was a crazy idea. People that weren't really homeless, that didn't want to work were called "bums" (gasp, I know that's not probably PC there!) The government didn't help in subsidizing loans. The U.S. has come very very far, and we are in a huge debt that can make ones mind swim in discouragement.

Imagine this, a people that worked, that were allowed to keep what they made, even up to 100% of what they earned! Imagine a time were taxes were collected through tariffs, by selling goods. There was no confiscating of income. These kinds of governments, run lean and efficient and avoid debt. Otherwise, they would shut down. Not necessarily saying here we should jump back to these ways, nor that we could. What is important though, is to realize how far we have come, and how far we keep going from what was a working system. Do we really want to get further into debt for our children and grandchildren? Even if you don't have children, what about doing your part for future generations that will live on the planet where you and I voted to make it better or worse? Just giving some food for thought.

John Maynard Keynes

Importing New Ideas, good or bad?

We imported an European idea, one more along the lines of socialism. We adopted some ideas from a key socialist British economist named John Maynard Keynes. In Europe, he helped to establish the idea of government intervention in private businesses(in European academia). He believed it is the role of the government to manipulate their economies of their given country, so they could lessen the effects of economic cycles. For instance, during good economic times, the government should force taking funds from the economy to put toward social mandated programs such as health care and jobs, etc.

Some might have thought these were great ideas, and it really doesn't sound so bad until you see how they play out over time. We now have the advantage of 20/20 vision, to see if it has helped the countries or hurt them and caused them to be in a poor way, financially. When you owe, you are controlled to some degree by the others you are indebted to. The same is true for governments. A super power doesn't stay a super power when it is controlled by other countries economies and we become to reliant on them and are indebted to them. Even if we don't care to see it, they do and some might see how it will play into their hands.

Its different for a country that is a poorer nation to begin with, but to really test out the ideas of John Maynard Keyes, it is critical to see what it has done to a country that was doing a lot better, financially, like the United States. So it was a kind of interesting experiment to do in America, where there was the strongest economy with amazing amounts of surpluses to whittle away at. These ideas have swept world over, and they are parent to the International Monetary Fund and the World Bank.

Final thoughts

Some of the things that show the problem with governmental manipulation is that each action creates an even greater reaction. Each action requires even more manipulation, and you can see how the idea can have snowballing effect. Lowering interest rates and making credit appear out of thin air obviously can stimulate an economy. The laws of supply and demand will always be in play and more people will always continue to compete for available products. Then prices go up, then we have inflation. As this happens, and the government creates "new money" out of thin air. We then have rapidly changing ratios. You can see examples of this in history, like with gold.

The economy has a direct effect on any of our investing philosophies, whether we want it to or not. So it is essential that we understand all of these things so that we can help in knowing best how to stay out of debt and build up our own savings. Those things are key to being financially successful.

Are you currently happy with the way the United States is making decisions financially?

See results


    0 of 8192 characters used
    Post Comment

    • oceansnsunsets profile image

      Paula 7 years ago from The Midwest, USA

      Thank you very much Simone for reading and for your comment!

    • Simone Smith profile image

      Simone Haruko Smith 7 years ago from San Francisco

      Great overview! You are so right that it is important to understand how the greater system works if one wants to function well within it. I appreciate your approach and really enjoyed reading this well-written and organized Hub!

    • oceansnsunsets profile image

      Paula 7 years ago from The Midwest, USA

      Hi Meg, I agree with you that learning from history is necessary and that we need to "get the lesson." Thank you for your comment.

    • megmccormick profile image

      megmccormick 7 years ago from Utah

      Yep if we don't learn from history we are doomed to repeat it until we get the lesson and evolve. Doesn't look to good right now. Great Hub thanks and good luck.

    • oceansnsunsets profile image

      Paula 7 years ago from The Midwest, USA

      Rpalulis, I agree we need some changes and drastically. Instead, a lot of the changes we have seen are for the worse and we are so much more in debt as a country than ever before. Thank you for your comment, and I think none of us should give up and keep trying to help change things as we can.

    • rpalulis profile image

      rpalulis 7 years ago from NY

      I try to stay in tune to what is going in our govt. but every time I turn on the radio or TV I get so angry and discouraged, we need change in the worse way.

    • oceansnsunsets profile image

      Paula 7 years ago from The Midwest, USA

      Thanks for the comment Phoenix. I hope we don't end up with hyperinflation or other big problems, but its more likely to happen if things don't change.

    • PhoenixV profile image

      PhoenixV 7 years ago from USA

      Great Hub, to me it looks like we are headed for hyperinflation.


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: ""

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)