Millions are losing jobs and tens of thousands of companies will be shut down before it's all over. I have little hope that the "bail out" efforts of the U.S. government will be successful in the long run. There is little chance that debt problems can be solved by creating more debt and that's exactly what our political leaders are doing.



Let's turn our attention to a time when a real recovery begins, although that could be 5 to 10 years from now. How will we claw our way back to prosperity? Let's begin by taking a look at the idea of credit scores.

The population must wake up to the fact that as well as buying we must also save. It is savings that will provide the capital needed for the creation of new businesses and jobs. It is savings that will break the debt death grip that now has us by our financial throats.

While we save we must also have controlled spending. New companies cannot thrive without customers. Some of that spending must come from savings, but limited credit buying will also be important.

We face two problems. Most people are not conditioned to save. Schools stopped teaching personal finance years ago. That training disappeared because most teachers do not really understand money, credit or finance.

To remain free we must understand how to control our own money and stop sending so much of it to the government. Our politicians excel at waste and misappropriation. Every new policy to "help the people" costs more in dollars and comes with the loss of freedom to control our own finances.

The second challenge is to rethink our credit scoring system. In two or three years the U.S. will have literally millions of people whose credit scores have been destroyed. Lost job, foreclosures and failed businesses will have bashed the credit ratings of millions.

Using old rules none of those people will qualify to borrow money for any purpose. They won't be able to buy homes or cars, two of the most important engines of our economy. Under those circumstances the U.S. will never be able to dig its way out of this financial hole. We will need new ideas about selling and buying on credit.

One of the first new ideas is really an old idea. When anything is purchased on credit the buyer must have money at risk. That simply means buyers must put up substantial front money. They must have something at risk. The idea of losing a large cash down payment keeps people focused on making payments and completing the purchase.

There were far fewer foreclosures when buyers were required to come up with a 20% down payment when purchasing a home. The same holds true for car loans. Players must have skins in the game.

Yes, old ideas will be new again. We will eventually smarten up and return to the financial rules that allowed the U.S. to become the world's financial powerhouse. It won't be quick and it won't be easy.