The Solution Can Not Be More Debt

Proper budgeting has always kept households solvent. Whatever money or income you have to live on, you must be realistic about how much you need and budget accordingly. We all know when we don't have enough money; it becomes more and more important.

I remember when I was a young girl, my mother would always balance the family chequebook at the end of every month. She would stress that this was the secret to good financial planning and would warn me, "It doesn't matter how much money you earn, you will never have enough money to do and buy all the things you want to - so watch what you spend."

Proper budgeting has always kept households solvent, and in most families this responsibility usually falls to the woman. If we find we have spent too much, the next month we cut back. We don't keep spending because we know if we do, we will end up losing our home, most of our personal belongings and a life we hold dear. Balancing expenditures against income means not having sleepless nights worrying about how we are going to survive. Having enough money means both security and freedom.

But now that the recession is biting hard, there are growing numbers of economists and political advisors who believe the only way to get out of this recession is to spend our way out of it. The number of boarded-up shops on the high street and half-finished building sites are just the beginning signs of the double dip recession and the new austerity we face. There is a growing chorus of naysayers who believe that austerity is not the solution, and if we spend more, our assets can be rescued and revitalised. They want us to believe that we can "spend our way out of this recession" and return quickly to the 'good times'. The economy just needs to be infused with cash in order to increase liquidity; then lending will start to flow again and the good times will return.

The mantra of the Cameron administration has, from the start,been that, "Reducing the deficit is a necessary precondition to growth". But is he right? In the UK, we have now had 18 months of essentially no growth and the latest forecast is for no growth this year. It is predicted that the UK won't get back to pre-recession levels until sometime in 2014. Already, this is this is the slowest recovery on record, including what happened after the Great Depression.

Years of economic greed, having more and wanting more, caused the subprime mortgage crisis and the European debt crisis. Perhaps we can learn from Iceland, a country that was bankrupt but has improved its economic status dramatically.

Iceland is now run predominately by women. Women know that the only way to run a fiscally responsible home is to balance incoming revenue with outgoing expenses. You don't need to be master of the universe or head of a country to figure out that a balanced chequebook, no matter how big it is, is, quite simply, the 'financially responsible' way forward. So, my advice to Prime Minister David Cameron: stay close to your female ally, German Chancellor Angela Merkel, stick with the austerity plan and no u-turns on what will be a painful but necessary process to a balanced budget.


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