William Poole, President of the Federal Reserve Bank of St. Louis, recently made a speech before the Financial Planning Association of Missouri and Southern Illinois. In his speech, he talks about recent financial events, and points to five mistakes that led to the current sub-prime mess. I suspect there were others that he didn't mention, but these five are, in my opinion, spot on in terms of major contribution. The list makes the speech a worthy read by itself.
But the more important part of his speech (for purposes of this blog) followed the list. In his section on avoiding future mistakes, he notes how better decision-making (particularly in areas of economic and personal finance) could have helped us avoid the current situation. He talks about economic literacy as well as financial literacy as key parts of a solid education. That last part is worth repeating. He talks about economic AND financial literacy.
Regular readers of this blog know that I am a strong proponent of doing both. I've presented to various audiences on the need to teach BOTH. One without the other only serves to create different levels of dependency. Those who understand the theory too frequently still need help with applying what they know to everyday situations. Those who are schooled in the application and development of day-to-day skills; too frequently know the how, but do not understand the why.
I encourage you to take a look at the speech, and to work within your communities to make sure that the students in your schools are both economically and financially literate. I would submit to you, the current economic situation suggests the opportunity cost of not doing both is too high.
I welcome your comments.