Our Economy is Based On More Money Than We Should Spend
Here’s an article from Slate.com.
Just when “we” need “us” to spend some discretionary income, we aren’t. I read an article the other day that talked about China. In addition to its problems with its main export recipient, us, not buying like we used to, it is trying to encourage its citizens to buy more stuff. They aren’t doing it as they have a long history of saving based on a history of not knowing what was going to happen in the future.
Back when, our parents (or our grandparents) grew up in the Depression. They had nothing and spent the rest of their lives based on that premise.
Then, the next generation came along and spent, and spent, and spent. Now, the remnants of our family, we and the next generations have quit, at least for the short term, and the experts are worried. The governments are pissed. They’re poring all this money we don’t have into the economy and we still won’t buy anything.
Should we continue the spending slow down? Reorder our priorities? Stop buying bottled water and Bistro takeout?
The recovery might not happen. Then what? Does everything then settle in at a lower level? What’s the loss? We make less money and stuff will cost less money. Supply and demand.
I know, this isn’t very sophisticated, I’m just thinking.
6 comments:
I used to slog around a lot of credit card debt. While I was paying it off, I wasn't buying very much. Once it was gone, I reached a new equilibrium. Now that it has been gone for years, my salary has gone up considerably and we have reached a new normal. Reasonable expenditures, but not spending more than we make.
I think if everyone did this, the economy would definitely contract, then stabilize much lower. But eventually, people would have more money to spend (not having to blow it on interest and debt service) and it would grow again. I'd sleep a lot better if the economy were not built as a house of cards based on everyone living well above their means.
I don't see how buying a bunch of stuff on credit generates any real wealth. It seems like, at it's core, there's always going to be a black hole of debt.
I guess I just don't understand economics.
I guess I stand alone with saying, let the depression hit and everyone go belly up, it will pop the inflation bubble and allow people to start again. It will also rob China of their hold on us and our job market. Companies will be forced to cut back on their job's and perhaps even rocket the Chinease government into a pitfall of dispair.
I'm glad you asked as I have been wondering the same thing.
My father was a banker (worked in at bank, not owned it) all his life. He taught me two things at a very early age. #1 - How to balance a checkbook and #2 - If you can't pay for it you can't have it. There are only two things you buy with a loan, a house and a car. Nothing else! You can use credit cards only if you know absoultly that you can pay the balance in full when the statement comes.
I have lived my entire life based on this principal and I have to say it has worked out pretty well. Credit card companies don't like it very much but we are debt free and have a very hight credit score.
Indeed, I too, am credit card debt free and have some savings in the bank. However, I too, am 'hording it', and trying to spend less.
Here in Canada they call it a 'perceived problem' with the economy as they are trying to say it will not impact us - only you guys.(States)
I definitly think most canadians are not buying that theory, so as far as I can tell, most of us are waiting for it to 'hit us' as well...it's already started... our dollar is lower and the house market has slowed down about 6% in the last few months.
Now if that house bubble would just burst - I could even afford to buy a house, but if it does burst, that means we're far worse off than originally thought.
Catch 22.
I only have a credit line of $1000. I don't want or need a bigger one. I try not to use it, but when I do, the payments come automatically out of my checking account. My grandfather was raised until 12 on a reservation and he learned to live frugally, and recycle which is just part of the Native American life. I tend to buy used or make things for myself before I even consider buying new. I constantly receive compliments on my Salvation Army wardrobe at work (I learned how to sew and tailor at my mother's knee, together with many other skills that no one ever does anymore). I plan out all major purchases, even grocery shopping. This is the first year I will be making over $25,000, yet I managed to raise and meet the needs (and most of the wants of) 3 children as a single parent for most of my adult life.
By purchasing used items and repairing or even remaking them, you could say I am living off of other people's jonesing, laziness, or maybe just stupidity. Saves me a lot of money though.
By carrying so little debt, no doubt I save a lot of money in interest fees and fines if my coworkers are anything to go by.
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