Tuesday, September 8, 2009

Spending Versus Saving

Flintoids are no strangers to confusing economic pronouncements, but the rest of the country has gotten a dose contradictory messages courtesy of the Great Recession. Take the recent news that Americans are breaking records for saving money and eliminating debt:
The Federal Reserve reported Tuesday that consumers ratcheted back their credit by a larger-than-anticipated $21.6 billion from June, the most on records dating to 1943. Economists expected credit to drop by $4 billion.
That's good news, provided we aren't too rattled by
the unsettling feelings that come with knowing that our top economists were off by a mere $17 billion. Haven't we heard for years that we spend recklessly and don't save enough, especially compared to more thrifty countries like Japan? Well, don't get too excited:
Economists expect consumers will continue to spend less, save more and trim debt to get household finances decimated by the recession into better shape. However, such action is a recipe for a lethargic revival, as consumer spending accounts for 70 percent of economic activity.
So if we simultaneously spend and save, everything should be just fine. What could possibly go wrong?

2 comments:

  1. Well, when we're talking about an economy where 70 percent is supposed to be made of consumers, then we got a problem: it's our spending that keeps people employed. If I don't spend, then someone loses a job: the barrista at the local coffeehouse, the repairman at the local car garage or the salesman at the Computer Store that used to stock cool gadgets for me to use. Eventually, if I save enough I may lose a job because too many people who depended on me for their jobs lost theirs.

    Warped, isn't it? Welcome to consumerism.

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  2. If I have nothing to spend, does that mean I'm saving?

    ReplyDelete

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