Is Really Frugality Bad for Our Economy

[parafly]

Originally Posted by kork13

In part, you're correct. If the entire nation were to become a nation of saving, frugal individuals (haha), the economy would likely grow at a slower pace than our boom years. However, we would also suffer fewer, and less intense recessions, because families would not necessarily have to cut their spending in a recession. They could simply back off on saving, or live off of their savings. Savers and frugal people lessen the blow of recessions by maintaining a steady baseline of constant spending.

A frugal nation would yield a more steady, less volatile economy. At the same time, it would reduce overall job numbers and production.

[kork13]

Originally Posted by parafly

At the same time, it would reduce overall job numbers and production.

...... I'm trying to think this one through... would it actually reduce job numbers? I don't know macro-economics well enough, so I'm simply going to go with reason. We're agreeing that a frugal nation helps the economy to be more stable. A stable economy with slower (but again, stable) growth seems that it would protect jobs, not reduce them.... However, that's just a logic-based argument, what seems to make sense--no evidence, so I can't say it's valid.

[disneysteve]

Originally Posted by Scanner

Think of all the auto workers.

Did Americans really need all the cars they were producing? Apparently not.

Did Americans really need all the Disney vacations? Apparently not.

Did Americans really need the shiney new grill? Apparently not.

So, if you lost a job related to this, apparently you weren't that needed.

I've read a few articles recently in both financial and non-financial publications discussion the new age of thrift. They all agree that it will most likely have some lasting effect on behavior even after the economy recovers. I think that is true and that it is a good thing as the way people were spending before was simply not sustainable. People feel more in control of their lives when they aren't living beyond their means. I think lots of people are discovering that now and won't want to go back to their previous bad habits.

[disneysteve]

Originally Posted by parafly

A frugal nation would yield a more steady, less volatile economy. At the same time, it would reduce overall job numbers and production.

I think a more frugal nation would change the jobs needed but not reduce the overall need for jobs. Instead of more people building new cars, for example, we may need more auto mechanics to keep cars running longer. Instead of more fast food restaurants on every corner, we may see a resurgence in farming. Instead of more luxury department stores, you may see more consignment shops popping up.

Frugal doesn't mean you don't spend. It means you spend more wisely. There will still be a need for producers and providers of various goods and services.

[watsoninc]

Disney Steve,

Would you mind forwarding me some of those articles commenting on the long-lasting effects of this new wave of thrift? I would be interested in writing a follow-up article on this topic (on my site), and those articles would be immensely helpful.

Thanks

[disneysteve]

Originally Posted by watsoninc

Disney Steve,

Would you mind forwarding me some of those articles commenting on the long-lasting effects of this new wave of thrift? I would be interested in writing a follow-up article on this topic (on my site), and those articles would be immensely helpful.

Thanks

I'll see if I can find them online. I read them in print (yes, I still get old-fashioned magazines). TIME did a cover story on this topic within the past month. MONEY also had an article on it this month.

[Broken Arrow]

Originally Posted by disneysteve

I think a more frugal nation would change the jobs needed but not reduce the overall need for jobs. Instead of more people building new cars, for example, we may need more auto mechanics to keep cars running longer. Instead of more fast food restaurants on every corner, we may see a resurgence in farming. Instead of more luxury department stores, you may see more consignment shops popping up.

Frugal doesn't mean you don't spend. It means you spend more wisely. There will still be a need for producers and providers of various goods and services.

Amen!

And let's not forget the fact that, even if we do nothing but stuff money in our bank accounts, we're capitalizing our nation's banks. They need capital to survive this financial downturn, and the deposit base is one of the best sources out there. So, is investment management.

I kind of wish people would not demonize frugality, because that's a blatant (and sensationalistic) lie. We may not be good for the old consumer economy, but that doesn't mean we're bad for our economy overall.

[DFrancis]

I know that being frugal is good for my economy. I am not worried about it on a whole. Once the economy picks up, people will be out spending again.