Is Really Frugality Bad for Our Economy

[parafly]

Perpetual frugality most certainly is a detriment to our economy. Let's face it, the USA is capitalist, and it's economy is primarily built on consumerism.

Being extremely frugal for long periods of time slows the growth our of economy, period. However, not being frugal enough may be even more damaging as people overextend themselves and bring down their net worth. As with most things, the best solution is a happy medium.

[watsoninc]

Perpetual frugality most certainly is a detriment to our economy. Let's face it, the USA is capitalist, and it's economy is primarily built on consumerism.

Being extremely frugal for long periods of time slows the growth our of economy, period. However, not being frugal enough may be even more damaging as people overextend themselves and bring down their net worth. As with most things, the best solution is a happy medium.

I don't think there is any conflict between frugality and capitalism per se. Frugality isn't the absence of spending but rather choosing to spend wisely. As indicated earlier by many (including myself), many frugal people are spending a lot more right now because of the abundance of deals. I don't see how this frugality slows the economic growth presently. If anything, those who have been frugal over the long-term are helping because that's who has money right now.

Also, many of those who are "extremely frugal" are likely more miserly and cheap rather than frugal. They are likely to be hoarding money, which could be a threat to capitalism; however, misers and cheapskates are distinctly different from frugal people.

[kork13]

Being extremely frugal for long periods of time slows the growth our of economy, period.

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.

[unsecuredmoneygroup]

I think frugality in the sense of spending wisely is ultimately better. When people reserve their funds for purchase of quality goods and services that have results and products with staying power, manufacturers are pressed to produce quality goods to be able to compete in the market. When an economy is based on large scale production of quality goods and services, it drives innovation and results in a more stable long-term economic model. If you guys are talking about frugality as finding the cheapest and highest quality product, learning to maintain an attitude like that will do us good in the long run.

I think step one is to buy local whenever possible. In these unstable times, relying on our international buying power to get us through is a recipe for disaster. We need to shore up and make domestic production of quality goods a top priority.

[parafly]

I don't think there is any conflict between frugality and capitalism per se. Frugality isn't the absence of spending but rather choosing to spend wisely. As indicated earlier by many (including myself), many frugal people are spending a lot more right now because of the abundance of deals. I don't see how this frugality slows the economic growth presently. If anything, those who have been frugal over the long-term are helping because that's who has money right now.

Also, many of those who are "extremely frugal" are likely more miserly and cheap rather than frugal. They are likely to be hoarding money, which could be a threat to capitalism; however, misers and cheapskates are distinctly different from frugal people.

Agreed. It all depends on the definition of frugal.

Saving and being wise with money is a good thing that benefits the economy. Hoarding money and being cheap (for long periods of time) restricts growth.

[parafly]

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]

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]

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]

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]

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]

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]

Frugality bad for our economy

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.