I'm a bit confused so if someone can explain I would appreciate it. People are worried that Americans aren't saving enough on one end, and not spending enough on the other end. You can't have it both ways, so which is more worrisome?
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Saving & Spending
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Re: Saving & Spending
This is a great question, one that I have pondered myself.
In my opinion (and I could very well not know what I'm talking about), when it comes to this question, we are seeing a battle between long term needs/goals and short term needs/goals. The politicians are always looking for the quick win, looking to make sure the economy does not slip into a recession or worse a depression, therefore they seem to always want us (and generally speaking, us is the middle class) to "spend" the economy to growth.
The economists (some not all) are generaly looking at longer term trends. Obviously, the economists don't want to see a recession, but I think they are more comfortable with the cyclical nature of the economy, and realize the it is only natural for the economy to pull back and settle into a recession in order to correct itself. For the longer term, we are definitely not saving enough and unfortunately have become a nation of debtors. As a result, we have to seek foreign investment to help fuel our government and our economy. Some times that foreign investment is good, such as when Toyota builds a new auto plant here, that creates lots of jobs. Some times that foreign investment is bad, such as when China invests heavily in Treasury bills (this is not a bad thing except for the fact that China is essentially refinancing the US government debt, the investment is not being spent to fuel growth in the economy).
I suspect (and once again I may not know what I'm talking about) that at some point this growth that we are seeking will be unsustainable, because of the huge credit debt that so many Americans are carrying, combined with the large budget deficits that both the Federal Government is carrying as well as many individual states. I also suspect that if the price of fuel/gasoline does not stabilize soon, we could start seeing the beginnings of a recession.
In my opinion, not saving enough is far more worrisome than not spending enough.
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Re: Saving & Spending
Umm when we save enough don't we tend to start spending it? like if you have enough you look into investments? Not to mention if we arn't storing it in the mattress it is in a bank and don't they make investments? So wouldn't saving help both saving and spending in the long run?
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Re: Saving & Spending
I agree 100%, but you struck the nail on the head, when you said that saving helps both saving and spending in the long run. In the short run saving doesn't stimulate the economy as much as spending does.
If the high gas prices and the aftermath of the Hurrican Katrina slow down the economy (and it probably will), you will start to see a cycle begin.
Consumer confidence drops, consumers spend less (I think we are starting to see this already).
Consumers spend less, economic growth slows.
Economic growth slows, corporate profits drop.
Corporate profit drops, corporations layoff employees.
Employees laid off, consumers spend even less.
The big problem I see, is that usually during times of economic prosperity savings go up, but during this last economic recovery, the saving rate has actually fallen not risen. So I'm a little concerned about the many Americans already in over their head in credit and home equity debt.
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Re: Saving & Spending
After WWII people were urged to curb their spending and save and buy savings bonds (actually, this could have been during the war, I just heard the commercial on an old recording of Fibber McGee). That to properly build the economy people had to be prepared to weather emergencies.
What a difference a few decades make.
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Re: Saving & Spending
What shocks me is the kind of spending that we are "encouraged" to make. When I see people spending almost as much on their vehicles than my father spent on his house 20 years ago (a particular co-worker of mine spent $58,000 on a Caddilac Escalade last year), I am flabbergasted (sp?). Not to mention the barrage of Home Improvements that of course we all "need".
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Re: Saving & Spending
Bagagt1 - that's more than I spent on my last house. We paid $54k (or maybe $56k).
Yeah, we're being encouraged to spend until we are bankrupt but we can't file bankruptcy anymore. Our gov't is not our friend in terms of our economics right now.
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Re: Saving & Spending
Originally posted by cercisBagagt1 - that's more than I spent on my last house. We paid $54k (or maybe $56k).
Yeah, we're being encouraged to spend until we are bankrupt but we can't file bankruptcy anymore. Our gov't is not our friend in terms of our economics right now.
I know we each have to be accountable for our own finances, but I do believe that credit card and home mortgage lenders are not underwriting risks properly, extending far too much credit to anyone with a pulse.
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Re: Saving & Spending
I know we each have to be accountable for our own finances, but I do believe that credit card and home mortgage lenders are not underwriting risks properly, extending far too much credit to anyone with a pulse.
"Oh, sure we screwed the consumer, but now we're wanting the consumer to bail us out with their tax dollars."
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