Monday, March 9, 2009

Shouldn't We Be Saving?

Let's start with a great graphic:

This is a hugely informative piece for comparing consumer spending during past economic crises. The 'Peak' line intersects with '1' in the middle, so anything to the left is before the worst of the recession, and anything toward the bottom reflects less spending. That sagging red line shows our current decline.

Now it's clear: recessions deepen until spending picks up.

That makes sense. What employer wants to hire more workers without more customers?

Once answer to that question could be 'the government,' when suggesting that federal money be used to build more bridges, upgrade the electrical grid, and improve schools. All those will indeed create jobs and ease the recession.

But if we want more jobs in the private sector, we need consumer demand, and as long as it keeps falling, we're going to lose more jobs. 

Don't take those jobs lightly. One reader responded to the above graphic by saying, 

'So what if it gets worse? Standard of living is all relative, anyway. You don’t mind not having as long as your neighbor can’t have it, either. Find other things to enjoy in life besides more stuff.'

But we're not just talking about the amount of 'stuff' you have. We're following people's ability to earn a living. Before we start telling others how they ought to handle their money and values, let's reverse the loss of millions of jobs.

Maybe you think people shouldn't be buying junk, but while they refuse to buy anywhere, America will continue to lack jobs.

So do you have to run out and spend? No, do what you see fit: no one knows your needs better than you do. But don't feel guilty for spending when you do, and above all, join me for a cheer when that red line starts to rise.

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