At least that is the latest headline in the news. The Associated Press reported a story that consumers are being cautious about what they spend and that is hurting the economy.
“For the economic recovery to gain strength – and the unemployment rate to come down in any meaningful way – consumers will need to become less frugal.”
While I understand the basics of economics and how less spending can influence employers to be wary about hiring new employees. This can then affect the unemployment rate, I have to take offense at blaming the economy on frugal shoppers.
Are we in this mess only because of the few of us who weigh our purchases, buy things with coupons and don’t run to stand in long lines to buy the latest gadget? Would we recover from this slump better if we run out and got mortgages for houses we can’t afford, take out loans to purchase new cars before the old ones are paid off and run of tens of thousands of dollars of credit card debt to go on vacations and buy our kids the latest expensive toys?
While perhaps it seems as though I may be overreacting to the headline, consider this bit of the article:
“One telling detail about consumers’ habits these days came from the Commerce Department’s personal income and spending report for June: the annualized savings rate stood at 6.4 percent, the highest level in nearly a year – and triple the rate in 2007, before the recession.
“The savings rate hasn’t dipped below 5 percent since October 2008.”
Faced with the experience of losing home and jobs, I have to assume that people are more conscientious about saving. And that, it is implied, is a bad thing.
Obviously, there needs to be a balance between savings and spending. We can’t all go live in caves and off the grid. Consumer spending is important and it does stimulate the economy. In fact, a big chunk of the health of the economy is related to how much we spend–point taken. But to imply that the solution is simply a matter of getting those bad frugal people to start spending and stop saving just rubs me the wrong way. After all, didn’t living beyond our means have something to do with the state we are in now?
What do you think?
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