To spend or save

that is the question.  And a horny dilemma it is.  We, in the US, are the world’s worst savers if you look at the stats that tell us we save less than negative 1% of our income as opposed to China where the savings rate is a plus 20%.  We are the world’s best consumers, too.  We are so good at spending that our President told us to use our skill as a defence after 9/11.  The government is so confident of our inability to save that it is willing give us money that it just knows we will spend to stimulate the economy

Meanwhile, our common sense and our personal finance education has taught us that in order to be in safe territory financially we need to set aside funds for emergencies and put our money to work in a variety of ways so that it earns returns for us and the economy.

That is why this situation is so frustratingly confusing.  What is good for one should be good for all.  But in a consumerist economy that is credit based like ours, the opposite appears to be true.  Our savings and investing should be good for the economy because savings make us less and less vulnerable to hard times while the money invested supports businesses and growth.  But the hard times come because our economy is seven eigths consume and one eighth save.  In order to keep up with this imbalance we have dipped deeper and deeper into a credit future to pay for it.  Not just we the consumer but theythe corporations that produce the goods.  Instead of being secure and wealthy we are shakey and awaiting a recession.

Strangely enough the news though daunting is not all bad.  The apparent settlement of the long term dispute over oil production along the Santa Barbara, California coastline is one sign that economics and ecology are finally reaching some agreement.  My recent post on Real Estate brought this interesting corroboration from a realtor in Illinois that that market may be seeing some welcome change from the bottom up.

” the National Assoc of Realtors have actually been running an ad lately that makes a very accurate statement, “real estate is local.” In our market (northern IL), there are homes available for sale to any income level. I’ve worked with people who live on disability income, but they have practiced living within their means, kept their credit in good condition, and have purchased homes successfully. We work with employers who provide down payment assistance to their employees (and get tax credits in return), and we work with the state to provide matching funds. People are walking into $50,000 homes with $10,000 in assistance. Just because some ideas don’t fit in your market doesn’t mean that they don’t apply elsewhere.”

We are, after all is said and done to us, all about challenge and survival.  Our greatest improvements, most important inventions, and best performances come under stress and during duress.  I don’t see how this time around it will be any different.

 

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2 Comments »

  1. Bankthis said

    Planned obsolescence, immence governmtent waste, hurricanes and floods, fashion and accessorizing, travel for the sake of escape, increasing debt and loose credit, an unproductive and doomed economy absolutely addicted to growth.
    Your article was prophetic, it is now October 2 08.

  2. rhbee said

    I really wasn’t aiming to prophesize and now here we are $2300 in debtitude while all the politicos and their pals bask in the warmth of a bailout that lets them keep on doing what they’ve always done. Rape and pillage because they can.

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