Are we ready to spend?
I don’t know about you, but I don’t want to spend money right now. In fact, for the past few of years, I’ve been relatively thrifty (compared with my previous, debt-building, ways). For a while, I imagined I was unique, that I was somehow getting ahead. But a couple of years ago, at the beginning of 2007, I started reading articles that said that people were starting to save more. A significant amount of people had begun to feel uneasy, it seems, about all the debt they were accruing and starting to save more. Of course, two years and a couple of stimulus bills later, people are feeling even more skeptical of debt. I don’t know about you, but debt is one of the scariest bits of the possibility of losing my job. How am I gonna handle this mortgage!?! I can hear my inner-breadwinner screaming. And with layoffs and unemployment growing at substantial rates, I’m sure many people are looking for ways to set aside something “just in case”. Certainly they aren’t likely to be building even more debt. Further, I’m in line with Steve Ballmer, Microsoft’s CEO, more than our politicians, when he says:
… over the last period of time, the balance has really shifted. Instead of innovation and productivity driving growth, it’s really been unsustainable levels, particularly of private debt, that have been a key driver of economic growth. (emphasis mine)
He continues: “In my view, what we now have will be a fundamental economic reset.” A fundamental reset. Nudges to “free up cash” will mean I have more cash to put in the bank, to help stave off what seems like an inevitable doomsday scenario, not that I’m going to spend more just to get a newer, larger TV. So politicians don’t want to give us money, because we won’t spend it. Instead, they give it to banks and dying car companies. Strangely enough, it seems to me that, of the two, the car company is the best way to get money into the economy — especially if no one is buying cars — since the car company will have to spend, spend, spend just to stay afloat. The banks, it seems, can’t help but reward themselves with tax-payer-funded bonuses in obscene amounts. But what do I know? I’m just a freetard. I don’t have a degree in economics. And I certainly want to increase the liquid assets I hold right now and fill in the the debt hole I’ve managed to dig for myself. I can’t imagine others feel much differently. And giving bailouts of billions to banks will just aggravate that feeling, no matter how much they need or deserve it. Update: I love this bit from winterspeak: The US household has gone from an unsustainable level of negative saving to a sustainable level of positive saving, as we all knew it eventually would, and this is only triggering the Apocalypse because academic economists have no idea how money works.