If you read personal finance blogs or magazines you'll find a lot of advice to save money, get out of debt, and build an emergency fund. This is all solid advice and things that I fully endorse on Lazy Man and Money. It makes too much sense to stretch your dollar further and to be prepared in the case of some kind of emergency or job-loss. Plus there as of 2002 Americans had $750.9 billion of debt spread across 84 million households.
If you watch CNBC or read the Wall Street Journal, you'll get a different view of things. They'll discuss consumer spending as being a sign of a healthy economy. It goes a little something like this. If you decide to not go to restaurants or make your coffee at home instead of going to Starbucks, these businesses will close. It's not just these business, but if you cut back on travel hotels lose money... entertainment movie theatres and netflix lose money... you can go on and on. If businesses lose money, jobs are be lost. When people lose jobs, it's never a good sign for the economy. This is why the government is giving us money, to stimulate spending.
So if people spend money and live on credit, the value of a dollar falls. If they don't spend money, people lose their jobs and the economy suffers. Doesn't this seem like a game of lose-lose. It seems you are quite literally damned if you do and damned if you don't.
I wish I had a solution for this problem. Maybe I should have studied macro-economics in school. I'm trying to think of how America can win this Catch-22. Maybe I'm crazy, but it seems like as long as the money shifts between business and consumers the economy isn't going to improve overall. If consumers have more money they have safety and security, but businesses suffer. If businesses have more money, consumers are likely overspending and have too much debt. I'm probably being a little simplistic in thinking that money might be a zero-sum game.
The best idea I can come up with is to sell goods and services to other countries and bring in outside money. If money within the US is truly a zero-sum game, the solution is to add more money to the game. That outside money can pay off our consumer debt and keep businesses running. I wonder if we can export goods and services cheaply enough for foreign countries to buy them. Questions, questions, questions, I wish I had answers.
Maybe you have some questions as well? Perhaps you even have answers? Let me know in the comments below.
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