Should we all be spending like mad? According to the financial analysts, consumer spending drives 2/3 of the economy, and is faltering. If this confidence is restored and people start spending, will it bring the economy around? Or is this jus a symptom of the faltering economy? In which case, should we be saving our pennies?
If I recall, it’s a vicious circle in that consumer spending falters, we spend less, inventories rise and production falls, people are laid off, consumer spending falter more, wash, rinse, repeat. In a very general sense, of course. I would think that increased consumer spending would be helpful - sort of like how for quite a while there, the stock markets was all jittery, but consumer confidence was still strong and spending was steady - the economy was wobbling, but overall appeared ok.
I would also venture the media are in part to blame (used loosely) due to their influence on consumer confidence. I read an article on CNN several months ago saying that the number of IT jobs in the country would drop by 30-40% in the year 2001. That was the headline - sounds bad right? Read into the article and they say that even with that, there would still be 400,000 jobs left empty because no one was skilled enough to fill it. This was a case of the media directly influencing the consumer with a negative (and somewhat dishonest) headline.
Now, as for Dubya’s tax prebate - I don’t see where it will stimulate the economy. If people are smart, they will put the money towards accrued debt during the happy years of the American economy. Thus, no benefit to production or decreasing inventories. Of course, most Americans will probably go out to dinner with it, or buy clothes, so who knows.
I don’t think people should be spending money they don’t have - borrowing or using credit - just to “save the economy.” And I am skeptical of the idea that if everyone just went out right now and bought that new car or refrigerator or George Foreman grill that suddenly the tide of layoffs and slow growth would be changed.
I get the impression economists say:
“Sacrifice your personal financial life (by spending on credit) to save the economy”.
This is a path to disaster. Americans owe too much as it is.
I just spent $1000+ this month at Home Depot, so I was being fiscally irresponsible whether I wanted to or not…