12-21-2008, 11:21 PM
I hear a lot of talk about doing virtuous things like doing with less but the thing is that what may make sense on an individual level in typical times (and are practices that I generally try to uphold) are not the kinds of things EVERYONE should do when times are the way they are now. Sure, people with lots of debt should make do with less - even a lot less - to get out from under so much debt. But when even those who can afford to spend cut down on spending it really hurts the overall economy. And when it hurts the overall economy it doesn't hit evenly throughout. It's not like if economic activity drops by 10% that EVERYONE has to do with 10% less goods and services - no, much more likely is that at least several more percent of people would completely lose their jobs. We could easily end up with something like 12% - 15% joblessness (something like one out of every eight people not having a job at all). Those people will suffer awful hardships - it won't be everyone sacrificing by having to do with a bit less. So, as odd as it may sound, it really is better for everyone in general if those who have savings use some of it to buy goods and services now rather than cut back. Hoover did the virtuous things during the early phases of the depression and they made things a lot worse. This is one of those times when conscientious savers/consumers need to go against their inclinations and spend more than they might be inclined - the flip side of what needs to be done by those whose inclination is to spend money they don't have.