Friday, March 13, 2009

Pulling the economy up by our own bootstraps

We the people are responsible for our current economic situation. We are responsible for the fall of the stock market, the crash of the housing market, the over-consumption of on-credit purchases. We are. Not some goverment leader or legislature, not Congress, our president (former or present), not our elders or the banks or any such leader. We are.

Sure we trusted the bank, the president, the ad campaign and our government leaders. But that's our fault. Lesson learned?

We got ourselves into this mess with purchases we couldn't really afford, houses bought with far more of a loan than we should have been approved for, and by trying to leave it up to someone else to fix it. We're still hoping someone else bails us all out. Even with massive bail outs, this isn't going to happen. That won't fix it. We fix it.

The current message is "don't be afraid to spend, we need consumers to be confident in spending to help our economy get moving again"....um, spending too much and making too little is what got us all into this mess in the first place. That's the offered solution? Consumers, people, think about it. Saving, not spending, causes businesses to lower prices and offer deals. You can still get the things you need. Maybe not the things you want. But the things you need...at a discount. GIf anyone is going to bail us out it is our power of influence with our own pocket books. Get the store, the bank, the whatever to lower the price to what we can actually afford by holding on and waiting for prices to drop to a reasonable level. Hold on to your savings, pay down your debts and I know this doesn't sound like fun (trust me, this is very hard for me, stay away from the shopping mall). We the people can pull ourselves out of this, and for good, if we take a cue from our grandparents and save our money and only buy what we can afford, no matter how easy it is to use our credit.

5 comments:

Steve said...

Sure, but then since the stores and factories aren't selling enough things or selling them at such a discount that they can't pay their bills, then the store closes, the factory lays off all their workers, and no one has a job or any money.

Your plan works great for the individual, but not our consumer and service based economy. If everyone does this, we'll have near Great Depression levels of unemployment before the economy recovers. If it ever would, since it took a world war and all of Europes factories destroyed for us to recover from the last one...

SJ said...

It's our consumer credit based culture that got us into buying things we couldn't afford. Consumer based retail jacked up prices according to the demand as a result. If we didn't buy, buy, buy and do it now, now, now, we wouldn't have this problem. Is the solution really to put it all on tax-payer credit? When does it end?

Steve said...

Too little too late.

This has been going on for decades. It IS what made our economy the best in the world. Manufacturing, for the most part, has not been the dominant economic thrust since about the 60's.

I agree, we COULD do what you (and personally I) think we should do, however, many, many people will lose their jobs; state governments will be overwhelmed with need and you'll see Sacramento tent cities everywhere. Eventually, the economy would balance out, but like I said before, it took unique situations like a global war and the destruction of all other modern economies (England, France, Germany, Italy) for us to recover from the Depression. If not for the war, it'd be probably another 10 years until unemployment levels were "normal". The same would occur now with most service jobs (retail, hotels, travel, and office support) positions drying up. How many people do you know that work in factories? But even then, who is going to buy their goods if no one has a job?

Credit buying is a snowball effect. It ISN'T what caused THIS mess, that was greedy lending practices and lack of oversight and regulation coupled with people making poor financial decisions (although again, whose fault is it when a bank gives you a million dollars knowing you can never pay it back?).

If you like YOUR job, you better hope the status quo stays the same!

mj said...

I wonder if a happy medium could work here. I never really use credit to buy anything and haven't since I wised up after being stupid in my early twenties. However I did take out a loan to buy my house. And I do purchase good products after doing a lot of shopping to find the best value. Why can't we all just be a little smarter but also not turn into total misers?

Steve said...

MJ, what you are suggesting is perfectly acceptable. We don't HAVE to have thousands of dollars (or any!) in credit card debt. Buying a home/car/boat(?) is different b/c most people would never save enough cash to buy it outright and borrowing rates (4.5-10%) are waaaaay less than credit card interest rates. So yes, the medium is people using cash and cash only for most of their life purchases.

Maybe this is what SJ was talking about, but her extreme savings and "deflation" idea would be catastrophic for our economy.