Everyone knows we're in a recession, and the economic landscape is pretty grim.
In 2008, Americans lost $7 trillion in stock market wealth. We lost another $1.2 trillion thanks to tanking home values. In 2008, 2.6 million Americans lost their jobs, and the Conference Board estimates another 2 million people will lose their jobs by mid-2009.
No wonder people are skipping the mall and saving their money. But the unseemly side effect of a deepening recession in an American economy so dependent on consumer spending is saver bashing. Yes, blaming all of the country's woes on people who don't spend money.
A curious slate of stories has emerged in the news in recent weeks, all bashing people for being frugal and actually using their money to invest, pay off debt, or god forbid, start a savings account.
Here is a round up of my favorite shame-on-you-for-being-thrifty articles that have appeared in recent weeks.
- One of my personal favorites is this one from CNN Money, where the expert says that yes, it's better for the country as a whole if people save more, just not right now and not everybody at once. The author even admits that the U.S. savings rate, although almost 3 percent higher than in recent years, is still paltry by international standards.
"It's not that the savings rate today is high by historic measures, or
by comparisons to some other countries. But it has moved sharply higher
in recent months -- at a time when what the economy needs most is for
consumers to be spending more freely."
- Businessweek does a good job explaining why a savings rate increase is good, just not if people start saving all at once. Just let us remember that we are borrowing money, as a nation, from the countries that do have a higher savings rate.
"However damaging its short-term impact, there are good reasons for wanting the saving rate to climb over the long term, most importantly the fact that more savings means a bigger pool of capital to finance companies' investment in improved productivity and innovation, says Nicholas S. Souleles, a finance professor at the Wharton School. Without a higher level of savings, innovation and increased productivity would stall, leading to wage stagnation and a lower standard of living in the future. Ideally, savings would build up gradually. The last thing you want to see in the middle of a serious recession is for savings to go up all at once, says Souleles."
- There is also this lovely primer on Keynsian economic theory courtesy of the New York Times. At least this one is a bit tongue-in-cheek, but it does raise a good point:
"John Maynard Keynes, the great 20th-century economist, would have appreciated the apparent absurdity in these mixed messages. He coined a phrase, “the paradox of thrift,” to point out that what was rational for an individual during hard times — saving money — could be ruinous for an entire economy. Eventually, many of the savers may end up out of work because everyone else is saving, too."
- If you really want to throw on the guilt, read this Wall Street Journal story about how one family's spending cuts ripple through an entire town. This story, although the intentions were likely good,can't help but leave a "how could you?" taste in your mouth if you so much as dare to cut back on restaurant meals or haircuts. The story follows the layoff of Mr. Smith (his real name.)
"Now they realized those carefree spending habits were the first thing that had to go. Mr. Smith stopped perusing the list of new video releases and buying DVDs that would go unwatched for months. Mrs. Smith stopped shopping at Harold's, the upscale clothier that had been a favorite since her days at the University of Oklahoma.
Thousands of other shoppers were making similar decisions to cut back, and the drop in sales sent Harold's, already struggling to compete with larger rivals, underwater. The 60-year-old chain filed for bankruptcy in November, and this month closed all 43 of its stores in 19 states."
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