Tuesday, January 15, 2008

Are Consumers Driving Us into Recession?

Last month I posted a blog entry with a video called We're the Government -- and You're Not, a funny video showing how the government thinks we should be good citizens. One segment of the video shows a young lady who liked to save her money and be cautious in her spending habits, until she found out that if she spent all her money and maxed out all her credit cards, she would be helping the economy! Well, here's a real life example of people who think this way, and it's in the New York Times. Lew Rockwell, needless to say, disagrees, as he points out in this article:

With recession looming or already here, the time has arrived for finding scapegoats. Expect a long list of these. Here is the target of the day: tightfisted consumers. A decline in personal consumption, writes the New York Times, "would be the first since 1991, and it would almost certainly push the entire economy into a recession in the middle of an election year."

This recalls Bush's advice after 9-11, when he assumed the mantle of the nation's personal financial planner. He told everyone to go out and spend money so the economy could avoid recession. Even then, there was confusion about whether he was right or wrong. Some sensible voices pointed out that economic expansion is based not on spending but on capital expansion rooted in savings. That is to say, the only path to future prosperity is delaying current consumption in favor of future investment.

Read the rest of Lew Rockwell's article

No comments: