Wednesday, April 8, 2009

Spend or Save?

This is a question that is facing a lot of people including the President. Should we begin to spend money in order to stimulate the economy in hopes of improving things? Or, do we need to save our money in the event the economy continues its downward trend?

I can say this. With the confidence level of the CEOs extremely low and their predictions that the GDP will decline by 1.9% and more layoffs will occur within the next 6 months, I would say that the answer has already been made. Take a look at it. If people are afraid that they will be laid off, will they honestly consider buying a computer or a big screen television? I don't think so. I don't have a degree from a prestigious business school, but I can tell you that 99% of the people I have talked to will not be spending their tax refund checks on frivolous toys. For example, my brother said that he was using his tax refund to pay off some more of his debt. I think my brother is doing the right thing with his check. Yes, he could have bought something with it; however, he decided that being debt-free was more important.

On the other hand, he could have purchased something and saved a person's job. I am being idealistic. The money wouldn't save a job, but it would be used to pay a bonus or package for some executive in the company. Until we get to a point where confidence increases for both businesses and consumers, Americans will continue to save money. I have a refund check on its way to me and I will be saving it until I find a job.

With more and more Americans out of work, spending will continue to drop and people will save more and more of their money. So, it doesn't matter how money the government pumps into the economy. Until Americans have jobs, we will not be spending. In a recent article, I read that food purchases constitute 49% of Wal-Mart's sales. People are saving money. The days of unbridled consumerism are over.

Have you noticed that gas prices are increasing? So much for spending on luxury items.

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