Friday, November 14, 2008

What did they expect?

According to this article consumer spending is down by 2.8% for October. This is the biggest decline on record, going back to 1992. (Prior to 92, the Commerce Department used a different methodology, and presumably cannot compare those number to today.) What I really want to ask these people is: Did you think anything different would happen?

I've already stated that I think using consumer spending as a measure of the health of the economy is a foolish thing to do. It seems to me they are measuring the amount of credit people are able to get as much as anything else. So now that credit is tighter, jobs are becoming less secure, and everyone is generally bummed out about the economy, did they really expect people to go out and buy big screen TVs? The answer is probably so. People like to shop when things look bad. It's called retail therapy.

I however think that people choosing to save money in the face of this difficult economic time is a very responsible thing to do. Sure I could go out and blow my emergency fund on new toys, but it would be better for me to let it sit there in case I have a real emergency. And further still, for me to add extra money to it here and there so I'll have even more financial security. If the majority of the companies in America can't survive in an environment where people individually make healthy financial decisions, then there is something wrong with those companies.

We are the little guys at the bottom of the great financial pyramid. We need to keep ourselves healthy or the whole thing topples.