Frugality fuels recession's vicious cycle, say government economists.
Even those whose jobs are safe are spending less, which holds down growth, say economists, governments and their psychologists
by Michael Smith (Veshengro)
Oh dear. What next?
Now, according to the governments and Quangos those of us who have decided to live with less impact on the Earth and who wish to live a more frugal lifestyle are to blame that the recession is continuing. It could not possible, I guess, have anything to do with the banks and other financial institutions that were greedy.
Many of those that are now heading down the frugal living lane – even if only in very low gear – are people who have not recently lost their jobs, for instance, nor are their jobs under immediate threat. Yet things are driving them to change their spending habits, and let's face it; we cannot ever spend our way out of a crisis.
Many have cut back on foreign holidays and instead take vacation at home, as in country as well as home as in home, on eating out, on expensive clothes, and other such. Others decide to lop of 50 bucks a month off their cable bill, eat out only on half-price days.
The frugality of those millions of Americans who still have their good jobs feed back on the economy, holding down growth and encouraging other worried workers to trim their spending - causing the whole vicious cycle to run another lap, according to some studies.
Oh dear! What they really mean that it is cutting into the profits of the companies and they, because they no longer make those profits, and it is only profits that count for most of them, will get rid off workers and blame everyone else for it.
Frugality and frugal living was once seen as a virtue as was saving. Nowadays, while some governments pay lip service to our need to save and such they say at the same time that we must go out and spend, spend, spend, our way out of the current crisis, the one they just call an economic downturn or a recession but which is more akin to the Great Depression. This approach does not work, and neither does throwing ever more money at it and printing more of the same. Germany did that in the late 1920s and see where that led.
Economists say many still-flush consumers are handcuffed by psychological traps that cause them to tighten their purse strings even though economic hardship is not their reality. The economists do not, however, seem to appreciate that some people have decided to downsize because of costs that have begun to skyrocket, whether gas to power their car or the costs of heating and cooling their homes, etc. When prices rise, even though the job of the people themselves might not – as yet – be under threat, people will cut back, especially on the nonessentials of life.
Underscoring the crucial role that consumer psychology will play in turning around the economy, President Obama and Federal Reserve Chairman Ben S. Bernanke have both been on the hustings recently sounding notes of optimism. Only the people with brains, and it is most of those that do the downsizing and the becoming frugal, are not buying that.
People in this higher echelon with good jobs began cutting back on the nonessentials when they heard stories of people losing their jobs left, right, and center and came to the conclusion “what if?, that is to say “what if my job is cut back as well?”
The majority of people with their brains in gear will not be looking at what the experts say. They will be looking for signals from the same people whose experiences caused them to fasten their purse strings to begin with. When someone they know actually finds a new job then, may they begin to relax and look at the economy with a different eye.
The governments may be employing psychologists even to investigate the phenomenon of people going frugal and have them look for a way to boost the people's confidence again, but as said, this is not going to happen unless people see that others are finding jobs again.
It would appear that the governments assume everyone to be a moron and that all of us will swallow, hook, line and sinker, what they are trying to tell.
When all the signs say that we are in a recession and more than likely in a depression then I would say that you could bet your life on it that we are, regardless of what they are telling us.
If it looks like a duck, walks like a duck and talks like a duck, chances are that it is a duck and not a black bear.
Now they, obviously, have to look for the villain of the peace somewhere else and it is now all those of us that decide of have decided a long time ago to live a more frugal or seriously frugal lifestyle. Someone has to take the blame and the frugal people are in line this time.
© 2009
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Frugal folks now made responsible for deepening of recession
