Yesterday, I posted about how the Great Recession has helped to keep my expenses low in my first year and a-half of retirement. So far, our retirement budget has experienced deflation instead of the inflation I expected.
Clearly this won't last. Eventually, inflation will come back, and some believe with a vengeance. Will I be able to keep my expenses in check? Will the lessons of this recession have a long-lasting effect on my future spending habits? Will I still be buying the money-doesn't-buy-happiness line when I actually have some?
Many out there think that Americans have permanently changed their spending habits. Conspicuous consumption is dead! Debt is totally uncool! Saving is the new black!
Yeah, I don't think so. As this piece in the New Yorker says, I think the reason "Americans have been spending less (is simply) because they have less money to spend."
When Americans have more money, either from finally landing a job, or for those with jobs, from the wealth effect of increasing stock and home values, will they spend more?
Some think that the biggest economic downturn since the Great Depression will have a lasting effect on consumers' psyches. I'm not so sure. Unless it lasts for another eight years like the Depression did, I think we Americans have a pretty short memory.
And even if the pain did last another eight years, Surowieki points out:
The notion that the Depression turned Americans into tightwads is largely a myth. In fact, it was after the Second World War that America really came into its own as a consumer society. In the five years after the war ended, purchases of household furnishings and appliances climbed two hundred and forty per cent, while between 1940 and 1960 the rate of homeownership rose by almost fifty per cent. If the Depression didn't make Americans wary of the pleasures of consumption, it's unlikely that this downturn will.
I like to think that retirement has made me a more evolved person, more appreciative of the simple (and free) things in life. But I'm guessing that if I had a lot more money, I'd probably be spending a lot more of it.