Two-thirds of the American economy is driven by consumer spending. But with all the layoffs, the stock market's deep decline, and the housing market's implosion, consumers aren't really in the mood to spend. Consumer confidence is at an all time low. Even the people that haven't lost a job or a home are cutting back on spending. If we have money, we're paying down our credit card balances and building our savings accounts instead of buying stuff.
It's a vicious cycle, though. The less we spend, the less businesses sell. The less they sell, the less they need to produce. The less they produce, the fewer workers they need, and so we have another round of layoffs. Then, more people can't spend and our economy shrinks even more. When we read the new unemployment figures each month, the rest of us cut back further on spending, even if our job isn't in jeopardy. We just feel less secure. Our confidence is shaken.
What will it take to restore our confidence? How do we break the cycle?
I have a suggestion. We all need to stop watching the news. Get a movie from the library, read a book, go for a walk, but don't turn on the TV! Don't check the market on your computer, in fact don't even turn on your computer (except to read my blog, although here I am writing about this, just helping to make it worse. I take it back, don't even read my blog.)
The truth is, if I stop and look around me, the world doesn't look as bad as they are telling me it is on CNBC. People are still going about their lives. With the exception of those retirement account statements, not much has really changed for the majority of Americans. Over 90% of the people that want to be working are working. Over 90% of the people that have mortgages are still in their homes.
The thing is, these same 90% are glued to the cable news channels' 24/7 streaming play-by-play of how bad things are. With so much focus on the negative news, we are forgetting that life is pretty good here. That's not to say that there aren't many people going through some very hard times right now. There are. But we're never going to reverse course if that 90% group doesn't stop focusing on the negative and start appreciating what we DO have.
"Life temporarily assumes a more human pace. For a while, at least, we are not all rush-rush here and go-go there. We revert merely to talking on our cellphones while driving instead of talking and texting and trying to download pics of that sweet retro Harley we are thinking of buying with our bonus this year.
If we're not eating out as much, perhaps we're eating home more often, maybe even as families."
I especially love the final thought: "Relearning to appreciate the simple things -- playing with the box prosperity came in -- can be the silver lining in austere times."
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90% of the people who have not been affected, as you say, still are seeing their retirement funds shrivel away, their property values decline and an uncertainty of life. Turning off the news will not allay anyone's recognition of higher food prices, energy (gas) etc. Ignoring Hitler didn't accomplish anything either.
There is no doubt that people have over leveraged themselves, purchased tons of useless crap on credit cards, refinanced their equity to put in stupid pools, granite counter tops, ridiculous vacations and other wasteful spending.
It is fantastic that people are finally saving money, paying off their debts and vowing never to overspend again. The lessons are being hard learned. The overspending meant overconsumption and over production of the worlds' finite resources. Less wasteful purchasing will mean less workloads, less human consumption, shorter workweeks and finally, people will have to look at themselves in the mirror and discover they are not defined by a job!
Once people have saved an adequate amount of cash, so much so that it makes them confidant and happy, and once they have eliminated most or all of their debt, confidence will return and they will once again spend. But all within reason. One car per 7-10 years. One pair of jeans every other year. One home for 30 years.
ONE!
Yeah, it's amazing. But until then, no one should be happy.
PS: I do not consider you 'lucky' because you managed your own financial home ownership responsibly and correctly. Don't under rate yourself. It is beneath you. You and your husband are exceedingly smart and savvy people. Luck had nothing to do with it. You carefully planned, thought it out, discussed it with your parents, were/are well educated, well read, happily married, etc. Wonderful things like that are not accomplished casually. Please, do not berate you nor your husband. You are 2 great people!
Posted by: Anonymous | March 03, 2009 at 09:58 AM
That is hilarious and so perceptive! It is amazing how much of life happens to us in our heads first before checking reality. I confess I am afraid to spend money even though I am not a member of the 10% who are deeply effected by this severe recession. Yesterday, I decided against purchasing an envelope for 1.69 because it cost too much. I realized later that I was over reacting to the new battle cry of save, save save. I was a saver before it was popular but now I am turning frugality into a new religion—and like most religions it is all in my head.
Posted by: frugal | March 03, 2009 at 11:06 AM
@frugal: Well as a recent inductee to the club of cheap bastards myself, I would never denigrate new-found frugality. There's nothing wrong with saving and spending responsibly.
But I don't think it's helping matters to participate in the low-level anxiety being caused by the media drumbeat of doom.
@Anon: Gosh, I would hate for people to take to heart the idea that no one should be happy until then. There's so much to appreciate right now, I hope people can find some happiness in that right now.
Posted by: Retired Syd | March 03, 2009 at 01:28 PM
Very wise Retired Syd.
I remember reading Dr. Andrew Weil's Eight Weeks to Optical Health (or a title similar to that) years and years ago. One of his recommendations is to eliminate or reduce TV watching - news can cause a lot of anxiety.
Love your posts!
Posted by: Jules @ Lovely Las Vegas | March 03, 2009 at 07:21 PM
@Jules: I read that book many moons ago too. It was something like a two-week news fast, as I recall. I don't think I was able to do it (and I admit, I'm having trouble doing it now.) But he's right, I feel yucky when I follow this stuff, and it's nothing I have any control over, so what's the point of immersing myself in it? It's advice I'm sure we would all benefit from (not just as a nation for economic purposes, but for health and sanity purposes), but it is certainly hard advice to follow!
Posted by: Retired Syd | March 03, 2009 at 07:28 PM
I was listening to a radio show about the history of newspaper advertising. The summary was that because, in general, people are pretty safe and happy in North America, doom and gloom news stories sell more advertisements than happy ones. I imagine that would apply to the TV news as well. If you look hard enough, there are even some good news economy stories out there, they just don't get as much air time.
Posted by: BlondHeretic | March 04, 2009 at 08:25 AM