Saturday, November 15, 2008

The Economy and Spreading the Wealth

So, I was having dinner last night, and the man I was with and I were discussing the economy and its effects on both of us, and US in general.

As I've mentioned, I lost my primary client about a month ago. I haven't been really working since then (I've been working on some website stuff, but I've spent very little time with that), and that's by choice -- I haven't been seriously seeking new work.

He has his own business, and last month and this month to date have been grim. Things can go either way for him, because of the nature of his business.

One thing we both agree on, is that people are over-reacting to the recession. He pointed out that so many people hear "recession" and they think "depression" or "dust bowl." We both agree that people should live and spend like they normally do. When people stop spending money, it just exacerbates a slowing economy. To wit, we went to dinner at about 10pm, and the restaurant was completely empty. Granted, it was not in the downtown core of Seattle, but that's not what you expect on a Friday night.

I've been thinking for a while that what people need to do is just spend some frivolous money every week. Go out to dinner. Go to the movies. Buy groceries at local markets, instead of the grocery stores -- even if it costs a little more. Just pump some money into local businesses. Let's look at it this way, with the restaurant last night as an example: people continue to hoard money and not eat out and half the waitstaff is laid off, and maybe the restaurant eventually closes. Because people are hoarding their money, other people are directly and negatively affected (less money, no job), and local business suffers. Anytime people hoard money without spending on anything non-essential, they are impacting their local economy. Economies thrive because money is put in to them.

I'm not saying everyone should go on major shopping sprees or get into debt. Far from it. I think the first priority is to build an emergency fund, even if it's just $1000. Second, work on paying down debt, but don't let this dominate your personal budget -- allow you or your family a "splurge" for each week even if you don't normally. If you have income, share it.

We can't expect the government to bail out every organization hurt by this recession. That said, I strongly believe that individuals can have a much greater impact on their local economy than they probably think they can. I'm not advocating using credit cards, by the way.

So, help your local economy by going forth and spending some cash.


Jerry said...

This is a tough subject but it applies to people who have some to spare. It's hard for most people to see that because after the car payment, insurance and grocery bills we feel we don't have much left over. But, if we don't spend some of our money on things it will lead to an even slower economy. Do it if you can, right?

Associate Money said...

Letting the economy slip into deflation will cause the housing market to collapse. That is what happens to Japan in the 90s.

I think those who have the means should step forward and do their part for the economy.

Just go shopping and spend, I don't think that is too hard to do.

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