I know that many of you are like me and very frustrated. Frustrated at yourself and others who have made some really unwise financial decisions. The current economic crisis in our country is the direct result of people who have made some poor decisions over the last 20 + years. I want us to learn from our current economic "crisis" and make new decisions moving forward into the future to put us in the best possible shape financially. I asked Dr. Lou Pantusco, Professor of Economics at Winthrop University if he would mind answering some tough questions about the current economic situation and to give us some practical tips that might help us moving forward.
For the next several days I will post some of his answers and feel free to chime in and ask your own questions.
For the next several days I will post some of his answers and feel free to chime in and ask your own questions.
The first Question: Should we listen to the government and other "experts" and spend more or save more during this economic crisis?
As an observer of Sunday’s service on the economy, I was amazed and impressed with the clarity and simplicity of Chris’ message. There were a few points that he made that I thought were perfect! Specifically, his critique of the economist who claimed that “this is not the time for American’s to start saving” was right on. I agree with Chris. If Americans had been saving over the past decade, we would not be in the mess we are in. The number of foreclosures would be much less, consumer spending would be more consistent, and subsequently, there would be less employment fluctuations. In the fourth quarter of 2008, US spending (consumption) decreased by 3.8 percent, and savings actually increased by 3.6 percent. The starting points for these numbers are completely different, so one cannot say the reduction in spending equals the increase in savings. However, there is a trend toward savings and away from consumer spending. More specifically, the numbers suggest that consumer spending has decreased on “food, clothing, and automobiles”. In South Carolina retail sales fell by 23 percent. All this simply means people are being more frugal with their money, they are not going out to restaurants to eat, they are not spending as much in malls, they are not buying new automobiles.
While the health of the US economy is dependent on consumer spending, the welfare of your family depends on personal savings. Should you focus on the economy or your household?
As an observer of Sunday’s service on the economy, I was amazed and impressed with the clarity and simplicity of Chris’ message. There were a few points that he made that I thought were perfect! Specifically, his critique of the economist who claimed that “this is not the time for American’s to start saving” was right on. I agree with Chris. If Americans had been saving over the past decade, we would not be in the mess we are in. The number of foreclosures would be much less, consumer spending would be more consistent, and subsequently, there would be less employment fluctuations. In the fourth quarter of 2008, US spending (consumption) decreased by 3.8 percent, and savings actually increased by 3.6 percent. The starting points for these numbers are completely different, so one cannot say the reduction in spending equals the increase in savings. However, there is a trend toward savings and away from consumer spending. More specifically, the numbers suggest that consumer spending has decreased on “food, clothing, and automobiles”. In South Carolina retail sales fell by 23 percent. All this simply means people are being more frugal with their money, they are not going out to restaurants to eat, they are not spending as much in malls, they are not buying new automobiles.
While the health of the US economy is dependent on consumer spending, the welfare of your family depends on personal savings. Should you focus on the economy or your household?
Thanks Dr. Pantusco. Great post! What do you think? What are your questions for Dr. Pantusco?
2 comments:
Well, this is a great question from Dr. Pantusco's own reply:
"While the health of the US economy is dependent on consumer spending, the welfare of your family depends on personal savings. Should you focus on the economy or your household?"
Obviously, we personally are not spending as much because we don't have as much to spend...also because we are worried about tomorrow...will we still have a job? Also because it's clear that we need to do a better job of handling our finances and this is a good time to learn this valuable lesson.
But, as you said above, if the health of the economy is DEPENDENT upon consumer spending and we are all spending less out of need, fear, or just trying to improve our handling of money for our own family's sake...then what's going to be? Is this like a chicken and egg debate or what?
Thanks Chris and Lou for this discussion. I have a couple of comments and questions on the subject. It seems to me the government bailouts and stimulus packages will just increase inflation. Also I'm uncomfortable with the huge deficit the US is incurring, are we just delaying the inevitable, as well as becoming dependant on foreign governments to fund our society? What are your thoughts. Thanks, Mary Lynne
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