How Should Consumers Stimulate the American Economy: Spend or Save?

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Discussion Overview

The discussion revolves around whether consumers should stimulate the American economy by spending or saving. Participants explore the implications of consumer behavior on economic growth, debt management, and investment strategies, touching on both theoretical and practical aspects of the economy.

Discussion Character

  • Debate/contested
  • Exploratory
  • Technical explanation
  • Conceptual clarification

Main Points Raised

  • Some participants argue that for the economy to grow, money needs to circulate, suggesting that spending is essential.
  • Others emphasize the importance of reducing debt before deciding to spend or save, noting that high debt levels limit disposable income.
  • There is a suggestion that purchasing durable goods domestically can be beneficial, especially if done without incurring debt.
  • Questions arise regarding which types of debt should be prioritized for repayment, with some proposing that high-interest debt should be addressed first.
  • One participant raises the question of whether investing in a 401K is considered spending or saving, expressing uncertainty about its impact on the economy compared to direct spending.
  • A later reply questions the balance between spending and saving, seeking to understand the optimal percentage for each to stimulate the economy.

Areas of Agreement / Disagreement

Participants express differing views on the balance between spending and saving, with no consensus reached on the best approach to stimulate the economy. Some prioritize debt reduction, while others advocate for increased spending.

Contextual Notes

Participants discuss various assumptions regarding consumer behavior, economic growth, and the role of debt, but these assumptions are not universally agreed upon. The discussion reflects a range of perspectives without resolving the complexities involved.

Who May Find This Useful

This discussion may be of interest to individuals exploring economic theories, consumer behavior, personal finance strategies, and the impact of spending versus saving on economic growth.

Loren Booda
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At this time, should consumers in the American economy best stimulate it by spending or saving? It seems to me that our government is giving us mixed messages in this regard.
 
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I'm not an economist, but I understand enough about it that I know that money needs to move around for the economy to grow. I also know that over-purchasing on credit helped to get us into the current situation.

So, this is the time to buy "Durable Goods" made domestically, with money not credit (or with reasonable payoff time). If you have the money and you need the product, shop around for the best quality you can find.

As for savings, you will always save more money by simply not buying frivolous, cheap, useless sandalwood knick knacks made overseas, or low quality kitchen utensils that don't last, or electronic gizmos that have only slightly better features than the one I bought less than a year ago. [Me, on those points: guilty guilty guilty]

If you have the option of buying something that is domestically produced, so much the better. If "Made in China" is the only option for what you need (something I have found to be the case over and over again), then at least buy it at a local business.

Actually, it's always the time for that.
 
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the more debt you have, the less money you have to spend on goods. this is because a significant portion of your disposable income goes towards paying interest. in the long run, it will pay to reduce your debt load.
 
Proton Soup said:
the more debt you have, the less money you have to spend on goods. this is because a significant portion of your disposable income goes towards paying interest. in the long run, it will pay to reduce your debt load.

That would indeed be the first step. Before either "saving" or "spending," one should pay off debt.
 
Are their some types of debt that are better to pay off first?
 
Loren Booda said:
Are their some types of debt that are better to pay off first?

I would imagine the ones with the highest per cent of interest would be the best to pay off first.
 
Is putting money in a 401K considered spending or saving?

Is this better than spending for the economy? I'm not so sure, but that's what I'm doing anyway.

I've put virtually everything in emerging markets since Nov. 2008 and it has given ridiculously high (Like 50% YTD) returns. (I'm expecting this is another bubble, but I'm not sure when to start shifting into more conservative investments.)
 
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Loren Booda said:
At this time, should consumers in the American economy best stimulate it by spending or saving? It seems to me that our government is giving us mixed messages in this regard.
Spending obviously... how can the economy possibly grow if everyone saves and nobody buys anything?...
 
If it were a matter of degree, then what % spending and what % saving?
 

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