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

[Loren Booda]

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.

 

[Chi Meson]

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.

 

[Proton Soup]

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.

 

[Chi Meson]

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.

 

[Loren Booda]

Are their some types of debt that are better to pay off first?

 

[Ithina]

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.

 

[DavidSnider]

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.)

 

[Quincy]

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?...

 

[Loren Booda]

If it were a matter of degree, then what % spending and what % saving?