Is Frugality Treason?

I don’t know how many news reports you need to qualify as a trend, or even a rash, but I’ve definitely seen a number of stories proclaiming that Americans are actually. . . (collective gasp of horror) cutting down on buying the kind of stuff that turns most two-car garages into overstuffed closets. Can it be? Check the evidence here and here

Naturally, people disagree as to whether frugality will help or hurt the economy. One  letter-writer to the Dallas Morning News bluntly blamed spooked consumers for our troubles:

If you are wondering when the economy will get better, then go into your bathroom and look in the mirror. If you have cut back on your spending because you are afraid of the bad economy, then you are the reason why the economy is bad. Consumers like you have stopped spending money, apparently because they believe the economy is bad, and they do not know what to expect.
Our economy will not get better until people stop being afraid and start spending again.

I feel guilty already. I’m off to Target in just a moment.

Seriously, I  make no arguments for mindless, wasteful, buying-for the sake of buying consumption. If we’ve built too much of our economy on consumer spending, we may have to bite the bullet and scale it back.

But I do wonder if we might be close to seeing what the economists call The Paradox of Thrift in action; i.e., it’s great if I cut spending 20% next week, and it’s nice if you do, too, but if everyone were to cut spending 20%, we’d quickly see massive layoffs in retail and perhaps other sectors. Then the Paradox kicks in: No doubt many of the 20% Savers Club would lose their jobs, which would cost them more money than they saved with the cuts. Ouch.


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