Get Out of Debt and Sink the Economy?

January 26, 2007

During a recent late night visit to the store I had a “deep thought” as I walked down aisles full of stuff and void of people. What would happen if the store was this empty all the time? If people stopped buying all this stuff what would happen to our economy?

No More Stuff!
In the personal finance arena we’re flush with the advice, stop buying crap. I happen to agree with this philosophy, I’m big on buying assets, not liabilities or “junk”. We’ve become a nation of debt because the need for this “stuff” has become ingrained into our society.

Looking For Growth
However, for every action there is an equal and opposite reaction. Consumers carried the economy on their back during the tough times after 9/11. What if everyone actually started listening to the advice and stopped overconsuming? What if the fuel of our hard-earned paychecks stopped flowing into the engine of economic growth?

You hear people talk of how they’re hoping for a “soft landing” for the economy. Corporate profits were great in 2006 but it’s thought they will be slowing in 2007. Economists may be looking to us consumers to mount up and saddle the weight of growth once again. Without our contributions to their profits the stocks of our country’s mighty merchandisers could take a plunge and set off an economic chain reaction.

How Will You Choose?
Who would you rather be? Are you going to be contributing to the net growth of our retailers while putting yourself into debt? Or are you going to resist the urge to buy and instead put the money you saved into the stocks of those same retailers through your S&P 500 index fund?

It’s sad you may be profiting from your neighbor’s loss but if they won’t listen what can you do? Maybe the government should create Debt Savings Plans, a kind of charitable contribution to help those in debt. You could contribute pre-tax dollars and the tax free capital gains from this investment account would go to fund the debt reduction of “the Joneses” next door when they hit rock bottom financially.

Ben

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Ben

Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn’t like the other kids… His addiction to personal finance has paid off for his family and now he’s helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.


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Comments

3 Responses to Get Out of Debt and Sink the Economy?

  • moneysmartz

    CreditShack, sometimes I forget sarcasm is lost in the written word, too bad there isn’t a tag in HTML 🙂

    I agree, my “proposed” Debt Savings Plans would foster poor money management. We can help our neighbors prevent sliding into a debt coma by giving advice much more easily than we can help them cure the debt disease once they’ve caught it.

  • CreditShack

    You’re absolutely right about how consumerism drives economic growth. If people quit spending, the economy quits growing.

    I think your Debt Savings Plan, despite the charitable intentions, would be a disaster because it creates incentives for people to get into debt. Why live within your means when you can count on free dough from the “Joneses” next door? If they’re getting into debt already WITHOUT incentives, imagine how bad it would get WITH incentives.

    Instead, how about a charitable (i.e. administered privately, not by the government) gifting system that allows others to supplement the earnings of the working poor “Joneses” next door, much like companies match 401(k) contributions? This would not subsidize bad behavior.

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