WSJ: Thrifty Families "A Major Reason The Downturn May Not Soon End"

[babylonsister]

OK, so now they're back to blaming the middle class-for not spending more? :eyes: I can't keep up.


Hard-Hit Families Finally Start Saving, Aggravating Nation's Economic Woes

By KELLY EVANS


BOISE, Idaho -- Rick and Noreen Capp recently reduced their credit-card debt, opened a savings account and stopped taking their two children to restaurants. Jessica and Alan Muir have started buying children's clothes at steep markdowns, splitting bulk-food purchases with other families and gathering their firewood instead of buying it for $200 a cord.

As layoffs and store closures grip Boise, these two local families hope their newfound frugality will see them through the economic downturn. But this same thriftiness, embraced by families across the U.S., is also a major reason the downturn may not soon end. Americans, fresh off a decadeslong buying spree, are finally saving more and spending less -- just as the economy needs their dollars the most.

Usually, frugality is good for individuals and for the economy. Savings serve as a reservoir of capital that can be used to finance investment, which helps raise a nation's standard of living. But in a recession, increased saving -- or its flip side, decreased spending -- can exacerbate the economy's woes. It's what economists call the "paradox of thrift."

U.S. household debt, which has been growing steadily since the Federal Reserve began tracking it in 1952, declined for the first time in the third quarter of 2008. In the same quarter, U.S. consumer spending growth declined for the first time in 17 years.

more...

http://online.wsj.com/article/SB123120525879656021.html

[ogneopasno]

1. This is just gets better and better.

[gollygee]

2. What do they expect people to do?

Less money = less spending. Duh.

[ShortnFiery]

3. WSJ = P.T. Barnum of the Financial World. eom

[Tutonic]

19. Haaaa! Classic. PT Barnum.

[AndyA]

4. I don't think most families have much choice at this point.

They have exhausted any savings they had.

They are up to their ears in credit card debt.

They've taken all the equity they can out of their houses.

They fear they might lose their job.

What else is left but to cut back, and hold on for dear life? :shrug:

[rurallib]

5. Who owns the WSJ? Oh yeah Murdoch

We know he has only the good of America in his mind. Time for Rupert to have FUX replay GW's "Go Shopping" video from the GW greatest hits vault.
Thank God the WSJ points outthat the depression is caused by people not shopping and not by massive lawbreaking on Wall Street. Tomorrow will probably be a diatribe on unions.

[NRaleighLiberal]

6. Sounds like most of my wife's quilt group - "It's patriotic to spend".

Same with her book club. Mostly very conservative, very religious. blindly patriotic. They think my wife is some kind of...of....socialist!

[supernova]

7. Damn those thrifty families!

Saving they money!

Eating they peanut butter!

Robbin' us of they hard earned scrabble.


:eyes:

Suck it, Murdoch!

[OregonBlue]

8. Typical Republicon thinking. Blame anyone but themselves for this nightmare.

[The2ndWheel]

9. I know I've done my fair share to destroy the economy

And fairly proud of it. I feel like I'm doing my part. For example, I've never purchased a car. I also won't be purchasing a car in the future, no matter what they run it with, or what color economy they say it came from.

It's true though, if people don't consume, the economy contracts. If people don't save, then everything is gotten with credit. That's why there is no solution to the various problems we face. No matter what we do, it won't fix anything. If the economy continues to grow, our impact on the environment will only increase. If the economy contracts, most of us will be in a bunch of trouble, since most of us are only here because the economy has continued to grow.

[guitar man]

10. Well duh

It's that Wall Street and CEO class that has made us "thrifty". Years of trickle-down madness, outsourcing and precious little if any wage growth have made all of us in the real world working class damn "thrifty".

And BTW, isn't this what we've been admonished to do by the mouthpieces of the priveleged classes every time we dared to complain? I can't count the times I've heard or read "well, if those people knew how to handle their money, they would have a better lot in life, don't blame it on us." Bullshit. The fact is, many of us DO know how to handle our money, what little of it there is. It is the only way we have been able to survive almost 30 years of Reagan's supply side wet dream.

So if the golden children at the WSJ want to complain that I'm not eating the goddamn crumb that falls off the table of the aristocrats all in one bite, fuck them. It's my damn crumb and I'll do what I want with it...or more accurately, I'll do what I HAVE TO with it.

"Have to"....now there's a concept that is most likely foreign to the corporate welfare class. :eyes:

[ogneopasno]

11. Also, I don't think this has anything to do with "saving." I think it's more a reflection of not

spending on credit. People are actually spending only the money they have, which is very little. They're still spending all of it and going short in many areas. But they just stopped buying stuff on credit, too.

[Gormy Cuss]

22. That's certainly the case with the two households featured.

Both anecdotes are about dialing back spending more than about increased saving. In fact, the Capps "saved" $500 of their stimulus payment while still carrying $5500 in credit card debt. The only reason that I could guess for that choice is they wanted to have some emergency cash on hand. If that's the case, this family is actually making a smart decision in the current credit crunch.

[JackRiddler]

12. Damn them, they didn't spend for Christmas and the world ended.

[DBoon]

13. Now wait a second...

Wasn't the downturn the fault of average people taking on huge ARMs to buy inflated real estate when they did not have the income to support this?

I thought the profligate and irresponsible ways of the average American was the cause of all this?

(snark, in case anyone can't tell)

[zipplewrath]

14. Really bad article

In case anyone is tempted to draw any conclusions from this article, I would be careful. It combines basically anecdotal data with broad population data. It also mixes various definitions of "savings". And much of it focuses on Boise, which is hardly representative of the US at all. It also makes no attempt to discuss why debt may be declining, or their various definitions of
"savings" might be climbing. Spending habits tend to be a bit like New Years resolutions, all the rage for a few months and then folks slip back into their old habits.

[Statistical]

15. Its not blaming its reality

If the WSJ pretended it wasn't happening and say things will improve quickly people would be mad about that too.

It's not blame but it is the new reality.

For the last decade economic expansion has happened because consumers BORROWED.

Now it will be twice as hard to grow the economy
1) Economy is shrinking and even when it stops will likely grow by small amount
2) Consumers are not borrowing so they amount they are spending is reduced.
3) To add to #2 is the fact they are paying down debt which means that spending is further reduced.

Take typical Joe consumer.
Has $1000 a month in disposable income.
Well for last 10 years Joe has been spending $1200. That's great for the economy but not so great for Joe.
Now Joe is putting aside $300 a month to pay down his debt.

So Joe is spending $700 which is bad compared to the $1000 but horrible compared to the $1200.
Multiply that by millions of consumers and it adds up.

The "free money" train just derailed and it will take a couple decades possibly a lifetime for consumers to unwind all that debt. While they are doing that their reduced spending means reduced GDP.

The article wasn't about blame. It was an explanation as to why recovery is going to be slow and rough.

[BR_Parkway]

16. Surprised the headline says "families" instead of "consumers" since

that's all we are to those people in the first place. Well, except for now - when we're not consuming

[bdamomma]

18. they should have used the disappearing Middle Class.

instead of families.

[BR_Parkway]

23. I ain't going nowhere - and if I choose not to spend my money on toys

and trinkets, that doesn't drop me out of the Middle Class - it just makes me a 'deadbeat' in some accountant's office who's responsible for telling the corporate heads how much I've done or not done to enrich them lately

[slackmaster]

17. The subject of the paradox of thrift is interesting if you can get past your hot buttons

There are some things I will not give up as long as I have the ability to pay for them - My favorite restaurants, for example. I know that if I stop eating out, they may have to cut staff.

[endless october]

20. when you outsource peoples' jobs

they stop buying stuff. who would have guessed? i guess those "overpaid" union workers actually contributed a lot to our economy.

neocons fail at economics.

[Lugnut]

21. We were forced into it.

Who has anything left to spend after a trip to the grocery store?