How Savers Could Doom the Economy

How Savers Could Doom the Economy

articles.moneycentral.msn.com

Pramod Kadambi wakes up every morning fearing the world has come to an end. He and his wife don't spend money on anything but essentials. Friends who have lost their jobs visit and cry. He sees war or revolution coming. Gold coins and guns are new additions to the household.

He's a professional earning more than a million dollars a year. That makes him the Obama administration's worst nightmare: someone who could help revive the nation's economy but instead has shut down his wallet in dread.

(visit the link for the full news article)

Haha, does this sound like anybody we know? Just a few posters on ATS...

IMO, the smart thing would have been to save at least some money when times were good, rather than waiting for TSHF and then starting to save. Saving too much is obviously bad for a consumer economy. If everyone clamps down on their wallet this really will be a depression before long because stores, restaurants, and any business not selling "essentials" will be closing its doors.



articles.moneycentral.msn.com
(visit the link for the full news article)

Here's another really good part of the article.

A key difference between the theories animating the work of Obama's economists and the theories behind the Levy-Kalecki formula are that the former assume people will act rationally in accordance with government prodding and the latter consider the possibility that people will freak out. Contrary to mainstream economics beliefs that people operate with perfect knowledge, Levy-Kalecki assumes that economic participants -- families, officials, workers, investors and executives -- grope about their lives in an atmosphere of uncertainty, develop false beliefs and make mistakes, especially when surprised.

Basically, to paraphrase the article, without the Obama administration creating enough jobs through public works and directly stimulating the economy, people will continue to obsess about a bleak future. Savings will climb (at least while people are still employed), profits will fall, and unemployment will continue to rise.

So, what do you suggest? Go spend it on throw away things? You know, this is a throw away world we live in. Why build something that may last for years, if we did, no one would be spending any money, so yea, lets keep manufacturing things that need replaced at least once a year. When did we move away from building things that last? When corporate America figured it would bring in lots more money. So remember, go spend what few dollars you did manage to put in the bank, why not, the bank sure isn`t loaning it out or spending any of it, only on themselves.

[edit on 16-3-2009 by FiatLux]

That millionare is not at fault for anybody's problems. He has already produced fair value when he made the money, it is not his obligation to spend it. Also, buying guns employs people, buying food employs people.

Say I was a trillionare, if I cashed all that out and burned that money, wouldn't I be lowering the money supply and raising the value of the dollar?

So how is it so bad for him, just another drop in the ocean of people, to save it? It is all quite relative and seems to come down to efficiency and value. I agree with FiatLux, our economy has been, and is driven by junk and arbitrary value, instead of real value.

Just government pointing fingers, they don't know any better than any of us do. If government was competent and ethical then many of us would be fully behind them I imagine, but history shows failure after failure.

reply to post by sc2099


Over a mil a year and he's buying gold and guns. I wonder what his ATS screen name is....

Anyways, I agree with Fiatlux, SAVE. I refuse to waste money on trivial things anymore, and when I do go out I much thriftier. I would say that slowly, very slowly, more and more are coming to this realization.

[edit on 3/16/2009 by Rockpuck]

Originally posted by FiatLux
So, what do you suggest?

I suggest we work towards getting rid of money altogether.

If we can get the idea rolling, to the tipping point, we could do it. This will bring about abundance for all 6.7+ billion of us.

If you want to see what it might look like, as well as a map to that future, please read my book, linked in my sig.

What am I going to spend it on? cheap crap made in China? Ive learned my lesson like alot of people on here. I dont need to spend my money on trinkets I will hardly ever use, it wont make me happy. I think saving is the way to go.

I'll use houses as an example.

Houses from 300-400 years ago were well made and a GREAT investment. Easy to fix, easy to live in, a generational investment your grandchildren could live in.

Houses from today and 30 years ago last 50~70 years and is a horrible investment. Replace your roof every 7 to 10 years. Water damage? Gotta pull out those walls and floors, replace'em.

I'm not saying 100 year old houses dont come with problems they are just more hardy and tough.


What I am saying isss..... I would rather by products I know will last ALONG time rather then need constant upkeep. Which is why I am tightening my budget and only buying products and things that will last.

Edit: What are 100 year old houses made of? Hard Woods! Which last ALONG TIME. Today's houses? The cheapest construction wood house builders can get.

[edit on 3/16/2009 by Tentickles]

True enough,I grew up in a house built in the 1880's, and currently it fares better then the newer development houses that where built on top of other farms surrounding it. Built of strong wood, excellent detailed construction (we believe Amish built, we know the barn was at the very least built by the Amish), and where wood and some form of plaster was not used, drystone construction that still stands in perfect shape to this day.

Wiring needed to be redone when my parents bought the place, and my dad redid the plumbing, and I ran the wiring for high speed internet, cable, etc.

When looking at houses to buy I go into these on-site manufactured homes (thats what they are anyways) and you can see the counters separating from the walls, gaps in the floors, you can tell the spacing of wood in the walls is stretched precariously, and more often then not the cabinets are this cheap composite wood with a sticker on it.

Which leads me with two options. Buy a really old house and rebuild it from scratch, or buy a plot of land and have a custom home builder build one to perfection. The latter being much more expensive, I guess I will continue my search for an old home in need of repair. Staying away from McMansion neighbor hoods. I wouldn't dream of buying a home that had no trees either.. looks like Suburban Deserts when you go into those McMansion neighbor hoods, makes me sick.

OK, fair enough. I am not advocating frivolous spending, but how many people do you know that work for industries that only supply essentials? Only one person I know does. Everyone else works in industries which supply luxuries - restaurants, stores, entertainment. This includes the industries that are built upon those industries that employ delivery drivers, musicians, publishers, etc.

Blowing all your money on poorly constructed imports isn't good for society, but how is society supposed to react to the millions of unemployed who will emerge when spending is totally dried up? Even if we restructure our society from one built upon a throw away lifestyle to one built differently, what will we do in the meantime? Will we leave those left without a job simply to starve?

Of course Mr Kadambi is the Obama administrations worst nightmare. He is taking steps to make sure he has as much control as possible over his and his family's future, not simply relying on the government or the goodwill of others. Guns and gold are excellent investments during these uncertain times. Land for farming and equipment would also be a good investments.

[edit on 17-3-2009 by Jacob08]

One thing they don't teach in public school is to save and build interest.

They teach that in the homes of millionaires.

You know that money deposited into banks is immediately leveraged into investments, right?

Kadambi definitely is the worst nightmare for the Obama administration. That's precisely why Obama doesn't give a crap about the inflation that will come as a result of the stimulus. He WANTS inflation to kick in.

If a person has already paid extortionate taxes on their earnings, how else can the government snatch their money? The only way is to print money so rapidly that it devalues the amount in the hands of private savers.

Furthermore reducing the interest rates has the same effect- it slams savers.

Kadambi is a very intelligent man- he knows what Obama plans to do and is thus investing in gold to offset the upcoming inflation. He's clearly not a millionaire by luck

The Smart American knows when to prepare.

Just look at gun and ammo sales. Through the roof.

Then look at the movie industry. The last batman movie made nearly a billion dollars (remember it came out the summer before the stock crash.) Today movies are hardly paying for their production costs.

Reply to: sc2009

I see what you mean about how practically nobody's job is based on essentials, it's almost all luxuries. I don't really have a solution to this, but I look at it like this: If I am buying "things" primarily for the purpose of giving money to others, then why not just give them the money directly? I'm not really going to get much out of that thing or this thing. And that would save me time in shopping. Other than maintaining the lifestyle I have grown to love, of course, which in my situation is quite frugal.

But then, giving people money, welfare, charity, just adds to the problem because they no longer bother to support themselves in this particular way, or for this particular need and now rely on government, or "goodwill."

But then, isn't it better to just give them the money instead of buying their junk?

For instance how much would you pay per year just to be left alone completely by telemarketers and direct mail marketing? $50? $100? I think the headache may be worth that, especially if you had the money to spend. And then that would also save the companies money on postage...
But things like this seem to not work in reality, in reality we seem to just need more and more of this sort of marketing and buying, and to many of us it is so counterintuitive, we KNOW something is not right with this, we just aren't sure exactly what.

It's just all very complicated, and my sincerest hope is that we simply all get through it all with a roof over our heads (somebody's roof) and food/fresh water in our bellies.

We need more saving and less spending and above all less credit. People should not buy anything on credit unless it's for a health emergency.