Welcome to the False Recovery by Eric Janszen
Companies planning for sudden and relatively near-term growth should reshape their strategies to make the best of economic flatness.
He makes a decent point for companies, but the he flips back and forth between the need to save more (because we are buried in debt) and the need to spend more (because we need to grow the economy right now). And while I wouldn’t stake my life on it I wouldn’t be surprised that we have a strong economic rebound (it is also perfectly conceivable we have a next to no growth or even fall into a recession). But it seems to me the return to bubble thinking and spending beyond our means is making a strong comeback.
Another ok, point but we have hardly paying off anything of the previous living beyond our means. It would take decades at this rate.
So the problem is the saving are not actually resulting in increased ability to spend (first point above) – which is bad he says, because it means their won’t be more spending (because people won’t have the ability to spend). Then he says when banks lend the consumers money they will spend and the saving rate will go down (which is bad – though he doesn’t seem to really want more savings (because that means business won’t get increased sales).
The conventional wisdom likes to point out the long term problem of low savings rate but then quickly point out we need more spending or the economy will slow. Yes, when you have an economy that is living beyond its means if you want to address the long term consequences of that it means you have to live within your means. It isn’t tricky. We need to save more. If that means the economy is slower compared to when we lived beyond our means that is what it takes. The alternative is just to live beyond your means for longer and dig yourself deeper into debt.
That is not the path I believe is best. I have wanted, and want now, for us to stop living beyond our means. Pay off some of the lavish living we have done while we save money for the future. And then build a strong foundation for a sustainable economy. We are incredibly materially rich. We can easily live well without living beyond our means.
Related: Dollar Decline Due to Government Debt or Total Debt? – Saving for Retirement – Our Capacity Remains Undiminished – Families Shouldn’t Finance Everyday Purchases on Credit