Thursday, March 26, 2009

Good News in the Downturn?

Most of us know someone at this point who is out of work. Maybe not your best friend, but certainly a neighbor or family member. The unemployment rate hit 8.1% in March, and by all accounts will rise to 10-12% before the recession subsides. That's scary, and I'm not rejoicing in the fact that anyone has lost their jobs. However, as the saying goes, every dark cloud has a silver lining. According to a recent Newsweek article by Zachary Karabell, "The Biggest Thing to Fear is Fear:"

The most obvious consequence is that personal savings jumped from under zero in the middle of 2008 to 5 percent in January. People have been socking away money and paying down debt. Outstanding credit-card debt has been decreasing for the past two months at least, and plunging auto sales are partly attributable to the unwillingness of many to incur new auto loans. Consumers are already rebuilding their own balance sheets.

Karabell goes on to say that the gradual return to spending from people on Main Street will lead the way out of the economic crises. Instead, I hope that people have used the past six months to reevaluate their priorities. Was it really that big of a deal to forgo the new car or Disney vacation and instead sock some money away in the bank to protect against a rainy day? It's nice to have a savings cushion and get your personal "balance sheet" in order. I know a lot of businesses have been lamenting the lack of consumer demand, but maybe the expectation that people will ALWAYS want to get something that is bigger and better is too demanding of consumers. There is such a thing as good enough, and maybe some of the businesses selling stuff people don't need should be downsizing. Waiting to buy something until there is enough money to pay for it used to be a lot more common; hopefully some of the new savers out there will continue to live this way even as our economy recovers.

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