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

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."

Read the whole story here.

Comments

[MovingtoNorway]

I thought the consumerism society is ending.

[Rule Of Law]

"But this same thriftiness, embraced by families across the U.S., is also a major reason the downturn may not soon end."

I have the answer for that: Every Company in America give every employee a nice hefty Raise! Then watch us spend!

[research]

And start those major Green public works projects!

[TallGrrl]

Hell, I'm single--and child-free, thank goodness--and have NEVER spent beyond my means. I have a checkings and savings account and NO CREDIT CARDS. The savings NEVER gets touched. The checking account pays bills and the occasional treat (like movies or music or hobby stuff), but my mantra is: If you don't have the money for it, too bad. If you REALLY want it that badly, save up for it."
My job is relatively safe but that iMac I was saving for, however, will have to wait. That money is going into the general savings account.
Just in case.

[mrcontinental]

Will you marry me?

[TallGrrl]

; )
LOL!

[Montanagramma]

People are beginning to see, and put into action, a survival plan. Once they have mastered that plan, "thrift," there may be no coming back to the status-quo. It actually feels good to not play the consumer game, and to find out you have the means to actually be financially solvent. So, if our national financial system is suffering because we the people have taken charge of our family's financial well being, so be it. There will be adjustments, and they may be difficult, but our country needs to "get real", too.

[WonderingNThinking]

A thrifty family had to resort to playing the Wii they bought as a Christmas gift.

[TallGrrl]

It was apparently all they bought...and instead of it being for one of the kids, it was for the whole family. And neighbors came to play as well.
So...what the hell was your point?

[Bluedrgn]

OMG! Those evil thrift shoppers! It is all their fault! It's not the irresponsible banks who made bad investments and now aren't loaning cash! It's is though danged thrift shoppers who are trying keep their families fed, it's all their fault!

[frankiestage]

Wasn't this all predictable? When people had to commit 40, 50, 55% of their incomes to mortgages, why weren't the banks, the lenders cocncerned? Surely they didn't think it was sustainable. And when the foreclosures began to mount, the banks folded their arms and decided they didn't want to play anymore. But since taxpayers have now funded their losses to the tune of $750,000,000, they're feeling a little better. The greed of the oil companies sunk the nails in the coffin though, and now here we sit. Change has come, and more drastic changes are on the way.

[MuchMadness]

No one has commented on a major social change over the past fifty years. It is now widely accepted that in order to survive financially most families will need to have both parents working in the paid labor force.

[tomas0808]

I have. And what was the major reason for that, even more than wages not keeping pace? The banks, who manipulated home prices to skyrocket. I did a little calculation: If home prices (where I live, Seattle area) had been tied to wages in the 60's a house that is $500,000 would be $80,000. That is where they should be, given people's reasonable ability to pay them off in their lifetime given what we make.

[Realist]

Yep - we need 104 paychecks per year. And this is just to cover FIXED COSTS - Housing, health care, education, and food.

Meanwhile, families facing greater risk if one is laid off - more risk to each family. Put on top of that the cost of mortgages today as is correctly pointed out above, health care today versus 20 years ago, then add day care... give me a break.

Now someone gets sicks and guess what - insurance doesn;t cover it or hospital sends them home early to recover with the family = more days off = more poor families.

Families today with children are facing 100% increase in mortgage costs, meanwhile they have to forgo health insurance to pay for these fixed costs and there is no social safety net.

LEt's face it folks - the middle class has been decimated....

[wdw505]

why do you need me as a tax payer to be your so called safety net

[Lochmon]

1) This country is creating massive debt that our children and grandchildren will have to pay for.

2) Oops, we made a little miscalculation, regarding when 1) would come due.

[tomas0808]

They have stretched the time/space continuum too far. Now it's snapping back. It's gonna hurt. Us more than them

[Lochmon]

This is remarkably similar to GWB's advice to all citizens after 9/11: "Consumers, go out and buy!"

If the entire citizenry of the US were to change their purchasing habits in a more sensible direction, and the entire retail and manufacturing infrastructure had to retool to not only get back to where they were a year or two ago, but to actually do something new... so be it.

The WSJ is whining, "give us back our profits! waaaah!"

[WonderingNThinking]

It's exactly the same - just a different delivery of the message. It's more disguised, if you ask me. It seems the propaganda has improved in it's methods to appeal to people's emotions. The article "appeals" to everyone's situation.

[tomas0808]

This is 'the moment of clarity' for America. Advertisers are liars and the corporations, banks and their conspirators in gov't are enemies of the people. See them for what they are

[quantumspin]

Notice that we citizens are called 'consumers' and that this is our most important role, and when we don't perform that role, well there is hell to pay. The corporations and banks hate it when we catch on and refuse to pay huge markups, inflated prices, and put it all on credit cards with 33% interest rates.

Maybe we are finally getting smart.

[tomas0808]

Withholding our money is, given how our gov't has been bought out by the corporations, the only power we have as citizens anymore. An old fashioned revolution would never succeed, but if we just don't buy crap the whole deal will collapse. I'm doing my part

[truthforme]

BINGO! Thank you to you both for saying it. Come on, people. WAKE UP! The only REAL power we have is to vote with our dollars.

Stop feeding the beast.

[cayuse]

Mr Postman

I sure hate to have to save all my post offline because you think you are a gate keeper instead of inforcer of the rules. If I break the rules then tell me what I did

Otherwise I will have to tell Arianna her sight is not open to free speech

[SCG]

Maybe corporate America can replace the lost demand with their cut rate workforces abroad?

[satyriasis]

The whole system is built on consumption and consumers have been obliterated in the past year. Thanks GOP. I wonder if overturning Sarbanes-Oxley will revive the morbid economy like so many of you claim......