Tuesday, February 24, 2009

Money Talk

So everyone is waiting to hear what the president will say about the economy tonight. Many hope that he'll say something uplifting, because if he says something too depressing, even if it's the truth, it could make the recession worse.

Economics is not an exact science. It has as much to do with psychology as anything else. We're not on a gold-standard anymore: once people think the economy is in trouble, they start acting like it's in trouble, and those actions stem the flow of money, thus ensuring the economy is in trouble.

I'm not saying it's not bad. It's bad. But, as one economist recently said, a crisis of consumer confidence could become a self-fulfilling prophecy.

Flyer editor Bruce Van Wyngarden wrote an editor's letter to this effect a few months ago and, truth be told, I vacillate between wanting to spend for the common good (or shoes, ahem) and wanting to bury all my money in a pot in my backyard where I know it's safe (which, btw, I have not done, so don't come sniffing around. You'll only dig up the creeping Jennies, and I would hate that.)

The NYT has an "object lesson" about Japan and how its spend-thrift ways have kept it firmly in a recession, one in which it is so dependent on exports that when the world economy falters, it almost collapses:

"The economic malaise that plagued Japan from the 1990s until the early 2000s brought stunted wages and depressed stock prices, turning free-spending consumers into misers and making them dead weight on Japan’s economy.

Today, years after the recovery, even well-off Japanese households use old bath water to do laundry, a popular way to save on utility bills. Sales of whiskey, the favorite drink among moneyed Tokyoites in the booming ’80s, have fallen to a fifth of their peak. And the nation is losing interest in cars; sales have fallen by half since 1990."

I'm not saying everyone should go out and spend carelessly. Not by any means. That's what got us into this mess. But as some point, if we continue on this pessimistic path, the potential end result is a out-of-control race to the bottom. Only there isn't one. (And that doesn't sound scary or pessimistic at all, does it?)

On a related note, a 93-year-old Grandma named Clara has been vlogging Depression-era recipes on YouTube for two years. You can learn how to cook pasta with peas, egg drop soup, and what's called the "poorman's meal."

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