Saturday, May 8, 2010

Mixed Messages on the "New Frugality"

Will the thrifty habits we learned during "The Great Recession" last throughout our lives? Hard to say.

Today's New Times has an article with the headline "Frugality Among Consumers Outliving the Recession." The premise is that average people kind of dig their new frugality and they have no intention of going back to their old spendthrift ways. It is, like most of the articles of this type, anecdotal. People say they will never overspend again.

But the overall economic reports seem to contradict this pro-savings view. Yesterday NPR put a positive spin on increased consumer borrowing.

"Consumer borrowing posted an unexpected increase in March, only the second gain in the last 14 months. It could be a sign that households are feeling more confident about boosting spending, a key development needed to support a sustained economic recovery."

See my previous article "You Are Not Your Credit Score" for another article cheerfully noting that the economy is going gang-butsters because we're willing to go into debt again, complete with charts on how our spending outpaces our income.

If "recovery" is defined as spending at the pre-recession level, and that level could only be achieved by racking up massive consumer debt--should "recovery" really be what we are aiming for? Perhaps we should be aiming instead for what best-selling author Richard Florida calls "The Great Reset." Instead of trying to get back to where we were, for example by abandoning "the new frugality," perhaps we should be striving for something entirely new and better. I'm interested in your thoughts on what that would look like. I hope you'll participate in the discussion using the comments.