I once thought I might have to join, or start, a Penny Pinchers Anonymous group. Frugality seemed old-fashioned, something left over from having parents who remembered the Great Depression. It seemed almost like a psychological problem or perhaps a bad habit to some of my grad school friends. But I continued down my frugal track from necessity (I have always worked for non-profits) and a deep belief that there is something really good about it. Rather than confess it, I'd prefer to extol frugality and convince others of its benefits. The time is right for that, after three years of recession. What once seemed out of date, now seems more popular, a recognized beneficial habit, like exercise. I'm not alone in thinking this either.
It was just reported that on average, Americans are cutting back on their expenditures and increasing their savings. These two recession-prompted behavioral changes, could, if continued, bode well for the nation’s long-term economy. The Federal Reserve Bank of New York reports that in 2011 Americans have 7 percent less mortgage debt, 12 percent less auto loan debt and 15 percent less credit card debt than they had in 2008. They are also setting aside more than 5 percent of their disposable income.
Put in perspective, however, that savings rate is still lower than the 7 percent average of the last five decades. Yet if lenders continue to require high credit ratings of borrowers and job growth remains stalled, as predicted, the savings rate of Americans could soon equal or exceed past averages.
Paying off personal debt and living within one’s means are healthy practices. As individuals become more financially secure, they will tend to spend again, stimulating demand for goods and services. And as debts are paid back, lenders will ease their standards. Truth is, this will take time.
Meanwhile, as the cost of living rises, frugality will become essential. When higher taxes come (they will) and federal and state subsidies dry up (they are), savers (not just high earners) will be among the few able to afford a home, even if that purchase has to be delayed until one’s savings grow. Savers also can prepare themselves for retirement as employer-sponsored pension plans disappear and 401k (403B) plans become the norm. Savers give themselves a modicum of security, whatever the fate of Social Security.
Reduced spending and increased saving are not just a silver lining in a dark recessional cloud. These indicate a return to responsible stewardship. To that, I say, Hurrah!
1. I think Mr. Mazzella should apologize to Ms. Smith. The mocking in his reply has no place anywhere.
2. Ms. Smith has espoused conservative and libertarian positions. Her way of life is consistent with both philosophies. More of us should be frugal and generate less debt. It then gives us freedoms we never could choose if we weren't.
I once thought you were a dynamic and creative person. Now I see you are just like all other wo/men. Don't tell me you are doing a Susie Orman on us and saying we can only have one car and a small house. I thought Orman was posing as David Smith until I read "no cable tv." I mean who will be left to watch Susie? And Susie knows that healthy food, especially in the cupboard, is more expensive. Then again karen, you should know that non-profits have been under suspicion for a long time. What with the staff at National Geographic living high off the hog and the Hudson Valley almost fully taken over by religious orders, churches and retreat centers. Why did you not figure out that the remedy is to organize pilgrimages to these sites? The indulgences alone make it worthwhile. Or do you not consider purgatory and limbo as cost effective? Where is Bernard of Clairvoux when you need him?
And who would think, Sue, that you would buy the simplistic theory that the Great Recession was driven by greedy new homeowners. Now I see why you merely initiate a thread and leave the dialogueing to the hoi polloi. At any rate, when you move or, go to your heavenly rest, a lot of people may want to be at that yard sale.
As Peter Maurin says,
Everybody would be rich
if nobody tried
to become richer.
And nobody would be poor
if everybody tried
to be the poorest.
If you paid attention to my words you might have learned something. Satire is ok when it is not cruel. I think Karen can take care of herself. Do you consider yourself frugal or distant when you address both of us by our last names I do question Karen's justifying her frugality by a crises caused more by greedy bankers than avaricious first time buyers. Not that Karen intended it. But the next step may be to blame the poor for not being frugal as many wax critical from the Hamptons. The fact is that the First Estate does not live frugally and we should never forget it. My more impassioned criticism was for Susie Orman who is more charlatan than beneficial.
But if it is true that Karen is offended, then I apologize. I find her posts outstanding.
No one ever blamed the first time buyer, though most gladly participated. Oh there was some greedy bankers but the origins of the crisis were in the early to mid 90's and three individuals who are primarily responsible for its origins are James Johnson, Bill Clinton and Andrew Cuomo. When they showed the way a lot of others joined in including some greedy bankers such as Angelo Mozilo who was a buddy of Johnson. Without these three meddling in the normal house buying process and willing accomplishes like Mozilo there would never have been what followed. Johnson made over a 100 million personally and then got out as what he sowed eventually led to the financial crisis. Mozilo made about a half billion. I wonder if he gave any of it to his alma mater, Fordham.
Johnson was even picked by Obama to advise him on picking a vice president. He had to be replace when it was pointed out that his hands were dirty.
How partisan can you get?
The greedy bankers were mostly Democrats too so is accusing them partisan. All I was doing was putting the primary blame where it should lie. You can also blame the Fed under Greenspan and now Bernake for the easy money. Another major culprit was the rating companies who were among the real low lifes in the process especially Standard and Poors. But the real origin was in the early to mid 90's with Fannie Mae and the housing policy of Clinton. It is another example of supposed good intentions leading to disaster.
http://blogs.the-american-interest.com/wrm/2011/06/07/fanniegate-gamechanger-for-the-gop/
"An unholy alliance between Wall Street, the Democratic establishment, community organizing groups like ACORN and La Raza, and politicians like Barney Frank, Nancy Pelosi and Henry Cisneros. (Frank got a cushy job for a lover, Pelosi got a job and layoff protection for a son, Cisneros apparently got a license to mint money bilking Mexican-Americans of their life savings in cheesy housing developments.)"
In other news, I saw Congressman Frank held a Wall St. fundraiser a few nights ago. I guess he was telling them the honest truth about how greedy they all are.
I just finished reading it. I also read the Walter Russell Mead review. Fannie Mae and especially James Johnson are the real prime movers in all this along with Mozilo. There are plenty of others including some Republicans and Wall Street people. A lot of people got greedy and added fuel to the fire. But without the Clinton housing policy and Johnson, the housing crisis may have never happened. They changed the supply and demand curves for housing and we have some very horrendous results. Some had good intentions but as we have seen good intentions often lead to very destructive results and the housing crisis is not the first time. Until the liberals admit this, there will never be peace between the two sides. Good intentions destroy unless checked by prudent action.
Also here is a prescient article from 2002 referenced in the Morgenson book about Fannie Mae.
http://www.washingtonian.com/print/articles/6/171/8593.html