Your own private Idaho.
When you can no longer afford even a night out in Boise, Idaho, your country’s in deep financial trouble.
In a clever immorality tale about 21st century capitalism, the Wall Street Journal tells us this morning that people in the Intermountain West are having to give up meet and potatoes. Like many other families throughout the country, the average-American Capp and Muir families have had to stop spending and start saving.
No more nights out in downtown Boise. The Capps now have to stick close to their suburban home. But — the bad news keeps piling up — they’ve had to sacrifice cable TV! And they have teenagers in the house! (Memo to the parents: If you can’t afford to put meat on the table, at least serve your kids Robot Chicken.)
Kelly Evans‘s story, “Hard-Hit Families Finally Start Saving, Aggravating Nation’s Economic Woes,” fascinates, not only because it’s a detailed yet smooth human-interest yarn, but also because it points out the financial perversity spreading through the land because of Wall Street’s meltdown.
Don’t feel sorry for these hinterland families. The fact that they’re desperately trying to save their money, instead of going into more debt, spells doom for the rest of us. By trying to extricate themselves from their own mess, they’re just making it worse for all of us…and for themselves. Screwy, huh? Here’s the explanation, per Evans’s story:
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.”
It’s more like a “Cash-22.” I mean, you finally start acting responsibly, saving money instead of piling up even more outrageous credit-card debt and purchasing gizmos and gewgaws that relentless advertising has brainwashed you into lusting after, and that’s bad for you, your family, and the country? More from Evans:
U.S. household debt, which has been growing steadily since the Federal Reserve began tracking it in 1952, declined for the first time in the third quarter of 2008. In the same quarter, U.S. consumer spending growth declined for the first time in 17 years.
That has resulted in a rise in the personal saving rate, which the government calculates as the difference between earnings and expenditures. In recent years, as Americans spent more than they earned, the personal saving rate dipped below zero. Economists now expect the rate to rebound to 3% to 5%, or even higher, in 2009, among the sharpest reversals since World War II.
The truth is that our economy demands that you continue acting like suckers by trying to live beyond your means. And when you stop being a sucker — like when you’re laid off and you don’t have a choice because you have to start saving your money to pay your bills and plan for the hard times — then you’re blamed for not being a good citizen.
Oh well, Wall Street’s worse-than-usual greed may have caused this problem, but we New Yorkers can be part of the solution. Bailouts of Wall Street haven’t worked, so why not try to rescue some other downtowns?
Road trip to Boise!
Now that you know that the real goniffs are yourselves instead of people like Bernie Madoff, you’re free to click on the following news items…
NO PARTICULAR ORDER:
N.Y. Times: ‘Death Toll Mounts in Gaza Offensive’
Crain’s New York Business: ‘Binge drinking raises HIV risk, report says’
N.Y. Post: ‘MODEL SNARED IN UGLY WEB: FIGHTING GOOGLE OVER “SKANK” BLOG’
FOX News: ‘U.S. Embassy in Iraq Largest, Most Expensive Ever’
N.Y. Times: ‘Ex-Detainee of U.S. Describes a 6-Year Ordeal’
Editor & Publisher: ‘Daily Show Returns — As Alan Colmes Becomes Stephen Colbert’s Co-Host’
N.Y. Daily News: ‘New poll sez Caroline is unsweetened’
N.Y. Post: ‘CAR-NAGE! DECEMBER AUTO SALES CRASH & BURN’
Editor & Publisher: ‘Ann Coulter Kicked Off NBC’s Today Show‘
Editor & Publisher: ‘Locked Out: Israel STILL Keeping Foreign Reporters from Gaza War Zone’
Wall Street Journal: ‘Hard-Hit Families Finally Start Saving, Aggravating Nation’s Economic Woes’
N.Y. Daily News: ‘Analysis: Third stage will be war’s hardest test’
N.Y. Times: ‘Toyota to Shut Factories for 11 Days’
N.Y. Post: ‘ARAB FLIER GETS 240G OVER SHIRT BAN’
Crain’s New York Business: ‘2 NY mortgage firms agree to restitution’
N.Y. Post: ‘ALBANY POLS STILL SUCK’
Bloomberg: ‘Madoff Investor Awaits “Imbecile” or “Dupe” Verdict’
Patrick Littaye, 69, [co-founder of Access International Advisors,] invested all of his own money with Bernard L. Madoff Investment Securities LLC last year, enticed by the firm’s positive returns as other hedge funds slumped. His error was compounded because he borrowed money to increase the return on his investment, leaving him with $4 million in personal debts, Littaye said in telephone interviews from Jan. 2 through Jan. 4. He declined to specify the amount he had lost.
“I’m going to sell everything I have and start over,” Littaye said from Brussels, adding that he planned to subsist on his French social security payments. “For Access, we’ll go to our investors over the next couple of weeks and we’ll see what they think of us.”
Littaye’s partner, Thierry Magon de la Villehuchet, chose a different course. The 65-year-old co-founder and chief executive officer of Access was found dead Dec. 23 at his office in New York. Villehuchet killed himself after it became clear he wouldn’t be able to recover the funds he and his clients invested with Madoff…
N.Y. Times: ‘Bid to Revoke Madoff’s Bail Cites His Gifts’
N.Y. Daily News: ‘The city’s star crook: Fed entourage protects Madoff’
Bloomberg: ‘Madoff Sons Reported Jewelry Violations to U.S., Lawyer Says’
Crain’s New York Business: ‘Madoff’s victims number 8,000 — and counting’
Bloomberg: ‘Bard College Had Losses of $3 Million Tied to Madoff’
This article from the Village Voice Archive was posted on January 6, 2009