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Mar 11

Written by: Greg Runyon
3/11/2009 12:16 PM 

I have a quote attached to one of the shelves on my desk.  It’s from radio-promotions genius Paige Nienaber, and was written in regard to the iPod’s impact on radio.  It reads, “The time to be afraid?  In 2003.  The time to lose control of our bowels?  Now.”  I laugh every time I read it, and I keep it nearby to remind me of all of the entertainment options that radio competes with.

 

One could apply this same thinking to our economy right now.  In fact, if one had applied that thinking to our economy, we might not be in quite so bad a shape as we are now.  In 2003, the stock markets were recovering from the burst tech bubble and the after effects from 9/11.  Things were once again looking up.

 

Were people afraid then?  Not economically, for the most part.  But we all should have been.  Hindsight is 20/20, of course, and I’m not going to sit here and tell you I was behaving in my own best interest all the time either.  Now that our economy is losing control of its bowels, it may be time to reorient the way we participate in our capitalist system.

 

One thing that this country lost in the last couple of decades is a savings routine.  From 1928 to the early 2000’s, I think the average savings rate was something along the lines of 6.8% of disposable income.  However, the last time that Americans saved more than 6.8% was 1992.  And only once since then (1993) did we save more than 5%.  Not once since 2000 have Americans saved even 3% of their disposable income.

 

Now, I’m no economist, though the topic does interest me (heh, heh, interest…economics…very clever.)  And admittedly, the savings rate was something around 5.3% for January of this year, so perhaps we’ve turned a corner in that regard.  Actually though, while people are now scared into saving some money, this is the worst time for the rest of the economy for us to do so.  Now is when the overall economy needs the velocity (movement from one hand to another) of the money supply.  Jamming it in a savings account (or your mattress) is actually not helping the broader economy.

 

So we’d all do well to squirrel a bit more money away during the good times, so when bad times come (and they are inevitable), we can continue to move our money around the economy by paying our mortgages, and spending money on consumer goods.  We seem to have forgotten that concept, and it’s one we desperately need to remember.*

 

*Please note that I am in no way qualified to offer any of this advice.  Except for the fact that I have a blog, which makes me qualified to pontificate about whatever I want.  I’m just sayin’, buyer beware.  I’m still right, though.  I think.

 

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