Friday, 25 May 2012

Consumer Confidence or Recklessness?

I was listening to a news program on CBC and the reporter was talking about the lack of consumer confidence in the economy.  By which he meant, people are not spending as much money as they were before.

How is this a bad thing?  Did we not just go through a major economic crisis because people were spending far more than their income could afford?  Are we not still dealing with those repercussions?

Complaining that people aren't spending as much is like complaining your car isn't going as fast as it was right before it crashed into something.  Technically true, but neither is actually a good situation.  Spending was out of control, people were racking up more debt than they could ever hope to pay off.  To continue with my car accident metaphor, we didn't just hit a buried curb, we were skidding on ice and smashed into a very foreseeable brick wall.

The last thing the government should be doing is encouraging people to go back to their pre-crisis spending habits.  Our economy might not churn as quickly but we'll be a lot better prepared for unforeseen setbacks.  If our economic model depends on reckless spending, then we need a new model.

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