[quote=Arraya]
But, to the idea of; if these people would “live within their means” and accept the fact that they are not “what ever consumption level” our economy would be better off, is not even a valid line of thought – if they did not open up the spigots of easy credit decades ago – we would not have the economy we have today – it would have ran into problems years ago – or the reality of our economy would have been exposed years ago and that is something nobody wants to face. [/quote]
We would not have the economy we have today… in fact, it would be much healthier (re: less leverage and risk), in my view, albeit at a lower level of GDP. If we had grown at 2.5% annually over the last 25 years instead of 3%, but we didn’t have all of the incremental debt that’s built up (which engendered that incremental GDP growth), we’d be in much better financial shape today, although, again, we would have left some GDP on the table, so to speak. Personally, that’s a trade-off I would make every single time.
[quote=Arraya]
Quite possibly, some of those living the good life, “within their means”, would not be where they are without those living above their means.
[/quote]
There’s undoubtedly some truth to this, although it’s all relative and the numbers are hard to gauge. That is, the folks running a successful consumer finance company – just to use an obvious example – might still be very successful, albeit not AS successful as the credit bubble has made them (for now – they still have to collect those outstanding balances!). But certainly there are a lot of folks worth $10 million (pick a number) that would be worth half of that without “the spenders/borrowers”.
[quote=Arraya]
Interestingly, a sudden rash of people being frugal and living within their means actually, in the short-term, is detrimental to social functionality because it increases unemployment, decreases tax receipts, etc… We all know wall street would boo and hiss consumer spending going down. Kind puts a new meaning on what it is to be responsible, eh?[/quote]
Indeed, Lord Keynes’ Paradox of Thrift raises its ugly head…
