12/22/2008: "Spending or saving?"
I don't get it.
We have been told for years if not decades how North America has a minuscule savings rate. How we aren't saving enough. Worse than that, the savings rate is dropping, and has now reached zero or even negative savings in places (meaning that as a whole the group is spending more than it is earning). How this will cause financial problems in the future if the trend is not reversed.
NOW that the predicted financial problems are starting to show, now we are being told we need to spend even more. Not only that, the Federal Reserve and the Bank of Canada are dropping their interest rates into uncharted low territories to induce people to take out loans to spend more.
If a lack of savings was bad, how is this making it better and not worse? Sure, in the short term it means we're spending more money, but in the long term it will make recovery even harder and more painful.