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Minyan Op-Ed: Buying Now To Save Later

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Another explanation for consumer spending increase.

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Dear Prof. Depew,

The cynical part of me, which right about now is going pretty strong, agrees with your comment in yesterday's Five Things You Need To Know:

"This is a good reminder, given surveys showing people were intent on saving those checks or paying debts with them, that while we talk a good game with savings and debt reduction we have a tougher time walking the walk."

There is a part of me that asks if there could be other reasons for the better-than-expected increase in consumer spending?

With very few exceptions, the people I meet in living my life – the hairdresser, the grocery clerk, the housecleaning woman, and the tractor salesman – are talking about how bad they think times are going to get. These are people who I've never heard talk about the economy before or I never expected to hear talking about the economy, ever.

Most are talking about what they can do to protect themselves and their families. Many have come to the same conclusion that my husband I have reached. It's time to spend money on durables and food storage. They are also scheduling medical check ups and eye exams now, rather than waiting. If they are anything like us, they are spending much more than they usually would be.

On an intuitive level, I think there are many people in this country who know that goods are only going to get more expensive and the dollar is going to be worthless. Many of those I have talked with think times are going to become very difficult and they are spending now in preparation. I don't think you can discount the impact this type of activity is having on the consumer spending numbers.

There is also another attitude I've seen where the spendthrifts are simply saying, "What the heck!" Their debt level is already so high, what difference does it make anymore?

To be honest, I've been tempted to say the same and run up my credit cards. With everyone in so much debt, what are the creditors going to do about it, especially if the economy goes into hyperinflation, or collapses?

We've chosen to try to preserve our capital as Todd advises. We've purchased gold and silver, and a farm tractor – a purchase we normally would have put off until some future date. We are also spending money on fencing so we can put several cattle and have chickens on our property. Again, this is something we were planning to do in the future, but we feel almost pressured to do it as soon as possible. From talking with other "everyday" people, this feeling isn't unique.

Still, in the end, I'm not at all confident that those of us who have taken the time to educate ourselves, and are trying to protect our capital are going to be any better off than those spendthrifts who have "maxed out" their credit cards, home equity loans, and have no or minus equity in their homes. I know life isn't fair, but it's still going to be hard to swallow if we find ourselves in the same predicament (not to mention darn depressing!). At least we'll have some food on the hoof and eggs for breakfast.

Thank you for your informative articles. I bless the day I clicked on a link and discovered the Minyanville website. It's the only way I've managed to remain sane as I wade through all the misinformation being spouted about the economy. You, Todd, Mish, and the other professors have explained, in clear, introspective articles, the reason behind the feelings of misgiving we were experiencing; giving a face to the fear.

While we still find these times scary, you've helped us understand what is going on. Thank you for your insights and for sharing your experience. Thanks especially for the education on the mechanics of the economic system. Perhaps due to your sharing of knowledge we will be able to recognize the signs of shifts in the economy before they fully develop so we can be proactive instead of reactive.

Thanks again,
Minyans Bonnie and Ed
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No positions in stocks mentioned.

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