Monday, February 11, 2008

Living off Plastic

This post will be quick. I'm writing a longer post on world economics and capitalism, a topic I am woefully unqualified to speak about, but I can't help myself. I just finished reading Muhammad Yunus' Banker to the Poor. If you haven't read it, I highly recommend you do. But more on that later.

So while I was reading and researching the other day, I came across this article on the economy, and was perturbed at the following:

Len Blum, managing director and partner at Westwood Capital, said the drop in credit-card use showed that consumers were "in trouble."
"It reinforces the view that consumers are struggling with the bad housing market and tight credit. It doesn't bode well for the economy," Blum said.

Why is a drop in credit card use a problem? The fact that people are choosing to not overspend makes me think that perhaps we are realizing that living off of credit is not the wisest thing to do. Perhaps our economy needs to correct itself, needs to be based on something other than plastic debt.

Credit should not be used for financing a lifestyle beyond our means. I'll speak a little about credit in the market when I review Mr. Yunus' book, but I will say that supporting the idea of investment capital is not the same thing as buying a TV on a credit card because you just can't watch the game on a 27-inch regular TV, and have to have that new plasma now. Personally I agree with Suze Orman:

The economy isn't floundering because we aren't spending enough; it's floundering because we're spending too much, largely on credit. So do the opposite of what the government is hoping for -- it's far more important for people to boost their savings, not their spending.

So when you do eventually get that tax rebate check, do as Suze recommends and pay off some of that debt, or if you are one of the few who has no debt breathing down your neck, save the money. Or another recommendation that Suze probably wouldn't make: find a worthwhile cause to donate that check to.

1 comment:

The_LoneTomato said...

I hear bands that move to Seattle from Hawaii are a good investment as well as a good cause to support.

Looking forward to your review...