In my recent posts I warned against the efforts of economists and financial experts to manipulate us into reducing our savings and increase our spending. As I have stated, the logic they employ is simple…increased spending will help to improve an economy in meltdown. While it may be true that you can help the national economy by spending more of your hard earned money, the result on your own personal economy may not be so beneficial.
Now a new wrinkle is developing. Many so called experts recently started encouraging consumers to avoid trying to get out of debt, and instead to pay just the minimums on their credit cards. This advice was embraced by some very popular “experts” including Suze Orman, among others. Even Steve Rhode, the founder of GetOutOfDebt.org, is encouraging it. And if that’s not bad enough advice, we have a respected columnist from the Wall Street Journal (Brett Arends) encouraging people to use the available balances on their credit cards to bolster their emergency savings accounts. All this leaves me with just one question…”Have they gone absolutely stark-raving insane, or is their an ulterior motive?” Surely there must be some logical reason for such illogical advice.
Before you take their advice, let’s give this some careful thought. Our economy is in shambles, as if it had been hit by a tsunami. From all accounts the cause seems to be linked to irresponsible behavior on the part of lenders, borrowers, investment banks, and government regulators. That being the case, how will more irresponsible action solve the problem?
I am just a humble blogger, not some world renowned economist, but it seems to me the solution to our economic problems would lie in returning to responsible behavior, and making just minimum payments or taking substantial cash advances could be considered highly irresponsible. So why would “experts” give such irresponsible finance planning.
Here are just a few quick thoughts:
Our economy depends almost 70% on consumer spending. When the economy slows down it’s to be expected that tremendous efforts to encourage spending would take place. This “encouragement” (also read as manipulation) would likely come from merchants, advertisers, lenders, economists, and even the government. But should it come from the financial “gurus” we trust to help us improve our personal station in life? Not unless they are in some way compensated by the companies that benefit by our increased spending.