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Frugality Is In For Good – What It Means

21 September 2009 No Comment

I often like to look at the mainstream financial magazines to get a feel of what the concensus personal finance or investing sentiment is.  While the investment advice makes me fall asleep (how many different ways can you recommend broad diversification?), the personal finance stuff is a pretty good gauge of America.  If you take a look at recent issues of these magazines, there is a clear trend: how to cut your expenses.

Whether it’s how to cut $500 from your monthly bills, or how to cut $1,000 from your monthly expenses or this or that, it’s all the same; Americans have less to spend and need to cut back.

The difference with this recession, and it seems like most agree with this, is that the current feeling of frugality is here to stay.  There are a bunch of factors here, but mainly the weak job market, the housing crash and the fact that baby boomers are trying to retire and have had their funds cut in half.  It all adds up to weak consumption for years out.

As I mentioned recently, the result of this weak consumption is going to be more government stimulus to try and make up for the shortfall in demand.  Because our country is broke and because entities such as China are unlikely to continue loaning us the funds in increasing amounts, our government is likely to turn to the printing press.  The result… pure inflation.  Make sure you’re ready for inflation, at least to some extent.

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