An overall view of the history of personal finance in the United States reveals a distinct change in the money philosophies associated with spending and debt. In the earlier days of the nation, values of thrift and the avoidance of unnecessary debt were culturally held up as responsible, desirable financial behavior. However, with the social and economic changes that began to be felt as the American Industrial Revolution spread throughout the nation came a shift in the national fiscal culture towards consumerism. Then came the Great Depression and the rise of the economic theories of John Keynes, which form the basis of the modern day spend your way to prosperity concepts of money handling, in which decreased consumer spending and “excessive saving are construed as threats to the economic system.

The Industrial Revolution and its myriad of technological advancements made consumer goods available on an unprecedented scale and allowed those products to arrive in the marketplace at prices that were more affordable on a broader scale. However, in order for the flood of consumer goods to be profitable, a shift in attitude towards money and debt had to occur. This period of time saw the birth of mass marketing and the buy now, pay later culture, as well as the beginning of the shift in public opinion concerning consumptive debt.

While debt in general was something to be avoided, old-school money philosophies also made a distinction between productive debt and consumptive debt. Productive debt had potential future value, such as the loans taken on to start a business, to pay for education, or to buy a home. Consumptive debt, or that entered into for nonessential consumer products, was widely considered to be unwise. After all, it was more economical to save up and make cash purchases, rather than to pay the additional interest charges accrued just to have it now.

Concepts of thrift and saving began to fall out of fashion. In fact, the new economic concepts that rose to prominence during the era of the Great Depression maligned “excessive savings” as causing significant damage to the overall economic condition of the nation, even the world. John Maynard Keynes is credited with bringing the new concepts of money to the major economic systems of the world, including that of the United States. From his concepts developed the spend your way to prosperity mentality that has made a major contribution to where we, as a nation, find ourselves today economically. 

We stand now in what some have referred to as the perfect economic storm, and an astounding percentage of us carry a debt load that is staggering in its size. With the recent correction in the housing market, many owe more on their homes than they are currently valued at. Credit card and other types of revolving consumer debt are at record levels. Years of using homes, as the now nearly cliché phrase says, as ATMs to fuel consumer spending and an extended period of low rates of personal savings, which dipped to negative levels of the like that haven’t been seen since the Great Depression, have left a large proportion of the American public ill-equipped to manage a significant economic downturn.

Many point to the decrease of consumer spending as yet another potential economic crisis. However, that point of view completely ignores the issue of whether or not the current consumption based economic mode is one that is sustainable or smart. With more than 70 percent of our economy relying upon consumer spending, and a great deal of that percentage relying upon consumer spending that is typically not in the best long-term financial interest of the consumer, it may be time to examine the sustainability issue a bit more closely. In the context of today, high consumption and low savings combined with serious debt doesn’t seem very smart at all, not for the individual and not for the nation as a whole.

While in the short-term assessment, those who present a significant drop in consumer spending as a blow to the economy may be right, in the long-term view, a reduction of spending that is merely consumptive and not particularly necessary, one that results in increased personal saving and a strengthening of individual financial conditions, may be a financial move that’s time has come.

Those entering into the increasingly challenging times that clearly are to come burdened with debt and weighed down with all the latest and greatest in consumer goods that – while attractive, enjoyable, convenient, etc. – won’t feed their families, are going to have to struggle hard to hold on to what they have. Those who have the liquidity to invest in more sustainable ways of living for themselves will also be in a position to help make the national shift to an economy that is based upon a more sustainable model, as well.

Decreasing consumer spending is not a bad thing, really. Not when viewed over the long term and not when viewed in the context of not only the financial situation of individuals, but of the entire nation. Relying on consumption for the continued functioning and growth of the American economy is not smart, not at a rate of over 70% of the economy. If that percentage drops through wiser ways of spending and saving, a stronger and more sustainable system is sure to evolve.

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