COMMENTARY | It felt like the recession never really ended. Now, some experts are saying we are falling into a new recession.
According to a piece by Yahoo's Daily Ticker, the new recession is being caused by a drop in consumer spending.
Economist Gary Shilling said this current recession wasn't caused by a housing crisis or rising rates. He calls it a consumer-led recession. People aren't spending because of the weak job market.
I always like to hear Shilling's opinions on the economy because he always tells it like he sees it and his predictions are usually right.
Choosing to spend less
In my personal case, I'm not spending less money because I'm earning less money but because I choose to refrain from making discretionary purchases.
The recession changed the way I handle my money. I no longer take my job for granted. I know I can't afford to blow money on clothes and new furniture because I have to think about the future. Even though we are doing well financially right now, we might have less money to work with in another month, year or decade.
I've seen too many friends lose their homes to foreclosure or their jobs to downsizing.
Getting it out of my system
As far as frugal fatigue, I experienced that just after the Great Recession. I went ahead and made my splurges after going without for so long. We purchased a new car one year ago. I freshened up the interior of my home with new paint, drapes and accessories just after the Great Recession ended. As we enter this new recession, I am fine with what I already have. I'd rather funnel my discretionary money into savings rather than go on vacations or buy a new pair of shoes.
Waiting out the recession
I agree with Shilling who said he believes the solution to the new recession is just time. He is basing his opinion on the time it takes for monetary policies to be successful. I'm basing my opinion on psychology. I think a lot of people still have mental barriers when it comes to going back to the way things used to be. I don't plan to run up any credit card debt. I rather pay down my home mortgage than take out a home equity loan to buy more stuff.
With 10,000 baby boomers retiring every day, I think the job market will strengthen for the rest of us. It may take years for younger consumers to have a carefree attitude about spending, but maybe that's a good thing. We know what happened to the baby boomer "me-generation" as they lived their lives on credit. I know I am committed to a pay-as-you-go life.
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