For the economy to strengthen, Americans need to become consumers again.
In the American economy, some 70 percent of activity is derived by consumers. But when consumers hunker down and quit spending, economic activity decreases.
The history of America shows it has always had a tendency for action. It has made this country great. People and companies believed in the possibilities of the future and spent their money accordingly.
Today, the mood is the opposite. Economists warn that if we don't jolt consumers and the economy back to life, we could fall into what economist John Maynard Keynes called the "paradox of thrift." That is, if everyone saves during a slack period, economic activity will decrease even more, making everyone poorer.
If we don't start spending and investing again, we also run the risk of experiencing what was known as Japan's "lost decade of the 1990s."
There have been signs that investors are putting money back to work again. Retail sales are slowly rising, and housing starts for February were up more than 22 percent. Sales of existing homes increased by about 5 percent. But we have still a long, long way to go.
The rush to hoard cash and pinch pennies is understandable, given that the net worth of many investments has declined dramatically, say experts writing in Newsweek.
But for our $14 trillion economy to recover and thrive, money hoarders need to open their wallets again and become consumers.
No one is recommending big credit card debt, but worthy and affordable purchases or investments should no longer be put on hold.
Maria Smith-Alvira
http://www.elitetitleonline.com
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