An occasional outlet for my thoughts on life, technology, motorcycles, backpacking, kayaking, skydiving...

Thursday, November 20, 2008

More “Basic Economics”

I saw someone make the following statement on a technology forum discussing expensive Solid State Drive storage: "Why not save that thousand bucks or two so we can help prevent another economic disaster like the one we currently got ourselves into?"

This demonstrates how poorly the average person understands our basic economic fabric. It does not give me encouragement about our future.

A strong economy relies on the exchange of liquid assets. Economic downturns can almost always be attributed to the spending of money that is [merely] speculated to exist in the future.

In non-academic English: Going into debt almost always kills an economy (eventually). (Whether that be the economy of a nation, state, county, city, business, church, or family, it still holds true.) When you go into debt you spend tomorrow's money. When tomorrow gets here*, you are in trouble. This problem is resolved when people spend money they have. That "spending" can be on groceries or fancy restaurants, netbooks or expensive SSDs, charitable donations or investments/savings (which get invested). The only thing you can do with money that is bad for an economy is take it out of circulation. (aka: "Save" it under your mattress.)

Huh? But what about debt? Aren't I contradicting myself? No. Debt is not money. Debt is like anti-money. The collision of money and anti-money is similar to that of matter and anti-matter. Tomorrow finally got here*, and this is what it looks like. Go spend some money. Just do it responsibly. For some that means buying 256GB SSDs. For me that means having $0 debt and socking money into low to moderate risk investments to be prepared for layoffs, retirement, and kids going to college (in that order).

Do not think that luxury items or those who purchase them are evil. That's politics. We have to be smarter than that.

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