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Wartime Spending VERY Different Today

Discussion in 'BBS Hangout' started by Jeff, Oct 19, 2001.

  1. Jeff

    Jeff Clutch Crew

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    My wife and I were talking about how so many businesses seem to be capitalizing from the "keep America financially strong" concept that has been going around. I hear radio ads and see TV ads that stress the importance of keeping America strong by spending money on cars, furniture, clothes, you name it.

    What is so interesting is how sharply that contrasts with World War II. During the late 30's and early 40's, saving was encouraged and spending was really frowned upon. As a result, America was strengthened financially by leaps and bounds.

    Some examples include:

    <li>Weddings held in Sunday clothes at city hall. It was considered in very poor taste to have a big wedding. Most couples got married at city hall for the cost of the wedding licence.

    <li>Victory gardens. Citizens were encouraged to grow their own food in "victory gardens" as a way of conserving resources for the war effort. Families planted small gardens in their yards and grew a lot of their own food.

    <li>War bonds - In maybe the most striking difference, people were strongly encouraged to buy war bonds - essentially savings bonds that would help finance the war effort but also gain interest. Today, bonds are still considered the safest investment going.

    It is pretty incredible how how we have gone from conserve to splurge in the last 40 years. I heard the other day that credit card companies are seeing gradually increased spending on cards. Even though consumer confidence is low, spending is increasing and businesses (and the government) are pushing very hard to convince people to spend more.

    Personally, I wonder if this is the wisest move. Instead of spending, shouldn't we be investing our money and protecting ourselves against long-term debt. With the billions that are being funnelled into the fight on terrorism, what happens when it is over? How stable will we be financially?
     
  2. red

    red Contributing Member

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    i have no debt...
     
  3. Ottomaton

    Ottomaton Contributing Member
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    You can have mine if you feel left out.
     
  4. ROXRAN

    ROXRAN Contributing Member

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    I just think people want to save money.
     
  5. Cohen

    Cohen Contributing Member

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    Jeff,

    We are not short on resources for our military. We are not mobilizing millions of conscripts.

    War bonds are passe since the US government has a huge market for its debt instruments.

    If the economy tanks, that destroys government surpluses that can be used on defense, so keep spending! Our military and intelligence forces are now integral to your savings, since terrorism threatens our assets. If we cannot defend our economy, about the only thing you could safely invest in is gold.
     
  6. Colby

    Colby Member

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    Debt is evil. The borrower is slave to the lender.
     
  7. ROXRAN

    ROXRAN Contributing Member

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    I think this fact is why we must all save for a rainy day.
     
  8. MadMax

    MadMax Contributing Member

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    i think cohen's right....the wartime effort required greater sacrifices of the american people...it was also a very different kind of economy.

    in addition, we were already hitting a rough spot in our economy...you can't "save" your way out of a recession. it ultimately requires consumer confidence and spending.
     
  9. Cohen

    Cohen Contributing Member

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    What? Are we in the 21st century?

    Almost any company that does not have debt would be routinely chastised by analysts. Generally speaking (for profitable companies), you can always find some debt whose costs are more than offset by the profits made on it.

    Same goes for individuals. Mortgage rates are in the 6's, yet the appreciation on our home last year was about 20%.
     
  10. Jeff

    Jeff Clutch Crew

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    Alan Greenspan said a couple of years ago that the easiset way for citizens and companies to help the US get out of debt was to eliminate their own debt freeing our responsibilities from interest to spend on goods and services.

    Generally, the most conservative financial experts agree that debt is damaging both to the economy and to individuals. It may be standard practice, but it doesn't make it a GOOD practice. Bloomberg reported last year that American families and companies were dangerously in debt and that nearly 45% of families and 38% of companies were in debt beyond their means.

    That is NOT a good thing.
     
  11. DaDakota

    DaDakota If you want to know, just ask!

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    I agree and it took me years to get out of debt. Credit cards are EVIL, and I am very happy to owe them NOTHING.

    In fact, I paid a couple of them an extra $1, just so they would spend months sending me a bill saying they owed me....IT WAS AWESOME !!!


    Finally, they just sent me a check.

    :D

    DaDakota
     
  12. Jeff

    Jeff Clutch Crew

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    That is so freakin' cool! As mine get paid off, I'm going to do EXACTLY the same thing. :)
     
  13. ROXRAN

    ROXRAN Contributing Member

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    Another advice: when you're car is paid for, don't turn around and trade it right away. Keep it for a few years after pay off and you will be amazed at how much better your financial situation will be....I guess I learn the hard way.
     
  14. HayesStreet

    HayesStreet Member

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    Debt is relative. It can be either good or bad. Going into debt to finance a fur coat or a vacation is not a good idea if you don't have the income to pay the debt back quickly. Debt to finance your education is good debt. Generally good debt is anything that you NEED that you couldn't otherwise pay for up front. A house, tuition, medical emergency, business loan etc are all good debt.

    Going into debt as a country to stop a national security threat of the magnitude of Osama and his buddies is good debt. Already we've seen the negative effect of these attacks and it is hitting our economy from top to bottom. Note the airline industries shaky position. Note major cuts in investment banking and other sectors. We NEED to stop these threats to our security and economic wellbeing.

    As far as a saving goes, the economy is much different now then it was in the 30s and 40s. Putting your money in a sock or your mattress or a savings account drawing 5 % is not going to do you a lot of good. People are being encouraged to spend more because in the short term the main threat is a downward spiral in investor confidence leading to further withdrawl of cash from the stock market leading to major collapses in industries that drive our economy overall. If people are spending money on consumables and companies are still making cash, or at least if there is that perception then the downward spiral can be avoided or at least delayed.
     
  15. red

    red Contributing Member

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    speaking of debt...i saw a hdtv 16:9 42' TV at best buy today...only $1899 with no interest for a year...hmmmmmmm...but that could set back my 2001 passat i want in a couple of months...decisions decisions...
     
  16. MadMax

    MadMax Contributing Member

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    hayesstreet -- very well put. debt can be bad when used to finance luxuries or things that don't appreciate. but as cohen pointed out, when real estate is appreciating at the level it is in houston right now, taking out debt to finance the purchase of it can be a great investment. and, as you point out, debt to finance your education is a great investment.

    a company without debt is just flat out silly! a church without debt is great (mine just recently paid off the mortgage on our land and the loans for its improvements -- it's great!!) it's completely relative to the debtor and the reason for incurring the debt.
     
  17. Cohen

    Cohen Contributing Member

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    Greenspan never meant to retire ALL debt; with 2 finance degrees I can guarantee that. Saying 'debt' is a bad thing is flat-out wrong.

    Also, Greenspan's comments cannot be taken out of context. He makes these comments when the economy is steaming along, the best time to get rid of excessive debt. When the economy's growth rate slows, he shies away from statements that would lead to further contraction.

    No financial experts believe that 'debt' is damaging, only excessive or too little debt is damaging. As I stated before, companies that do not carry enough debt are downgraded by the stock market for good reasons.
     
  18. Cohen

    Cohen Contributing Member

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    HayesStreet,

    Debt can be 'good' even with something you just want, not need. Say you really want a vacation this year that will cost you $2000, and you can pay it off through 1 year's worth of payments, accruing an additional $150. If the vacation is worth $2150 to you (ignoring the time value of money which makes it a little under that), you get to do it with debt. Who's to say that is bad just because it is something that you want, not need?
     

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