Almost all economists get hot around the collar when it comes to consumers and their consumption. On the one side (usually, the left side), there are those that believe in the power of consumption to drive economic growth: when people want to buy more, then businesses have to produce more – which means more jobs and salaries for people to spend. On the other side (generally, the right), there are those that dislike consumption, because it takes away from savings, which could be used to make investments and a ‘better tomorrow’.

Macro Follies

Here’s a thing:

I think it’s awesome.

However

I’d like to add some nuance. Because after years of reading and listening to this debate, these nuggets of ‘common sense’ have become platitudes.

Here they are again:

• Saving too much is bad and miserly, you Scrooge – spend money because it helps – and YOLO!
• Spending too much is bad and stupid, you fool – save money because college tuition and rather YOLO tomorrow!

The things is, both those viewpoints are valid – it just depends on who you are.

If you’re wealthy, why fixate on saving more? Once you’ve accumulated more assets than you can ever conceivably spend, further capital accumulation will no longer change your today or your tomorrow. You’re set to live as well as you would like for the rest of your life, your children’s lives, your grandchildren’s lives, and probably beyond…

So unless you’re of the philosophical view that making money for money’s sake is the point of having money (which seems circular to me), you’ve reached a point at which you’re able to live extravagantly without threatening your capital base. And at that point, you should. The best thing you can do for yourself and for society is either spend your money or give it away. Society doesn’t need your savings, thanks.

And if you’re not so well off, then being a spendthrift isn’t such a good idea. After all, you can benefit from your savings. And do things like pay for education and pay off old debts and prevent taking on future debts by having a savings buffer.

Which, in the long term, is heaps better than buying toys.

Just a thought.

Rolling Alpha posts opinions on finance, economics, and sometimes things that are only loosely related. Follow me on Twitter @RollingAlpha, or like the Rolling Alpha page on Facebook at www.facebook.com/rollingalpha.