It does not take long when you wander the blogs of the ‘retire early’ community before you hear the common refrain: If everybody did this stuff it would kill the economy. To which I promptly call foul.
Bill Gates and Warren Buffett managed to not spend over $100 billion of their money over the last few decades and the economy has done fine. In the 1950s the savings rate was much higher and the economy more vibrant. When the research is reviewed there is no doubt excessive debt, a low savings rate and excessive spending have more to do with an anemic economy than any responsible spending will do.
People look for any excuse they can to remain married to their poor habits and lack of self-control. It is easier to complain about successful people than it is to take responsibility for your own actions. Somehow these people have been lied to for so long they actually think poverty is the only way to keep the economy going. Really? They think the only way to survive is to spend every nickel they have. They think living on the financial edge of ruin from the first light breeze is what makes the economy purr and provides job security. Where does this nonsense come from?
No Help from People
In my office most payments are made automatically. Services are handled without much human intervention. Billing/invoicing is on automatic, payments are made by automatic transfer, personal and business bills are set up for automatic payment by either credit card (for the rewards) or from the checking account and the credit card is set to pay the balance in full on the due date from the checking account. The process keeps flowing without any human intervention in one big circle. All parties can focus on their tasks instead of wasting time playing around with financial transfers.
Think about what this really means. If the rapture were to happen this very second and God thought we were all worthy of the instant removal from earth to heaven and no one had a chance to turn off the electric generators, the economy would keep humming just fine. The automatic transfers would keep going round and round. In fact, the economy might actually start growing at a faster rate without people around to mess it up!
Now, if the economy will do fine without a living human on the planet, how bad will saving and investing half your income harm the economy? The arrogance it takes to even assume responsible spending behavior will destroy jobs and the economy blows the minds of intelligent people everywhere.
The economy will be fine if you save/invest a significant portion of your income. Look back at the most stable and productive times in human history. These times are marked by large levels of saving and investment. Without an ample pool of ready money there is no opportunity to move from concept to reality. Money for investment comes from savings—money people earned, but decided not to spend.
The Economy is Bloated
The economy is too big as it is. Most of the economy, the sales of goods and services, is mostly wasted material. If you don’t believe that statement, I invite you to join me on a short trip to your local landfill. That enormous pile is a testament to all the stuff people wanted and then threw away. If it was so important to spend money on, why are landfills so ungodly huge? All the resources wasted to produce junk we didn’t want in the first place end up as a credit card payment for the next 28 years at 17% interest. And you want me to believe this is good for the economy?
The stuff that really makes us happy and fulfills our lives is about a third of the economy. Yes, I mean two-thirds of the economy is nothing but fluff, waste. We keep buying junk until our homes are so full we can’t move. Then we buy bigger homes to store the stuff. The basement and attic are loaded. Don’t worry. In the name of ‘keeping the economy going’ and jobs we can always rent a storage unit. Let me ask you this. When was the last time you looked at your stuff in the storage unit? Thought so.
All that stuff and the debt from buying it harms the economy! A ‘healthy’ economy does not have so much waste. You, me and everyone else in town can easily live on a third to half our income without any problems. The economy will keep humming along. Debt loads will be modest. Stress will be low.
There are a few losers. The government is in trouble without all the tax revenue they need to service the massive pile of debt. The world governments have over $63 trillion in debt as I write this and it is growing at a rapid pace. The United States has nearly $19 trillion of government debt alone! World government debt interest is accruing at over $500,000 every seven seconds! At least it is good for the economy. Right?
Another loser in a world of modest spending is landfills. These tremendous piles of dirt covering the junk we bought on credit and decided we did not like after all would be mere molehills. Other than governments straddled with debt and landfill companies, there are few losers if the FIRE community ran the place.
A quick look around the internet gives a few different answers to the total worldwide government debt load. The numbers are all large and the differences are semantics at best. Debt in and of itself is not bad. What is bad is the level of leverage and what the money was wasted on to create the debt. Governments can print their way out of debt crises if they are willing to risk economic dislocation and/or inflation. You on the other hand need to engage financial responsibility.
The current world environment would seem to indicate high levels of debt are NOT healthy for the economy. More debt does not automatically translate into a larger economy, dollar for dollar. As more debt is added it has less affect on economic growth.
More is not Better
The sickness affecting Western societies is spreading to other cultures around the world that more equals better. But does more make you happier? Research tends to indicate it does not. Having more stuff is a responsibility increasing stress levels protecting, insuring, maintaining, and using said stuff.
Modern technology has made stuff cheap compared to our earning level. The more we have the more we want when it makes no sense to add more to the heap of crap already in the stable. Happiness declines instead of increasing after we reach a certain level of saturation. More things then start to eat into our happiness and overall satisfaction with life. You can have more, but does it matter?
The FIRE community is on to something and it boggles my mind more people have not climbed aboard. Where people got the idea financial independence and fulfilling labor are a scourge on our society is beyond me.
I am only a country accountant; I don’t have the answer for such an ignorant mindset.
Problems will not magically disappear if people start saving and living more financially responsible lives. The problems will change, however. The problems will also be less critical. Money is the leading cause of divorce so reduced money issues will lead to better family life. Children will have more nurturing formative years which translates into lower levels of crime and higher levels of overall life satisfaction.
Issues of resource usage will be reduced, but still an issue to apply our efforts toward solving. Moving from a carbon economy to a more green, renewable framework will increase further the quality of life. Technology will still be a vital part of a smaller, more efficient economy.
The real question to ask is: If we are happier spending at a much lower level, why do we waste so much of our most precious resource, time, so we can have stuff which ends up making life less pleasurable? Sure, we will still work, especially for things that interest us. I can’t imagine myself sitting around all day and there is no doubt I will find something constructive to do. But this idea of working ourselves to death for just a little bit more needs to stop.
With most of our time freed from required work to meet our basic needs and a modest amount of wants we can explore what truly drives our passions. It is easy to say what we really like, what we really want. But until we are in a position to really have the opportunity to live that dream we cannot be certain of our choices here.
Happiness dust is not fantasy. Happiness is possible. Living on $20,000 or so a year is easy. All the rest is play money. And we have enough toys. The Earth can’t take anymore waste. The place is starting to look like a dump. Even the oceans are filled with waste from garbage and stuff spilled from ships headed for markets around the world.
It is time for less trade and more living. And the economy will be fine without us.
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Monday 23rd of January 2017
I disagree about the government; it wouldn't be as much of a problem at all if we saved more money. If people planned ahead and saved for retirement, we could get rid of most or all of Social Security. Entitlement programs are sucking the U.S. government dry, not the smaller stuff like paving new roads. Social Security, Medicare, and DOD (and VA, since that's the back end of DOD). Those are the big-time money suckers from our government (the first three I listed are about 60% of the federal budget, last I checked a few years ago).
Saturday 21st of January 2017
You're right Keith. Think of the second and third order effects less consumption would have. People would have more money to spend on quality, sustainably raised food- improving the environment and their health at the same time. Less government spending on both fronts. More money could be funneled into charities, etc. College could be self-funded, which would reduce the inflationary pressure of readily available, government backed loans on school prices. Like you have said many times, money is fungible. Money not spent on wanton consumption is money free to do something else. It doesn't just go away.
Saturday 21st of January 2017
And you get to live the life you want, MilitaryFIRE! When life is lived with purpose and not as a buying unit you can pursue things that stimulate your mind. Work is fine as long as it isn't forced servitude. And debt is forced servitude whether you want to believe it or not.