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Some people want us to burn our own forrest to the ground so we're starting over, rather than working hard to clean it up and make it pretty again?

Imagine there is a fire in the Forrest, and the fire fighter tells you to bring gasoline.

I mean what this is saying is that if we put out the fire then we have a mess to clean up but if we inflate it, we won't have to deal with it and we can start fresh.

“the fallacy of the argument that living within your means will bring down the nation is that our late, great prosperity was phony”

What we're seeing now is a return to more sustainable patterns by consumers (at least for the time being). I think it's a good thing, because it means that more people will hopefully have a security net in place for bad times.

Wouldn't it be a good thing if more homeowners had a backup fund now, when people are losing their jobs?

I think that showing personal responsibility can only help the economy in the long run.

As My Journey points out, a bank or credit union is not Uncle Scrooge's money bin. Bankers take your money and invest it elsewhere (sometimes, as we've seen, unwisely). Among those investments are loans to businesses. Since a large part of our present economic headache stems from sick banks refusing to lend money to businesses, it stands to reason that if Americans had saved more money we might be better off.

I don't think what's being criticized is saving; it's frugality. They're not quite the same thing, because it's possible to eat in restaurants, buy junk you don't need, rack up credit-card debt, and still put something in your 401(k). To my mind, the fallacy of the argument that living within your means will bring down the nation is that our late, great prosperity was phony. With everyone spending until their income went mostly to service debt, no one had a REAL nickel or dime to rub together. When the bank owns your car, your house, your furniture, your clothes, and the dinner you sit down to at a restaurant, you're renting your whole life and you have nothing. Although you may look affluent, the truth is you're living in poverty. Living on the cuff creates the illusion of wealth, but it's only an illusion.

When everyone spends and saves responsibly, from the average person in the street to the A.I.G.'s of this world, then the economy will be healthy. The economy is healthy when most consumers, businesses, and lenders are healthy.

That's one thing to always remember – the experts are always human. It doesn't matter if they're on Wall St., Main St., or some guy out on the corner.

You do have to look at the overall picture. That's why I feel like saving more now is a good idea for most people, because we weren't saving enough.

And you're right about things being cyclical. I can't say when things will turn around, just that they will. And it's the people who are thinking ahead that will ride the wave to the top (though I must point out that we're making acting on our plans now – not trying to time the market).

Right now, we have businesses that are in danger of failing because they depended on unsustainable trends. Wouldn't it be better to let them fail, and allow their resources (employees, talent, etc…) back into the economy? Keeping things stuck where they are only postpones a true recovery and period of growth and innovation.

It seems like you need more than just increased spending to fix this…businesses need to innovate (produce products that are of greater quality, cheaper, or solve problems innovatively), and banks need to lend money.

I didn't realize that so much of our money could be lended out.

Oh – and I will keep saving. You don't have to worry about that

You may be smarter than you give yourself credit for. I am not an economist, but was an economics major during college (the wonderful years), and distinctly remember our fractional reserve system. Which basically states that nearly all the money in a savings account can be used to create loans.

So if you save $100 – this gives banks the opportunity to lend (lets call it) $90, to someone who wants to start a business, buy a home, etc. Which then inturns keeps our economy moving. So you saving, actually HELPS our economy! The speed bump incurs when you save it, and the bank doesn't lend it, i.e. Credit Freeze!

Keep Saving

I plan on using my money for investing – as soon as I build up an emergency fund. I want to guarantee long term stability.

Then I'll definitely use my money to help the economy – and my new worth – grow

By the way – how did you retire at 44?

And you're absolutely right. Spending responsibly is the key. Most people haven't been doing that

I think a strong economy starts with a strong individual. After all, the high spending of the past few years isn't helping the economy now.

However, if we had more people that could afford their debts, the economy wouldn't be in such bad shape.

I do agree that game plans shouldn't depend on if the economy is good or bad. After all, you can't predict what's going to happen.

Buying stuff you don't need just because it's on sale, but if it's something you were already interested in or needed, then now is a good time to take advantage of it. Assuming that the quantities are reasonable of course, and you have the money to pay for it.

I agree…we need a higher savings rate. The spending we've had recently isn't sustainable. What we're seeing now is probably the norm, and the past few years have just been the exception.

In the long-run, saving is great for the economy because eventually when you have a bunch of money in your bank account you will spend it (buy a house, furnish it, buy food, whatever). I doubt very much you are just saving to die with a bunch of money in your bank account. In the end, money is a way of buying the things you find valuable.

In the short run, though, it does effect the economy by contracting it. Something that is probably necessary to squeeze out the excesses caused by excessive credit spending over the last several decades. It's not a call for people to go out and spend irresponsibly when commentators try and explain the causes of recession. They are simply pointing out how a dollar spent works in the economic machine.

I myself spent my working years saving a bunch of money (not really doing my full part for the economy!) so that I could retire at age 44 last year. Now, I inadvertently do my part for the economy as I use that money to buy things like food, shelter, and entertainment. It's got to last a long time, so I must spend responsibly, but it's just the other side of the saving coin, so to speak.