Is his advice sound right now?
I heard Dave Ramsey on one of the FNC shows the other day saying we should all just say “NO”, to more debt, to more frivolous spending, and instead focus on paying down existing debts and our mortgage.
And yesterday comes news that the US consumer seems to have listened to him:
U.S. consumers spent significantly less per person at the start of the holiday season this weekend, dimming hopes for a retail comeback that
would help propel the economy early in 2010.
I like Dave Ramsey’s basic philosophy, especially about frivolous spending, but I have to wonder if his debt advice makes sense now. I say this because the dollar is plummeting. Paying off debts early means paying them off with good dollars, when you could wait and pay them off with wallpaper dollars.
In fact, it seems a good time to take on debt, if you can get it. The smart money people seem to be doing that, and using it to buy gold and other assets. This is creating an asset bubble with the unfortunate problem of it bursting instantaneously when the Fed finally raises interest rates and puts the kibosh on the free money.
But what else can you do? The best assets, it seems to me, are guns, ammo, food, and water purification. Perhaps a solar panel or two that will work for basic needs. Other than that you can play around with assets that are bubbling, but unless you time it right, expect a ride all the way back to where the bubble started or worse. Remember, however, that the pros spend all day doing this. By the time you see trouble… it’s over.
So good luck… I fear there is no escape for us wicked. Market forces will do what they do – and right now something has to be balanced to account for our governments fiscal madness.
Maybe I’ll e-mail Dave and see if he can talk about this dilemma. Trouble is I don’t listen to his show – it is hard to do when you have a 1/2 mile commute to work. So if anybody hears him cover this, e-mail me (-;
November 30th, 2009 at 10:33 am
Remember the Paradox of Thrift usually mentioned in Econ 101. From Wikipedia: “popularized by John Maynard Keynes, though it had been stated as early as 1714 in The Fable of the Bees, and similar sentiments date to antiquity…. if everyone tries to save more money during times of recession, then aggregate demand will fall and will in turn lower total savings in the population because of the decrease in consumption and economic growth. ” The fallacy of composition says that something that works for a few does not necessarily work if everyone does it.
November 30th, 2009 at 12:26 pm
It will reduce the total savings added to savings. It will also make some people more able to weather the situation they face.
Of course our biggest cost is corrupt government – I’d love to cut back on that.
November 30th, 2009 at 1:18 pm
In case we forget the basic economics, the level of employment is proportional to the volume of economic activity. If people all put another big chunk of their income into savings, the economic activity would shrink by that amount and the number of jobs would shrink accordingly. The effect would spiral downward until we reached some much lower level of income and employment. Which is why Keynesian government steps in with stimulus when that shrinkage threatens. We should recognize that the prosperity we enjoy today came from five decades of high volume economic activity with liberal debt that encouraged innovation. Government deficits through four of those five decades added more economic activity that kept pumping the engine. It all worked like magic as long as our economic competitors were recovering from WW II. But today our economic competitors have grabbed many of the industries that powered the prosperity. As a result, we have to find a new balance among income, savings, government, and investment. And anyone who claims to know the proper balance from some first principles doesn’t recognize how the real world works. “corrupt government” is just a convenient scapegoat for a much deeper dilemma because the “corrupt government” does keeps the money flowing even though to sub-optimum uses. .
November 30th, 2009 at 1:26 pm
I’d would have been happy to try Keynesian steps. We haven’t yet and I’m not sre they would have helped, as the Government was printing (injecting) free money for a decade or more. We’ve, instead, just handed over future inflation monetized today to Democratic constituents and scared everybody by ineffective deficit spending.
I agree that a big problem we have is better competition in the world. But we should be able to handily handle that. IF permitted. Corruption keeps us from reacting as effectively, or at all.
Corrupt is not a scapegoat – it is the main reason. Think about how much more I could do if they didn’t take more than 1/2 the money and spend it stupidly. What if we didn’t drive big chunks ofour population into dependency? What if we didn’t penalize and suck the life out of those that succeed or have talent?
These are ALL symptomps of CORRUPTION – of government working for a few. As D E said above, our CORRUPTION is legal by our Constitition.
And I maintain that dooms us.