Thursday, November 19, 2009 0 comments ++[ CLICK TO COMMENT ]++

Thriftville vs Squanderville

I came a nice video clip hosted at YouTube where Warren Buffett characterizes the squandering of wealth by those who live outside their means versus those that save. Thanks to The Big Picture for bringing it to my attention.

I think most people who are into macro stuff already know all this stuff but newbies and others may find something new.

The difficulty, of course, is that no one has direct control over any of this. It is easy to blame the over-consuming American or Canadian, or some faceless entity like the government, but it's hard to go up to someone and say that they are doing something wrong. As I have suggested in the past—this is something pure capitalists and those on the right never admit—cheap credit is the drug of capitalism. It's easy to say what should or should not be done but the reality is that, if someone offers a 1% to 2% loan to buy a car or a television or whatever, the consumer will almost always accept that deal. This is definitely true if you are middle class or lower and haven't seen real wage growth in more than 10 years.

As long as the free market keeps forcing long-term bond yields low, consumers, as well as businesses, will be addicted to credit. It's the flaw with capitalism.

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