I realize this sounds strange but there are some positives to going through a depression. I’m not recommending it I’m just saying there’s always another side to the story.
When our economy halts or goes backwards tax revenues naturally decline. This forces our government to not only tighten their belt but also evaluate areas in the budget they can cut. This is a great thing because when tax revenues eventually start going up our government wouldn’t be inclined to immediately increase spending. There’re a couple of reasons for this; first of all, they’d realize they could get by without the areas they downsized plus they’d be gun shy for a while due to what they experienced during the depression. This helps taxpayers a great deal because it lightens the burden on us to get our economy back on track because we'd have less government overhead dragging us down.
There’s another aspect of a depression that helps us that wasn’t available for those living in the 1930’s and that is we benefit from a depressed dollar when we compete in a global market. As our prices go down our products begin turning faster and so do profit dollars. With production increasing businesses would have to hire more people. With more jobs and less government our gross domestic product would go up which shows other nations we’re a good investment. This is because our productivity per person would get better and better. With this in mind our credit rating would improve so if our government would need to borrow money they could do so at a better interest rate.
Something else to think about; Americans would have less money because the value of a dollar drops in a depression but keep in mind prices would more than likely go down as well so there’s a chance that in the scheme of things it would be a wash. Not all economists agree with my statement and instead think prices would stay the same or more likely go up but I disagree. I don’t think they take into consideration the fact that things were different in the 30’s. There wasn’t competition during the Great Depression so a retailer could sell their groceries for just about whatever they wanted and people had to pay for it. If a depression occurred now there’s enough competition to keep everyone honest. In other words if a retailer went up on their bread and milk prices their competitors would eat them alive. And good luck to the retailer who goes up on their prices because their customers probably won't go back.
Even if prices didn’t go down like some economists say, most of us spend too much anyhow on things we want not necessarily things we need so we could easily tighten our belts. Plus if you think about it, we’d react just like our government and wait awhile before spending money beyond the basics because we’d be gun shy about the economy. Although saving your money and not spending it has consequences as well (which I’ll cover in another article) but I still think it’s the smart move for your overall financial well being to only buy neccesities.
In wrapping up, none of us wants to live through a depression but I thought I’d share with you that even the worst of circumstances often contains a little silver lining.
When our economy halts or goes backwards tax revenues naturally decline. This forces our government to not only tighten their belt but also evaluate areas in the budget they can cut. This is a great thing because when tax revenues eventually start going up our government wouldn’t be inclined to immediately increase spending. There’re a couple of reasons for this; first of all, they’d realize they could get by without the areas they downsized plus they’d be gun shy for a while due to what they experienced during the depression. This helps taxpayers a great deal because it lightens the burden on us to get our economy back on track because we'd have less government overhead dragging us down.
There’s another aspect of a depression that helps us that wasn’t available for those living in the 1930’s and that is we benefit from a depressed dollar when we compete in a global market. As our prices go down our products begin turning faster and so do profit dollars. With production increasing businesses would have to hire more people. With more jobs and less government our gross domestic product would go up which shows other nations we’re a good investment. This is because our productivity per person would get better and better. With this in mind our credit rating would improve so if our government would need to borrow money they could do so at a better interest rate.
Something else to think about; Americans would have less money because the value of a dollar drops in a depression but keep in mind prices would more than likely go down as well so there’s a chance that in the scheme of things it would be a wash. Not all economists agree with my statement and instead think prices would stay the same or more likely go up but I disagree. I don’t think they take into consideration the fact that things were different in the 30’s. There wasn’t competition during the Great Depression so a retailer could sell their groceries for just about whatever they wanted and people had to pay for it. If a depression occurred now there’s enough competition to keep everyone honest. In other words if a retailer went up on their bread and milk prices their competitors would eat them alive. And good luck to the retailer who goes up on their prices because their customers probably won't go back.
Even if prices didn’t go down like some economists say, most of us spend too much anyhow on things we want not necessarily things we need so we could easily tighten our belts. Plus if you think about it, we’d react just like our government and wait awhile before spending money beyond the basics because we’d be gun shy about the economy. Although saving your money and not spending it has consequences as well (which I’ll cover in another article) but I still think it’s the smart move for your overall financial well being to only buy neccesities.
In wrapping up, none of us wants to live through a depression but I thought I’d share with you that even the worst of circumstances often contains a little silver lining.
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