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Comment by jmonegro | Hacker News Reader

Articles and reports like these should not be made. This because it actually hurts the economy by discouraging the public. I'm sure many people spent at least a teeny bit more the last few days because of these signs of hope (which most likely led to more factory production, etc.) and now the media comes and shatters them. Not good.

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I highly disagree. To argue that articles like this have a macro effect on the economy (short term) is categorically false. If we want to focus on economic recovery as a function of consumer spending then we really can't zero in on a strong correlation between magazine articles and how the public feels about the economy without the data to back that up.

Furthermore, it is absolutely essential that everyone learns more about the current recession and are realistic about a recovery.

http://baselinescenario.com/2009/05/25/recession-and-recover...

I would in fact argue that economic education for the public helps the economy, because if more people are educated on the many factors that contributed to the current recession (negative U.S. savings rate being one major one) then they now have the knowledge to change their actions. On a wide scale (larger percentage of people saving more) this would have a net positive effect on the economy.

Agree. It's almost impossible to determine the correlation, if it exists at all.

On your later point, ironically if everyone now decided to save more, this would not have a positive effect on the economy.

I think saving right now is one of the smartest financial moves families can make. One reason being that if people have a stronger asset base then you not only have the ability to transfer value over periods of time, but you are in more sound financial condition when you buy a house. Think about the scale of the sub prime mortgage market, then think about how things would have turned out during the housing boom (2005, 2006, early 2007) if even 30% of those subprime borrowers had more savings to their names (the vast majority had none). While the financial crisis would have still occurred, maybe banks wouldn't have been hit as hard because a larger percentage of people saving could possibly translate into less people defaulting on their mortgages.

The second reason is the resulting taxpayer bailout of the financial institutions. The increase in taxes from all of these recent programs aimed at removing toxic assets from banks balance sheets, increasing liquidity in the credit markets, etc. haven't even hit taxpayers yet. Saving now enables people to react better financially when taxes rise later down the road. I don't think increased consumer spending (on credit) is as reliable a metric of the overall health of the economy as it was, because while the U.S. is a credit driven economy, using lots of credit and having any or little savings are one of those things that led us to where we are now.

I also believe saving is what families should do, but capitalist economies are based on spending. If everyone saves everything, and spends nothing - or next to nothing - on non-essential commodities, companies will suffer. And we don't need more bankrupt businesses.

I don't believe it will have a macro effect on the economy, but these small "glimmers of hope", as Obama calls them, need to be worked upon. The truth of the matter is that if we focus on the economy, and not in the people, it would be better if people spent more.

That's the whole point of tax reductions: giving more money to the tax payer in order to increase spending. That's what has been done for years. Remember a while back, when the government gave around $700 USD (?) to Americans so they could go out and spend that money.

Your stance is very short sighted. If public commentators and economists stop openly speaking their mind, the public will eventually find out and cut back on spending simply for fear of more unexpected shoes to drop. Distrust in everything that is being published is a dead sure way to destroy confidence in the economy and in the political system as a whole.

> Articles and reports like these should not be made.

What was the author's opinion of such articles in 2007 and early 2008?

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