Saturday, April 11, 2009

Frugality is in!

Even the NY Times has gotten it. But look at their example:

SAN FRANCISCO — Millions of Americans have trimmed expenses because they have had their jobs or hours cut, or fear they will. But a subset of savers are reducing costs not just with purpose, but with relish. These are the gleefully frugal.

“I’m enjoying this,” said Becky Martin, 52, who has cut up her 10 credit cards, borrows movies from the library instead of renting them, and grows her own fruits and vegetables — even though her family is comfortable.

Ms. Martin is a real estate investor, her husband is a plastic surgeon, and their home sits on the 12th hole of a Cincinnati country club.

“It’s a chance to pass along the frugal lifestyle that my mother gave to me,” she says, noting that her sensibilities seem to be rubbing off not just on her sons, but also on her husband. “We’re on the same page financially for the first time in years, and it’s fabulous.”

Real estate investors and plastic surgeons?

The NY Times couldn't find anyone in the heartland that has adapted frugality as a matter of choice?

Anecdotal stories like this, coupled with the contraction of credit, will be bandied about by the bears to bolster their argument that the economy will continue it's cliff dive.

But do the foreclosure math-where the banks have actually taken possession of the homes.

268,532 foreclosures in 2006
405,000 foreclosures in 2007
850,000 foreclosures in 2008

1.5 million homes times $200,000 owed per home, equals a contraction of $300 billion of debt.

And that's only with those homes that have been taken over by the banks.

Does anybody really think these people are living on their credit cards?

Through in 3 million homes that are in the foreclosure pipeline, and soon you'll have a nation of savers.

Now you are talking a trillion dollars.

They are saving, not just because they have become frugal, because it's trendy, as the NY Times reports, but because it is now a necessity.

That's the new cash economy. They have been saving to acquire their next items with cash, as credit has been cut off to them.

They are saving to consume!

The contraction of credit, is actually pent up demand, being facilitated by saving.

And that's the pipeline that the bears can't see!

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