Does the U.S. economy love or hate you?

One of the tenets of my school is financial literacy. And much as I try, it can get a little dry. A little boring. It was something I struggled with as a professor as well. Certain aspects of biology can be boring too. Cause student’s minds to drift. Understandable. It cannot all be fascinating. When I asked my wife this week what topic I might blog about and suggested something financial, she answered “Who would want to read a blog about financial stuff?”. Huh, I thought to myself. What could I write about that might be interesting to read about relating to financial common sense? Challenge accepted.

Here in the United States, especially around election time, you hear a great deal about the economy. Is it good, is it bad, is the President, governor, or mayor responsible for it? Did their policies actually change our economy? When the internet took off, the so-called .com race, was President Clinton responsible for making that happen? Did he create the internet, make the breakthrough needed so people could make money off the internet, or propose or sign any legislation that finally allowed this repressed field to flourish? The simple answer is no. He happened to be President during that time and the emergence of the internet led to a boom in the U.S. economy. And his popularity benefited. Timing is everything in this world. Clearly, the economy matters to our governmental managers.

What is the economy to you though? Why does it matter (or does it)? Ever thought about that (if you are not a business owner)? How do you impact our economy? Does it like you or not? If you are buying a lot, it likes you. If you are not buying much, less so. At its most basic, the economy is a system of how to use resources to produce and consume goods and services. Still too dry an answer? The economy is putting things out there for people to buy, their need to buy them, and their ability to afford that purchase. The old supply and demand gig. Zzzzzzzzzzz. Alright, I’ll just jump right in.

The economy needs you to keep buying things. Constantly. They don’t need you to buy something once and be done. Once everyone had their “thing”, they would rarely be a consumer again. Only people coming in who didn’t have the “thing” would need to buy or those that had lost or broken theirs. This is very little demand and very difficult to keep up with stores on every corner. This means fewer jobs and infrastructure to maintain those stores (less economy essentially). It is even harder if you are offering choice (multiple versions of that same thing) and people don’t need to buy it. The baseline truth of all this means companies are incentivized to get you to stop using something perfectly useful and buy it again OR create a product that initially serves its purpose but has a time window of effectiveness where it will need parts, maintenance, or replacement. The shorter the time, the quicker you become a consumer again and participate in the economy.

Let’s talk about the first point. What could get you to throw away a perfectly good item and replace it with essentially the same thing? In two words, societal pressure. Ever go to an antique store? Full of old stuff. Stuff few people want. Collector’s items maybe. The truth though is much of the stuff there, like furniture, is perfectly serviceable. Built to last. A hundred years old and works great. You could pass it on to your children and it would likely still work. Built to last. Why aren’t we using it then? It’s not fashionable. It isn’t “modern”. Someone convinced you it isn’t cool, so you won’t use it. Peer pressure. What about the house you just bought? Perfectly functional but you want to modernize it. Blow out some walls. Put an island in the kitchen. New fancy shower tiles. Essential to function? No. Convinced it is better because it's new? Yes. All because you saw some show on cable TV where designers renovated a house because the old one was “bad”. Need a new iPhone just to get the latest camera trick? Your old phone works fine but you need the newest and latest. New rims on your truck? A new jacket because you are tired of your old one? And I could go on. All because the economy needs people to buy stuff. Again. And again. And again.

This even extends to the housing market. If people just inherited and lived in the house their grandparents or parents paid off (or put a big dent into paying off), they would have no mortgage and their income would go miles further toward increasing their quality of life. Generational homes were the norm back in the day. But somewhere society tricked us into everyone needing to buy their own house and take on massive debt, only for their kids to sell it and buy another house. All this selling and buying means more interest payments, taxes to the government, and all the costs associated with moving and outfitting a new home. If we went back to the generational home model, how well do you think companies like Lowes or Home Depot would do? What about jobs for realtors? Moving companies? Construction companies? Think the government would eventually put forward some sort of law against generational home ownership? Maybe not, but all of them are heavily incentivized to do so. Hey, it’s for the economy, right?

Coming back to our second point, the economy directly benefits when it makes inferior products. They don’t want a chair that lasts 3 generations. They want something that breaks or wears out. The sooner the better. They want you to invest in a maintenance plan or constantly need to update or add parts. This creates more economy for people to provide these additional products and services. And they hide it under the guise of they can sell you the product for much cheaper. Why buy a hand-crafted wooden chair that will last 100 years when you can buy a cheap plastic one for 1/3 the price and therefore replace it often? This also feeds the first point of being able to constantly keep up with society by changing out the chairs multiple times to keep up with what is fashionable. They have incentivized buying inferior or cheaply made products and made you happy to do so. Prefer it even. Or else antique stores would be more profitable and popular. Do you prefer quality or the ability to change your stuff with the whims of society at that time? Be honest. Is cheaper really better for you?

The final trick the economy is doing is confusing so-called name brands with quality. People pay more for the same poor or inferior product because they saw some celebrity or influencer with it or because it bears the celebrity/influencer's name on it. You used to pay for quality. Now we pay for influence. Don’t believe me, go through your stuff, especially your clothes. Look at how well they are made. You could have a cast-iron skillet for 100 years or you could buy the latest skillet pushed by Rachel Ray or Gordon Ramsey. What about headphones? Or shoes? Did you buy your vehicle because it is well made and will last or because you saw it in a movie or in a commercial? I get it, social pressure is a real thing and a powerful ally for the economy. They need each other to function. And they need you to buy into their message.

Maybe you think this is me railing on capitalism. Nope. Maybe you think this is me judging people who buy stuff all the time. Nope. What I am doing is making you aware of how much you participate in the economy and all the things that come with it. How impressionable are you? Just be honest about it. The economy needs all of these factors working to sustain itself. I like having choices. I like not having to drive 2 hours to buy a washer or dryer. I like fixing up my house. And when the economy is thriving, this is fine. You are fine and happily go about your day, often looking forward to your next purchase. It is when the economy takes a turn that you feel the pain. Now, things breaking are bad and an expense you don’t have money for. Instead of quality items that will last through a down economy, you have cheap stuff that constantly needs to be fixed or replaced. This leaves you even less money for essentials like food, rent, gas, or other staples we all need. Or less money for fun. Now, you are mad at the economy and those same governmental managers. Is the economy their fault? Maybe. Timing is everything.

The takeaway from all of this, as I always write about, is an awareness of self. Which one are you and does your approach to the economy put you (and/or potentially your family) in the best position possible to be successful? Good times and bad times. Right now, costs are up. Inflation is up. And the U.S. is swimming in debt. According to the media, the economy is great. People are still going out and buying. Sure, everyone is complaining but few are changing their habits. Their approach to buying remains. And the economy thanks you. Me? I am learning to be grateful for what I have. Less consumed with what others think and more content with what I do have. I am buying less and waiting and buying based on quality. I don’t think the economy is too thrilled. Sorry Jeff Bezos.