Someone sent me an email urging their friends to spend at least $10 more a month than they otherwise would normally spend in order to help the economy (make that big purchase you've been avoiding!). Oh boy...
Here's my response:
The notion that consumer spending drives the US economy is a fallacy, as
is the idea that more domestic spending will improve the US economy.
The issues the US faces right now are much deeper. They have to do with
the fact that we have an enormous trade deficit and that we have a
bankrupt monetary policy. This is largely because almost all industries
in the Unites States are service industries whereas we used to have a
manufacturing and production emphasis. We no longer export goods, we
export the US dollar and play shell games with our currency. We do so
in exchange for commodities. Under this model, when the dollar gets
weaker the US economy gets weaker and your spending is less and less
helpful. This is exacerbated by the fact that we are devaluing the US
dollar at an extraordinary rate. The Federal Reserve has created
incredible amounts of money out of thin air in the past three years.
There's a reason that the Gold/USD exchange is up to $1,500/oz and the
USD is now 85% CAD. It's because the inflation is trickling in and
global confidence in the dollar is dropping like a rock.
"Economic growth is the production of goods not the consumption of
goods." - Peter Schiff
See:
http://www.youtube.com/watch?v=gaS-vwZ77x8&t=4m52s
You want to help the economy? Add value to the economy yourself by
producing things rather than consuming things. Anything. Produce
music, produce intellectual property, produce honeydew, produce
microprocessors. Get your money out of institutions who practice
fractional reserve banking. Invest in the small businesses and
individuals who generate domestic innovation, not the large institutions
who just move money around.
Why is your spending power so low? Because inflationary growth has far
outpaced income growth.
The median household income in 1950 was around $3,319 whereas in 2010 it
was around $54,442. The price of gold in 1950 was $34.72/oz whereas in
2010 it was $1,224.53. A family in 1950 could purchase 95.6 oz of gold
with a year's salary whereas in 2010 they could purchase under half
that: 44.46 oz of gold.
Same thing happened with house prices. The median house price was
around two years' salary in 1950 whereas it was around four years'
salary in 2008:

The only thing spending $10 more will accomplish is that it will ensure
that when the dollar hits its next big drop you will have fewer of
them. Maybe that's a good thing if you've invested in something that
will hold value better than the USD, but the spending of money itself is
not significant. If spending was the solution we would be seeing more
economic value from the $700bil Congress spent in 2008 (about 17% of the
total USD in circulation around the world that year). That's far more
spending than you or I could ever hope to do.