Sweet Orange

Driving that train, high on cocaine…
Trouble with you is the trouble with me,
Got two good eyes but you still don’t see.
–Grateful Dead

In one of last week’s posts, I wrote about the dueling opinions that exist on how we will react when the economy and employment improve. Some think that we will become more frugal, and some think that we will have short-term memories and will return to over spending.

Those who think that most of us will opt for the more cautious choice say that, although we have had short-term memories in the past, the seriousness of this recession will affect this generation to be more frugal–the same way that the Depression influenced that generation to be frugal long after the Depression had ended. But here is why change is so difficult:

“the neural activity of someone whose investments are making money is indistinguishable from that of someone who is high on cocaine or morphine.”–Author Jason Zweig on neuroeconomics

So what about it? When the economy recovers and employment is once again at a normal level, will we kick the spending addition? As New York Times columnist Tom Friedman points out, we might have come to a point where we have no other option:

Let’s today step out of the normal boundaries of analysis of our economic crisis and ask a radical question: What if the crisis of 2008 represents something much more fundamental than a deep recession? What if it’s telling us that the whole growth model we created over the last 50 years is simply unsustainable economically and ecologically and that 2008 was when we hit the wall - when Mother Nature and the market both said: “No more.”—Tom Friedman, “The Inflection Is Near?“

Note: If you are in the frugal category, the FDIC has some tips on managing your money wisely: “Managing Your Money in Good Times and Bad.” Also, for information on the current market for small homes, see my previous post “Note to Homebuilders: Small Homes Sell!“.

GRAPHIC COURTESY JASON ZWEIG WEBSITE