Spending

With so many blogs buzzing about the economy, I didn't find anything to which I could add value. But I did find something I can talk about today. Here's the video.



So, according to the video, the money you spend on a luxury haircut could instead be spent on buying textbooks for a poor boy. And based on this logic, it questions your spending habits.

"Spending" is now a controversial issue because of the US Government bailouts. Let me argue in the Government's favor for a minute. If I had Rs.500, what kind of an effect would it have on a society if I spent it on a deluxe haircut? I'd probably pay Rs.450 to the saloon and Rs.50 in tip to my barber. The saloon would probably give Rs.100 out of the Rs.450 I paid to the barber as part of his salary. The barber gets Rs.150. He probably spends 80% of his income in the same month, which would mean that about Rs.120 is going back into the market, for probably his daily needs - groceries, house rent etc. The grocer on the street gets some business, and the landlord gets to have his rent, which he would spend on something else. The saloon owner gets his pie, and he probably spends 10% on the saloon maintenance / renovation which again is a business for someone else. He spends 50% of it to run his family, which again goes into the market - he probably goes to the same grocer. The grocer gets more business, and he spends the profit on maintaining his own family.

Get the drift? The more you spend, the more you spread your "prosperity" around. So, it's not true that you're "wasting" money when you splurge.

Is that the whole story? Hell no. It's alright as long as you spend what you legitimately earn, on something that has potential value, as long the money you're earning comes from a controlled source, and after you are done feeding your piggy. If you don't follow this, you're doing more harm than good to society. Hmm... what did I say? Read on...

Spend what you legitimately earn. Don't spend what you don't have. Take a loan if that's an utmost necessity. Don't borrow because there's someone ready to lend it to you at throw-away prices. Don't borrow what's beyond your means of repayment. Follow your dreams when it comes to your ambitions, but check back with reality when you need a loan. And when you take a loan, use the money wisely. Don't take a home-equity and go on a vacation. Oh well, there's nothing wrong in taking a vacation - you're helping the economy of the small resort-town you might be visiting, but what material value did it add to you, other than probably delaying your wife's divorce plans? And remember, you gotta pay it back some day.

The money you earn should come from a controlled source. Do you earn Zimbabwian dollars? Then I am sure you don't have enough money to look at this blog, so you're not reading this. Do you earn US Dollars? You probably are doing OK now, but you are sitting on a ticking time-bomb. The US Government is not following this rule now and neither are you, if you're spending your big US Dollars today. Uncle Sam wants you to spend, but you should now how "controlled" the source is if you look at the trade deficit charts and how well the USD is holding against gold prices. And looks like US now wants to tighten the bond (aka treasury bonds) with China. What's this new-found-love for?

Feed your piggy first. Save your money and know where your savings are going. If you're about to retire and had your valuable 401k fully invested in the stock market, don't cry foul. And whenever you think of the Government, think of this song...

You say you're looking for someone
Never week but always strong
To protect you and defend you
Whether you're right or wrong
Somone to open each and every door,
But it ain't me babe...

Bob Dylan

So, now how much money do you really have, and what do you want to "spend" it on? And are you ready to lend it to someone? Oh really?

BTW... so many thoughts couldn't have come out of me if my good friend hadn't introduced me to Ron Paul and Peter Schiff.

BTW2... Looks like AR Rahman won two Oscars. How about that! Wonder what Rahman's doing with his money tonight.

BTW3... Is Barack Obama better than George W. Bush? Obama can speak coherently, so he definitely is better. But can he scoop the US out of the "deep shit"? Let's hope he does - unlike some of the republicans who just want to "see him fail".