Friday, April 29, 2011

Can I Borrow Some Money?

So you want to treat yourself to a little something nice but when the moment arrives it seems you don’t have the money (uh-oh).  Maybe you really did “forget your wallet” or you expected your paycheck to go a bit further (damn taxes).   If this has ever happened to you, don’t worry you’re not alone.  In case you haven’t heard, Americans like to spend (we took a year and a half break in 2008 but we’re back!).  We are so good at spending that our personal spending (called “personal consumption expenditures” or “PCE” for short) makes up about 70% of the value our country generates in a given year (exports on the other hand, where people in other countries foot the bill, make up just 12%).  In other words, your communities are relying mostly on your money to survive!   Last month our spending increased by $61 billion, or 0.6% from what we spent in February.  Certainly you aren’t the only one who wants to be a part of this action yet “forgot” your wallet.  (Some of this increase was due to prices going up as opposed to actually having more stuff, since if we all go to buy more stuff then the increased demand allows stores to increase prices.)  

Every time we go to the store, go out to eat, or fill our cars up with gas we are giving companies the resources they need to cover their expenses (like the salaries of the people who work there) and have some left over, maybe to invest in ways to provide you better service the next time you go there or increase the selection of stuff they provide.  The money in a sense “multiplies” in value as your $1 went to the store, which provided money to the employee, who used it to buy something else and so on.  Our spending (as long as we aren’t spending above our means) helps our communities thrive and grow, creating more wealth for all of us.  That’s why the government gave us a giant “stimulus package” in 2008 – to “stimulate” our economy (our communities) by encouraging spending.

An added bonus:  we also have more money to spend!  Last month the money Americans had available to spend (called “personal disposable income”) increased by $64 billion, or 0.5% of the money we had in our pockets in February.  Over the last year, our spending money increased by almost 3% even after adjusting for price increases (called “real personal disposable income”).  That is 3% more money in your pocket for however you choose to use it!

The next time you’re at happy hour or the movies or wherever you like to go, you should get that extra something even though you didn’t bring enough cash to cover it.  When the bill comes, wow your colleagues with your knowledge on how much their fellow Americans are relying on their spending and that by covering you they are acting as true patriots.   With people like them the recession will be a distant memory in no time!  (You also heard their income is only going up so they should feel comfort in fronting the money.)  Go big or stay home.  It’s the American way.  

(Commerce Dept.)

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