I also remember the 70s. My father scrimped and saved all his life so he could retire in what he expected would be reasonable security. The $100,000 that he thought would provide that security lost so much value that by the end of the decade he was living in poverty. And today none of us would dream of trying to retire on a hundred grand: it wouldn’t last even a canny frugalist for long.

The ex-, I guess, was a kind of surfer. He also earned a good income. That notwithstanding, by the time I fled we were three-quarters of a million dollars in debt. In retrospect, I realized he didn’t see that as a problem, specifically because he wasn’t bothered by living his life on a rented set. He had enough insurance that if he predeceased me (which wasn’t likely), I could have paid off the house and most of the revolving debt. In any event, your debts don’t pass to your heirs, and so he probably figured it didn’t matter how much debt he racked up, as long as he kept his credit ratings high, which he did.

He and his second wife still live in our house (now worth over $700,000), travel to Italy and Ireland at the drop of a hat, and move in elite circles. My son says he’s still in debt up to his teeth. Maybe the trick is to surf and let tomorrow take care of itself.

Some people like to surf with their money. Spend it all when they get it. If the economy in general is in inflationary mode, those people come out ahead. I know – I was there when it happened back in the seventies. But those people also come out ahead if they can keep surfing. Anyone living the unpredictable life – actors, waiters (but I repeat myself,) odd job guys, underground economy people – they just keep on surfing. They are people who don’t need to actually own things, as long as they have them.

Some people like to hang on to their money. Make it work for them by building up their capital. In a non-inflationary economy, that works very nicely. I think maybe we are entering a non-inflationary period, if we can avoid deflation. The squirrels will be happy about it, and have lots of nuts.

I don’t know what happens in a deflationary economy. I’ve never lived in one. What bothers me about it is that our money is just paper. If it were backed by a precious metal, I would be a lot less concerned about deflation, since I have a pretty much solid pension that will not deflate along with the economy. But hard assets, like investment houses, could well deflate. Hard to tell what that would mean.

@ Frugal Scholar: Sure seems that way, doesn’t it? {cackle!} So it’s the formerly profligate who got us into this mess and now it’s the newly frugal who are keeping us in it. Upstarts!

Thanks for the inspiration!

I know this sounds callous — and certainly I hate to hear about people losing jobs and dire economic predictions — but I think that currently our economy is predicated on living irresponsibly. Perhaps that wasn’t true once. But it has become true.

So, to go along with your Oz reference, it’ll probably get darker before it gets lighter. The reason so many businesses are having to let people go is because they expanded in good times. This is simply applying Newton’s law to economics: What goes up, must come down. You can call it a market “correction” or a “recession” or even a “depression,” but it’s simply the yang to our previous yin.

Of course, when we see it humanized, it’s awful. But I don’t think frugality is to blame. I think lack of frugality over the past decade is to blame.

But people not spending money are easy targets when business is drying up.