Consumer Debt and America's Economic Recovery
Scott Saunders, CEO and founder of financial empowerment website Payoff.com, responds to Jon Hilsenrath and Joshua Mitchell's "Consumers Step Up Their Borrowing" (Wall Street Journal, Economy, January 10) with the following open letter to Americans.
Jan 24, 2012, 09:00 ET
LOS ANGELES, Jan. 24, 2012 /PRNewswire/ -- We are collectively missing the mark as a society to think that debt reduction is what is holding our economy back. As long as we perpetuate the unhealthy cycle of an economy driven by mindless, debt-fueled consumption, we will find lasting economic recovery illusive.
Though consumer spending leads the economy, not every dollar spent contributes equal value. The difference between mindful and mindless consumption has a lot to do with the economic productivity of what consumers buy and the value both they and others receive from those purchases over time. Few would argue for instance the superior value to our economy of an individual "consuming" a class on photography compared to a carton of cigarettes. Now imagine that both the photography class and the carton of cigarettes were paid for over time, and the disparity in value is further compounded.
One problem with credit compared to cash in general is that it can increase the likelihood of buying "stuff" that is not economically productive. Mindless consumption is unquestionably enhanced with the option to buy now and pay later, and though mindless consumption can create the illusion of economic value in the short term, it will not payoff.
Over time, debt reduction will do more to propel our economy forward than it will to hold it back. In the meantime, businesses can protect their own interests with an aim toward delivering high value products and services that promote the long-term economic welfare of their customers. Similarly, consumers can use debt sparingly on purchases that are likely to offer a future reward.
CEO & Founder, Payoff.com
Payoff (http://payoff.com/) has changed the game of personal finance by making money simple, social, and fun. As a result, we've empowered Americans to take control of their financial destinies and be a part of a community of people committed to each other's success. Payoff helps its members set goals – like paying off a credit card or saving for a wedding – and offers practical guidance and tools to help people quickly achieve their goals, rewarding their progress with badges and prizes along the way. Payoff was founded in 2009 and has offices in Los Angeles, California. Get in the game at www.payoff.com!
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