Should rich Americans stop spending their money?
That's easy: No. As Harvard economist Edward Glaeser wrote in the NYT Economix blog last month, "the government itself is not about to start making a fetish of frugality." Well of course not, that's CNN's job!
As I write these words, the lead story on CNN.com is: "As Recession Digs In, Cheap is the New Chic." The piece, which details the totally awesome trend of rich people spending like poor people, goes on to proclaim that "conspicuous consumption is out and frugality is the new black."
Why is the author glorifying rich people who have scaled back their spending just when the country needs it most? CNN isn't explicitly asking rich Americans to make bonfires out of their wallets, but the sentiment is strange nonetheless. The same way it would be bizarre and borderline irresponsible to proclaim in 2006 that "Unaffordable mortgages are the new black" or "Leveraging 50-1 is the new black" it seems equally misguided to blithely fetishize the instinct for millionaires to embrace their inner slumdog.
For many industries, recession spending from upper-income Americans is essential, like a backup generator when the lights go out. One way to analyze the "rich frugality" trend (if it's really a trend) without cheerleading this catatonic economy might be to focus on a struggling luxury store, like the Louis Vuitton the story's first character dismisses. A story about how profits plummet at this particular LV, and it goes out of business, and its staff file for unemployment, and the owner of the building takes a huge hit because nobody else is willing to rent out the space. That's the other face of the new frugality, and it's not so chic.
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