Confession. I love business news. When I had cable, I watched a lot of CNBC. I would also watch CNBC when I am at the gym on a treadmill. I would sometimes work until 6:30PM so that I could listen to NPR's MarketPlace on the drive home. My iPod is about half filled with financial podcasts that I listen to as I commute. So, I like business news. However, I am reaching saturation. Since I have fewer coworkers I often find myself eating my lunch by myself in the cafeteria watching CNN. Well, the Financial Crisis has totally replaced the war in Iraq as the thing to talk about. Often my lunch is 100% business news. Please, make it stop.
When the topic comes to personal finance a version of the Prisoner's Dilemma pops up. If you recall this from game theory... Two prisoners are faced with a dilemma. If neither talks, they both get off easy. If one rats out the other the 'rat' goes free but the other guy goes to jail for a long time. For your average criminal they can't rat on their 'friend' fast enough.
The version being circulated by the financial media is:
The economy would do fine if everyone stayed the course and went out to eat, bought cars and generally kept up their standard of living. However on a personal level I keep hearing advice to 'act as if you were laid off now' and cut the cable service or sell the car now, others say that since the market has dropped you must increase your savings from 10% to 20% of income.
I gaurantee if everyone decided to suddenly cut expenses to the bone and save 20% of income that the recession would become much worse. That is if everyone perfectly executed the plan that is best for them, we would all sink together rather quickly. Fortunately, in this dilemma we can count on the general laziness of the public to NOT cut expenses to the bone so this worst case scenario will probably not happen.
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