Friday, January 25, 2008

Consumer Psychology

There's a whole bunch of back n' forth in the economic blog world about the governments stimulus package. Some of the debate revolves around who will spend the rebates and who won't. Another issue is the timing to sending the checks with the conventional wisdom being "the sooner the better".

For what it's worth, here's my take. When the checks actually go out, within reason, won't make much difference. Those who are likely to spend it (and that's most of us) will begin spending it now, long before we actually have the checks. That's what credit cards are for. In addition a whole lot of consumers, perhaps a majority, will spend the rebate amount a couple of times blithely rationalizing each purchase as covered by the rebate check. Government officials are well aware of this and counting on it to restimulate the economy well beyond the actual money spent. The only unfortunate part is that at the end of the day, many of these consumers will simply have more debt.

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