The worst of the credit crisis is probably over.  Governments around of the world have taken dramatic action to avoid a Great Depression like outcome.  However, tough economic times are almost certainly ahead.  People have and will lose their jobs.  Small business will feel the pinch of slowing consumer spending.

In light of these tough economic times, my first tendency is cut my own spending and hunker down.  From the perspective of the economy this is absolutely the wrong attitude.   The largest part of the economy is consumer spending.  When I cut my spending I effectively contribute to the oncoming recession.   As a nation, we cannot avoid this recession by merely spending more.   The root problem is that we’ve already spent more than we have.  This includes both the Government and its citizens.   The bill needs to be paid now.

So while consumer spending in general cannot save us from recession, I probably should be doing my best to spend more.   I am gainfully employed, and actually have more than enough savings considering I have no depedents.  I’m exactly the type of person who can risk spending more.   A modest tick up in my own spending does not endanger my finances, and would probably do a great deal of good on per capita basis for the economy.  In the end, I cannot deny my own nature.  I’m not going to ratchet up my spending, but there is at least one place I can do a little more.

GDP = C + I + G + (X-M)

Above is the basic equation of the Economy.  Gross Domestic Product = Consumption + Investments + Government Spending + (Net Exports).   I’m not much into consumption, and as much as I know I should be spending more, I doubt I will.   I’m by no means a miser, but I just don’t really have much of desire to spend much more than I already do.   However, I can add to “I” side of the equation.   Investments as definied economically is not investing in stocks or bonds.  Investing is considered capital expenditures as building a factory.  I can’t build a factory, but I could remodel my home, or look at investing in new business opportunities.    Ultimately that’s the key to turning round this current economic malaise, is to spend money or rather invest with eye toward better times.