October 31, 2019
Sam Green

Save the world – buy a TV

The global economic outlook is increasingly bleak, nothing a new TV can’t fix.

The world’s economy has had an interesting year. Uncertainty is everywhere, with political conflicts, trade wars and poor economic outlook around the globe.

With all the uncertainty, there is one glimmer of hope remaining. The solution to our woes is being sung in unison by Central Banks around the world. Buy a new TV.

Some would say that the only way to make our economy prosper and keep people employed is for us all to keep on spending money. Spending more means more things need to be made, which means more people need to make things, which means more people have jobs, which means more people can spend money. Round and round the money goes, and all of a sudden, the economy doesn’t look so bad. This is the solution we have been given, but we don’t seem to be jumping at the opportunity.

Buying a TV to save the economy isn’t something that is easy to pitch to consumers, so Central Banks have to throw in a few kickers to sweeten the deal. Firstly, they make it way easier and cheaper to borrow money. If you have already borrowed money, through a mortgage or other means, then you get a nice interest rate reduction, freeing up funds for additional purchases, a TV perhaps?

Central Banks around the world are in a race to the bottom to lower interest rates. Recently Australia lowered their rates, where their official cash rate is now just 0.75 percent. Now at 0.25 percent lower than New Zealand, we have one more opportunity to catch up later this year. Money has become so cheap that borrowing for consumer goods, like a TV, now often has zero percent interest.

If that pitch still isn’t strong enough, with the falling interest rates saving your money does not look like an attractive option at the moment. Now term deposits are only marginally higher than the inflation rate. So saving money now isn’t really worth more than saving in the future.  If you planned to buy a TV at any point in the future, you might as well just buy it now.

If you’re not interested in a new TV, that’s not a problem, buying anything you don’t need should do the trick, the key is to just keep on spending.

Unfortunately for the Central Banks, people keep on spending money on the “wrong” things, like  more houses, bigger houses, and skipping the wonderful spiral of economic expansion we are all waiting for.

On the other side of the coin, if there was a recession in the near future, the worst possible advice you could want now; “borrow some money, get a TV”.