Economic narratives develop over time, and they seep into the broader conversation in such a way that we come to understand them as gospel truth. Often without ever putting a great deal of serious thought into a concept, we often come to see the accepted narrative not so much as a part of conversation, but as the backdrop for the conversation itself.
Apropos of nothing, consider the experience of a 35-year old in 2022. They have lived through at least three significant global recessions of the kind often described as “once in a lifetime”. Two of those have been entirely during the adulthood of said 35-year-old, and that should really tell you all you need to know. If you can easily remember two cases of something that’s supposed to happen just once in your lifetime, maybe we need to re-evaluate the narratives we’ve set so much store by.
Below, we’re going to look at three economic statements that have been so uncontroversial during our lifetimes as to be accepted as fact – and we consider whether they should be so simply believed.
It’s careless to take on personal debt
The global economy is built on borrowing – there can be few major business undertakings in our lifetimes that haven’t been underwritten by a major lender. But as individuals, we are constantly told that debt is bad for us. Let’s be clear – if you have a great deal of debt and no obvious means of paying it off, then it’s very bad for you indeed. But putting a proportion of your monthly spending on a credit card – and paying it off in full where possible – you can strengthen your credit rating, which raises your potential to invest in areas which can make you money going forward.
It’s better to rent than to buy
If you’re renting from a landlord, you are paying their mortgage and paying into their retirement fund. Why would you do such a thing, if you could be paying the same mortgage they are paying, which is much less than the rent you’re handing over to them? Well, it’s not as simple as that. For one thing, finding homes for rent allows you a flexibility that means you can follow growth around as new areas become profitable. For another, being tied to a house makes you hugely vulnerable to recession – which as we’ve noted, is becoming a more common occurrence. As climate change becomes an ever greater factor, it’s not likely to mean housing stock becomes more valuable.
Economic growth is the marker of success
It’s controversial to even speak of discarding growth as a means of measuring success. After all, if you’re not growing, you’re stagnating – and as a business, a country or an industry, that’s a bad thing, right? Actually, maybe not. If your bottom line this year is the same, or even a little less than it was last year, that doesn’t mean you’re failing. What do you have to show for it outside the books? Growth every year isn’t possible, and it’s responsible for periods of boom and bust. That can be good news if you’re a speculator, but every bust means someone is losing a job, some business is going under, someone is becoming homeless. On an individual level, growth should always take a back seat to stability.
It’s best not to measure financial reality in unqualified statements – as the three truisms above show, those statements can bury a lot of important information.
(Disclaimer: This content is a partnered post. This material is provided as news and general information. It should not be construed as an endorsement of any investment service. The opinions expressed are the personal views and experience of the author, and no recommendation is made.)
