Doom scrolling. You may have heard the term. It’s where you find yourself on your smartphone scrolling from one YouTube video to the next or one Instagram post to the next or one (insert your favorite social media site) post to the next.

And you keep doing it over and over and over until you finally look up, bleary-eyed and realize that you’ve wasted three hours, have no idea where the time went and left yourself no better off…

It’s incredibly frustrating when I catch myself doom-scrolling.

What we’re talking about today has nothing to do with wasting time on social media. And its economic impact is much worse than wasted productivity.

Nobody really wants to talk about this trend – even though it’s key to understanding today’s economic environment. So today, we’ll take a deep dive into doom spending.

What is “doom spending,” exactly?

Haven’t heard of doom spending? That’s no surprise. We used to call it “retail therapy,” but that phrase doesn’t capture the mood of despair we’re seeing these days.

Sawdah Bhaimiya described doom spending this way:

Doom spending is when a person mindlessly shops to self-soothe because they feel pessimistic about the economy and their future…

It’s also been called a “YOLO spending spree” because, after all, you only live once, right? When you’re stressed because your paycheck isn’t keeping up with the cost of living, it’s pretty easy to convince yourself you deserve that new pair of shoes… Or that once in a lifetime vacation…

Essentially, doom spending has become the way many Americans cope with their broken budgets. It’s a form of protest – car insurance too expensive? Instead of worrying about how to pay for it, why not treat yourself to the latest iPhone upgrade? You still won’t be able to afford car insurance, but at least you’ll have a new toy to distract you from your misery!

The massive rise of ecommerce and next-day delivery has contributed to the doom spending spree. You don’t even need to drive to the mall anymore.

Instead of berating folks for irresponsible behavior, let’s look at this situation like an economist would.

Does it really matter if struggling households are wasting their money?

Should we really care about the doom spending trend?

That’s a completely valid question.

Most Americans are doom spending as an attempt to soothe stress about their lives, especially about their finances. Spending money you can’t afford doesn’t improve your financial position!

As Alicia Wallace put it for CNN this week:

But [Americans are] growing increasingly anxious about mounting credit card debt.

Debt balances have been growing, and US consumers are nervous about whether they’ll be able to keep up: Americans haven’t been this worried about missing a minimum debt payment since April 2020.

And it’s not just the average American who is worried that they may miss payments because they can’t keep up with the interest from trying to simply keep food on the table.

Doom spending just ramps up the pressure on household finances. In the short term it may make you feel better – in the long term, it’s guaranteed to leave you worse off and make you feel worse about your financial position.

The pressure’s risen to the point that households aren’t the only ones worried…

Banks are scared of the doom spending spree, too

In fact, a recent report noted:

…banks are increasingly offloading billions of dollars in bad debt that they’ve officially given up on collecting, according to new numbers from the Federal Deposit Insurance Corporation (FDIC).

Banks writing off bad debt they won’t be able to collect is nothing new – maybe they shouldn’t have made those loans in the first place? We’re talking about $21.3 billion in the second quarter of the year.

That’s a huge loss for banks. And when you get perspective on those numbers… they actually look even worse.

That’s the highest quarterly net charge-off rate since the second quarter of 2013 and 20 basis points higher than the same period last year as customers continue to battle higher interest rates and inflation.

People are giving up on paying off their credit card bills at the highest rate in over a decade!

Obviously this unsustainable doom spending spree causes problems for banks (and we recently discussed why banks don’t need more problems right now). And of course it simply worsens the situations of financially-stressed Americans, too…

Understanding the doom spending trend explains something that’s been puzzling me for the last few years. Even during the worst inflationary episode in fifty years, consumer spending never slowed down – instead, it accelerated. One of my favorite analysts, Wolf Richter, has been referring to American households as “drunken sailors” for a while now.

This kind of debt-fueled doom spending is a major economic force. After all, household spending is more than 2/3s of America’s GDP.

Now, it seems like doom spending is an irrational response to financial stress. But it reminds me of an article I read a couple of years ago about how Argentinians were struggling to survive their country’s economic struggles…

The Argentinian solution to inflation

Now, the mainstream legacy media doesn’t talk about the inflation situation that debt-fueled government spending led to in Argentina… And resulted in inflation – far worse than we’ve seen here in the U.S. The kind that wipes out paychecks from the moment you get paid.

And when asked how to deal with terrible inflation, one of the pieces of advice given is to “spend your paycheque right away.”

Why? The Buenos Aires Times explains it this way:

In a high-inflation economy, money that sits in the bank is losing value… As a result, many Argentines spend their paycheques as soon as they receive them, carting away weeks worth of groceries in a single shopping trip, even if some of it – excess meat, chicken, fish – will sit in the freezer for months.

If your money is going to devalue incredibly quickly (inflation), then, you spend it as quickly as you can to try to get value from it before it is worthless. Even if all you can get your hands on is a stack of cinderblocks.

But the principle still remains: Get value out of your income while you can.

Doom spending stretches this concept to its breaking point, though. However, there’s a nugget of good advice from inflation-weary Argentinians as well…

The opposite of doom spending

That second principle comes out of the following quote from the same article:

“Buy things,” says Marcos Lalanne, a 29-year-old lawyer. “There are things that will keep their value with inflation.”

This is an idea worth considering! Use your money to buy tangible assets that retain value regardless of inflation and economic uncertainty.

The problem with whipping out your credit card for some doom spending is simple. It doesn’t improve your financial situation. Any personal finance guru worthy of the name will tell you minimize debt, especially high interest rate debt like credit card balances. That’s an important step in stabilizing your finances.

At the same time, you can engage in the opposite of doom spending. Focusing on long-term financial stability and growth rather than racking up debt. The idea is to make thoughtful decisions on purchases that retain value, contributing to a secure financial future. Historically, one of the best assets for retaining purchasing power and resisting inflation is physical precious metals. Their intrinsic value and practical applications mean they’re a great way to diversify your savings and provide a firm foundation for your future.

And you can do this with money you’ve already saved in a 401(k) or any other sort of retirement account. So whether you’re looking for a constructive alternative to doom spending, or just want to ensure your savings are diversified against economic uncertainty, Birch Gold Group can help. Learn more about the benefits of physical gold ownership, and how to open a precious metal IRA today.

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Phillip Patrick is Birch Gold Group’s primary spokesman and educator. He was born in London and earned a politics and international relations degree at the prestigious University of Redding in Berkshire, England. Growing up in London, he saw the risks of government overreach and socialist policies first-hand. He spent years as a private wealth manager at Citigroup on Lombard Street (the Wall Street of London). He joined Birch Gold Group as a Precious Metals Specialist in 2012.