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The main talk at the social and family events I go to now a days is the terrible economy. The other topic is ways to cut spending, save money, pay down credit cards and ways to be frugal. I expect others are like this also.
For those that manage to hold on to their jobs, a few years from now there may be a huge pent up desire to spend money. All those purchases that people are putting off in 2009 will eventually need to be made. Or will they? Maybe people will learn to live with less which will not bode well for an economy that depends on consumers spending all kinds of money on things they really do not need.
Maybe our recession will last for years and get worse year by year as companies lose hope that consumers will go back to previous spending patterns and then layoff staff that serviced that spending. The downward spiral will go further and further south.
Cutting spending, paying off credit cards, being frugal....this all sounds good to me. If people are putting off purchases it probably means they can't afford it anyway. Many people have been living well beyond their means and the fact that they have to cut back now may be painful, but should give them a more realistic representation of what their financial reality should be. I'm OK with a longer recovery if it means people will get back to living with some financial sense. We can't afford to keep spending but not saving. For many people the 'wealth' of the last 10-15 years was imaginary and lots of people were banking on it.
Some businesses, unfortunately, will have to learn the same thing. However, I think we can come out better on the other side if we reel in our desires and let common sense (as well as financial and economic sense) rule....maybe not with as many cars and houses full of stuff, but better in the long run. There's still a good moral lesson to the story of The Tortoise And The Hare.
I remember reading just 10-15 years ago that the Japanese were awesome savers and that was the way to do well economically. Yesterday I heard that Japan's dept to GDP ratio is the worst in the world. On the contrary, just 4 years ago I read how Germany's economy was down the tubes as well (but now on this thread someone has mentioned they are doing well).
I think we're all being fed a bunch of lies. Lies perpetuated by both the governments and large corporations of the world. Curb your debt level, spend locally vs buying garbage manufactured overseas, and stop focusing on all the media negativity. If you can do those things you'll ride out the tough times.
Hi mbuszu,
If you understand the system and the Japanese its an easy answer. The reason why Japan has such high public debt is that they have low personal debt. The individual Japanese is a saver. So the only new money that could be created was public debt. Its their money just like here , debt is money.
If both the Government and the Japanese "saved". Their currency would grow so strong trade with the country would cease.
I should add that speculators in carry trade also lowed the value of the Yen. It just made debt cheap for those who did not save. As so often happens savers are sheered like sheep. Savers very often do not prosper because thieves will break into their seed. As the individual Japanese saved, their currency was being used by speculators flooding the international market with Yen which kept Toyotas flowing out of the country. Who profits? The saver or the speculator?
Yes saving is good and as a fellow saver I understand, but many savers are slow fat dumplings for the soup of another.
I worked for years in an office building attached to a mall, so I'm very familiar with pre-holiday traffic levels. We always dreaded November/December, because just running to the Food Court for a sandwich put you bumper-to-bumper with window shoppers and at the end of a very long taco line.
Three days ago I went to the local Mega-Outlet-Uber-Mall, and was dreading the crowds. I shouldn't have worried. It was easy to move around and there was no one in line ahead of me at the two stores where I made purchases.
Also, I'm friends with a woman who has a great home in an expensive suburb. Her car's snow brush is all shot, so she told her husband she was going to get a new one. His response was, "We're not buying a new ANYTHING. No more getting new things."
She was pretty shocked. He's never worried about money before. FYI they don't strike me as the underwater HELOC types.
...Also, I'm friends with a woman who has a great home in an expensive suburb. Her car's snow brush is all shot, so she told her husband she was going to get a new one. His response was, "We're not buying a new ANYTHING. No more getting new things."
She was pretty shocked. He's never worried about money before. FYI they don't strike me as the underwater HELOC types...
You'd be very surprised to see the kinds of folks who are in financial trouble. My wife was aquainted with some folks who lived in a town just north of Dallas. We went to their house a couple of times. It was a very nice house in a very nice neighborhood. Probably $500k...best guess. When I walked in I was shocked to see that there was almost no furniture. I mean...they had a couch & chair in the LR, table & chairs in the breakfast nook....but no furniture in the dining room....bare walls, etc etc. I said to myself, "These people must be hanging by a thread". It was so amazing to see they had this total facade of a house that was basically empty inside. They must be so leveraged by their mortgage debt that they can't afford decent furniture. They struck me as the exact type of folks who would have their home wrapped up in one of these ARM deals...and possibly a HELOC to boot.
My wife and I have cut back this season. We bought a Xmas tree for $27 rather than going for one which is in the $40-$50 range. We are packing the mattress to see what happens in the up coming months. Retail is already showing that sales are down. Here in New York we are seeing small retail entities going under. The larger ones like Macys are posting much lower profits.
Tennessee, which has no personal income tax but a high sales tax, is starting to feel the pinch of reduced spending. November budget shortfalls are hitting historic highs as people pull the the plug on spending. Black Friday wasn't.
From TN Business Journal:
Tennessee’s November revenue collections were $711.9 million, 13.16 percent below November 2007 collections, the state reports.
November is the fourth consecutive month in the state’s fiscal year in which sales taxes and corporate income taxes have experienced negative growth rates, says state Finance Administration commissioner Dave Goetz in a release.
November collections were $106.3 million less than the budgeted estimate, the state reports, and the general fund was undercollected by $105.4 million. Four other funds were undercollected by $900,000.
"We are experiencing a historic revenue shortfall, but we will continue to keep the state's budget in balance, as constitutionally required, during this national economic recession," Goetz says.
Sales tax collections were $53.6 million less than the estimate for November. The November growth rate was negative 7.64 percent.
The main talk at the social and family events I go to now a days is the terrible economy. The other topic is ways to cut spending, save money, pay down credit cards and ways to be frugal. I expect others are like this also.
For those that manage to hold on to their jobs, a few years from now there may be a huge pent up desire to spend money. All those purchases that people are putting off in 2009 will eventually need to be made. Or will they? Maybe people will learn to live with less which will not bode well for an economy that depends on consumers spending all kinds of money on things they really do not need.
Maybe our recession will last for years and get worse year by year as companies lose hope that consumers will go back to previous spending patterns and then layoff staff that serviced that spending. The downward spiral will go further and further south.
It is a shame this generation is going to have to learn this lesson the hard way instead of listening to the advice of their grandparents/parents. The age old wisdom of never borrow from Peter to pay Paul and tucking away for a rainy day fell on deaf ears and now many people are suffering financially.
I still think Americans are too resilient and creative to wallow around for too long. They'll figure out what they have to do before giving up their way of life.
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