All this talk about the economy is scary, but I have often thought “WTF?” when reading or listening to some of the news coverage. Especially the stories about today, aka “Black Friday,” that dubious American institution when retail stores compete for shoppers’ dollars with early opening hours and crazy loss leader specials.
For our foreign friends, that’s the day marked by news stories of innocent children being trampled by obese guys rushing the doors of Wal-Mart at 5:00 AM to be first to grab the marked-down 56-inch flat screen TVs. Yeah, that day.
The day on which I do my best to: buy. nothing.
It’s sad when our retail chains hit the skids, when stores have to lay off employees or, worse, close.
But the mainstream US media just doesn’t seem to want to close the loop and state the obvious. Which is that to the extent the economic “health” of our nation’s retailers is based on our nation’s people (consumers) spending beyond their means, it’s a castle built on sand. And that kind of foundation must inevitably shake down and settle if not totally collapse.
Our national personal savings rate is scary-low, especially when compared with what it used to be and with the personal savings rates in other countries. That is a function of how overstretched so many Americans have become – and were relentlessly encouraged to become over the past decade. The message, pounded at us by news articles, ads, TV shows and everybody with a hand in the pot, ran like this:
So what if you make $50,000 a year? You can afford two brand new cars and a boat and annual luxury vacations! Just draw on the growing equity in your house with a second mortgage or line of credit! And take out a handful of credit cards – don’t worry, just make minimum payments, be happy! Real estate prices can do nothing but go up and up, and next year you can refi and wipe out all that credit card debt! And eventually you can sell your house for a million bucks and retire!
Um, some of us weren’t buying it. Some of us, like me, have curiously old-fashioned ideas that you should not borrow money you can’t repay and ideally you don’t borrow it if repayment would stretch your resources. That your home equity is an ephemeral number that is the difference between what you owe (if anything) on the mortgage and what you could sell the house for, and there is no guarantee of what that number will actually be if/when you do sell. That the goal is not to keep borrowing money against your house, but to pay off the damn mortgage one of these days (not that I’m quite there yet but I have hope).
So, back to the moaning and groaning stories about how sales this Black Friday are going to be disappointing for retailers. Yes, I hope they will. Ugly as it is, a shakeout is in order.
People, don’t feel sorry for Walmart. Don’t go into more debt for Christmas presents. Save some money if at all possible – not as in buying stuff on sale. As in, opening a savings account with a decent interest rate – such as at ingdirect dot com – and putting money into it.
I know, it’s a concept that some people may find novel.
It’s old fashioned. It’s unfashionable.
Try it. You might like it.