Economic times really ARE tough! You hear it all the time. Everyone’s saying it, even those who have a good job and a steady income. I think we all feel it, regardless of our economic status…something’s just not right with the way the economy is working..or not working. The question is, exactly what is the problem, and how do we fix it? There’s a lot of blame to go around, and depending upon who you listen to will determine who’s at fault. I don’t think it’s all that simple, as a lot of different factors went into creating the economy we have now.
It wasn’t all that long ago, you could put just about any old thing up on the major selling sites, and it would be gone within days. I remember putting an old universal garage door opener up for sale on the Bay. The package was even opened, because we had tried it out, only to find it didn’t work on our particular brand of door opener. I put it up for sale, more as a lark than anything else…and it sold for 12 bucks, within 48 hours. At the time, I think that was almost two dollars more than I had paid for it.
There were other times when I would put items up and literally have bids before I logged off the site. It was pretty heady being a seller then. Very expensive collectibles were fairly easy to sell for nice profits. Those were fun times…people were eager to spend their money.
Fast forward to today. It appears as if those days are gone..at least for the near future. People are holding on to their dollars, and only spending what they absolutely have to. Savings levels for American families are way up. Brian O'Connell, in a recent article comments that savings levels today may be hurting the economic recovery (http://www.bankingmyway.com/save/savings/higher-savings-rate-hurting-us) because people aren’t spending. I’m not so sure how I feel about that assessment, but the article is an interesting read.
Many of us sell collectibles on-line. In times like this, most people will consider these items luxuries. “Should I spend 75 bucks on a Roseville vase, or hold onto that money for a trip to the grocery store. For many people, that choice is a no brainer…and I fear it’s going to be a “no brainer” for some time to come.
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It is true (at the moment at least) that a higher savings rate will lower our GDP. Last time I looked, consumption made up 70% of our GDP. If having consumption account for that much of our GDP is healthy for us over the long term or not isn't really addressed. As for his mention of low inflation, he overlooked one very important fact. The government changed the way that they calculate inflation recently. The inflation rate no longer includes food and energy prices. So basically, they are only tracking rising prices of important items that we need like televisions, iPads, and purses. Not the rise in price of unimportant stuff like food, gas, and your electric bill. If you add those items back into the measurement of inflation (as it has been measured for decades), our inflation rate is far worse than 1.3%. Brian should have caught this.
ReplyDeleteBut more to the point of your post, two things kind of jump to mind. College loan debt is now higher than credit card debt in this country. Granted some of this may be due to students who went on to advanced degrees, hoping to ride out the economic slump (that has been something of a trend lately). Another factor to this may be that the price of going to college has risen faster than inflation, wages, medical insurance premiums, and everything else for the last several years. In the end, if someone is getting out of college and gets a job (a different topic altogether), they can't afford to spend any of their earnings. They are starting out of the gate buried in debt.
The other (and larger) thing that comes to mind is uncertainty. Many businesses are sitting on the money that they have at the moment. One of the chief reasons sited, is uncertainty. Why are people socking more money into savings all of a sudden? Like businesses, they aren't sure what's coming next. Whatever is coming next though, we are pretty sure that we need to brace for it. Until that changes, I suspect that I will gets a lot of complements on my woodwork and very few credit cards.