Friday, December 2, 2011

Smoke and mirrors

It's troubling news that a significant amount of the Black Friday business boost came because people were putting it all on credit:

On Black Friday, payments made with credit cards rose 7.4% from a year earlier, vs. an increase of 3.4% for payments with signature debit cards, according to First Data, a payments processing firm. An analysis by Javelin Strategy & Research forecasts that credit card payments for online purchases will increase 63% from 2011 to 2016, vs. 2% for debit cards.
I even heard one radio news report that attributed it to "frugal fatigue" - that theory said people were so tired of watching their budgets that they went on a binge spending spree.

Why not? That's how our governments have been paying for their increased spending for years. That's why "debt service" is a growing chunk of the budget - and why there's less money available to pay for more increased spending.

With smoke and mirrors, we create the illusion of consumer health. But somewhere down the road, these people won't be able to buy as many Christmas gifts, because they're still paying off this year's gifts at 27 percent interest.

The solution is to spend less than you make. Easier said than done for many (most?) of us. And given the demonization of politicians who actually attempt to live within their means, don't expect governments to adopt that philosophy anytime soon.

No comments: