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Black Friday: The Day Of Excess Consumerism… My Thoughts And Advice

26 November 2008 No Comment

Happy Thanksgiving everyone. And with Thanksgiving comes the day after Thanksgiving, known as Black Friday.  The day where supposedly the retailers go from the red to the black (losing money to making money), except this year it might take a few days after to get into the black.

This is a day of big time sales in order to draw the droves of consumers into stores, ring up the debt, and take home lots of shiny new products.  With Black Friday only a few days away, I figure it’s a good day to talk about the consumer oriented economy that we are as well as maybe some actual Black Friday advice.

The Consumer-Driven Economy

With our economy definitely running off the track in recent months, a huge concern for policy makers is the lack of consumer spending.  Since consumption is approximately 70% of the Gross Domestic Product, any slow down on the consumer’s part is bad news for economic growth.

Unfortunately, I believe that the policy makers are addressing the wrong problem.  They should not be trying to figure out ways to keep the consumer spending, they should be trying to identify what truly constitutes economic growth.  Consumption is not an appropriate measure for economic growth.  Consumption is not the creation of wealth, but the destruction of wealth.  When economic growth is tied to consumption, that’s not good.  When economic growth is tied to debt-financed consumption (as is the case in America), we have real problems.  Economic growth should be measured by production rather than consumption since that is what leads to the creation of wealth in our country.

If you pay attention to our leaders discussing the economic situation, you will hear them use phrases such as “prop up the consumer” or “increase available credit for consumers” or “jump start the economy”.  These phrases truly show the lack of economic understanding of our leaders.  Propping up the consumer or encouraging the use of more debt to increase consumption are not good solutions.  In fact, the lack of consumption and the move towards more savings is the solution with the problem being too many Americans were borrowing money to continue to buy more stuff.  When that slows down since people are maxed out with debt, our leaders panic and try to “prop up” the consumer.  The reality is that a decrease in consumption and an increase in savings will lead to short term pain for the economy but will lead to a healthier economy over the long haul.  The accumulated savings can be used to invest in companies to produce things and create more wealth instead of spending it on new granite counter tops for your home.

Jump starting the economy is such a funny phrase, as if the economy can be compared to a car that needs a “jolt”.  The economy cannot be jumpstarted.  It can be “propped” up by borrowing more money and print more money, but this only delays and intensifies the eventually correction.  What you are seeing now is the appropriate response to an over-leveraged economy.  A lack of spending is a natural correction to the excess of the past years.  To get the economy going again, it will most likely take accepting a lower standard of living, saving more money, and working hard to create long term sustainable businesses that create jobs and wealth (and no, I’m not referring to the American automakers).

Back To Black Friday

With my economic rant out of the way, let’s examine Black Friday.  No matter how enticing the sales are on Friday, be aware that these purchases will have an impact on your personal finances.  Do not go into debt to buy things on Friday.  If there is any uncertainty in keeping your job, I’d recommend keeping your purchases to a minimum.

If you are planning to buy gifts on Friday, why not get more creative instead of increasing the purchase price of gifts.  You could create a custom scrap book, for example.  Your gifts can be more meaningful if you put more time in them and could save you a lot of money.  Instead of buying expensive jewelry for the wife, put together a memory book with some great personal notes.  She’ll love it and so will your pocket book.

The bottom line is that there is no better time than now to put a halt to your spending habits.  Increase your savings!  As I will talk about in an article in the coming weeks, we as Americans are likely way underestimating what we need to be saving to have a decent retirement.  Don’t go into debt this holiday season, go into savings mode!

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