Can the U.S. Consumer Save the World?
A commentary by Mike Bennett
UCG editorial content manager
Posted December 1, 2009
 Will
Americans spend or save? Which should they do?
After decades of growing consumer debt that contributed to the global
economic crisis, American consumers are being asked to do two contradictory
things to help bring the United States and the world out of the crisis:
Spend and save.
Christmas spending likely to disappoint many
MarketWatch reports
that the madness of Black Friday, with all its sales and discounts,
only brought in a half percent increase in retail sales. The Friday
after American Thanksgiving is considered the official beginning of
the Christmas shopping season, the most important period for retailers.
The small increase in sales is a reminder that the American consumer,
once considered the engine of the world economy, is still overstretched
and cannot serve as the catalyst of another boom.
Spending was a bit stronger in the Internet world. "Analytics
firm comScore said Sunday that U.S. online spending on Black Friday
was the strongest it has ever been, up 11 percent over the prior year,
with $595 million spent online," reported Reuters.
Still that online figure is dwarfed by the $10.66 billion spent at brick-and-mortar
stores on Black Friday.
The National Retail Federation noted that consumer traffic increased
over the four-day period from Nov. 26 to 29, but total sales still only
rose half a percent to $41.2 billion. "The higher turnout and
lower average spending were in line with expectations, the NRF said.
The group is sticking to a forecast for a 1% drop in spending this holiday
season," reported BusinessWeek.
"For investors who were looking for material topline growth and
a return of the consumer, that's not in the cards for 2010," Eric
Beder, an analyst at Brean Murray Carret & Co., told Reuters.
Many analysts had predicted that retail sales would improve since sales
figures were so bad in 2008, at the height of recession and the credit
crisis. For these analysts, this year's results are especially
disappointing.
Why is this important? Because consumer spending makes up about 70
percent of the U.S. economy. Reuters says, "Economists and analysts
are watching the holiday shopping season closely this year for signs
consumers are willing to spend again."
Savings rate disappoints the rest
On the other side of the ledger are the realists who note that no society
can continue indefinitely to borrow more than it saves. As the Bible
says, "The borrower is servant to the lender" (Proverbs
22:7).
America, as the world's superpower with what has been the world's
easiest currency to trade, has seemingly had a free pass. We have received
the benefit of the doubt, though that benefit appears to be coming to
an end. Up to this point, countries like China have sold us far more
than they have purchased from us. And they have turned around and loaned
trillions of dollars to the U.S. government to finance its debt.
A smaller, less powerful country that did not control the world's
reserve currency would have been forced to shape up long ago. Government
spending would have been curtailed, and taxes raised. Household debt,
which grew as much, relative to income, from 2000 to 2007 as it had
in the previous 25 years, would have been restricted. Personal savings,
which reached a low of -0.7 percent in 2005, would have been encouraged.
As it is, the recession has forced many consumers to reduce their debt,
and fears of unemployment have caused some to increase their savings.
But the rate is still very low compared to most countries.
In fact, the only sustainable economic approach would be for Americans
to save more and spend less. But this tough medicine has its dangers.
We're in so deep, the prudent thing in the long run can be foolish
in the short run.
Research from the McKinsey
Global Institute shows that "each percentage point increase
in the savings rate would reduce spending by more than $100 billion—a
serious drag on any recovery."
And so we see economists and government leaders playing this precarious
balancing act of encouraging people to spend, but not too much, and
encouraging people to save, but not too much of that either.
 On the microeconomic level of your own family, what are the prudent
steps to take? The Bible contains a great deal of advice about the wise
use of money, and we have collected much of it in a free resource called Managing
Your Finances. Read it online or download your own copy.
Related Resources
Are
You a Slave to Debt?
Millions have allowed themselves to become enslaved to a harsh taskmaster—debt.
Are you one of those caught in this trap? What can you do to break free?
The
Debt Trap: How Do I Get Free?
How can you escape the debt burden? The solution isn't hard to understand,
but it takes effort.
Do
You Know How to Use A Credit Card?
What tips do financial experts recommend on using credit cards? In principle,
does the Bible offer advice on this modern practice? Understanding and
practicing the keys revealed in this article can help your family bolster
its financial security.
Avoiding
Financial Black Holes
Identify financial black holes that can undermine your financial planning
and help you consider ways to avoid them.
The
Growing Economic Crisis: A Biblical Perspective
The recent turmoil in U.S. financial markets has drawn the attention
of the entire world. What's behind the crisis? Where could it lead?
A look from a biblical perspective helps us understand.
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