Hi as you can see in this graph from Google Insights, the interest for gifts in the US is declining. Now, may say that the interest for online gifts is declining, however, it should be in the rise. What is happening? Well, I think that a better indicator that the DOW JONES is how people’s interest for gifts is. Why? Well, ultimately companies make their most money during the holiday season and most people purchase the most amount not for themselves, but for gifts. People are willing to spend even what they don’t have (credit) to buy things during the season to make their loved ones feel special.
This season seems a bit off though. It seems like it has been declining since 2007. The problem that I see with it is that the government has been infusing lots of cash into the economy to prevent this. Lots of money. And you guessed it right… it doesn’t seem to be working. I looked at other statistics for example related to cash for clunkers. The government program for buying cars that according to the media was a huge success. In my opinion it wasn’t. It helped dealers in the very short term because they got people to buy at least some cars. But what happens now that there is no program? Nothing. No buying of cars. So, now what? Another cash for clunkers every month? Obviously Cash for Clunkers was not a success.
So you say, ok so then what? The real problem is credit, not money. The people don’t spend these days because they have no money. They don’t spend because they have no credit. In other words, most people feel like they have put so much stuff in their credit cards already that they can’t afford to do more. The government has understood some of this problem and tried to address it by restricting the way banks kill credit card customers. But that is not going to help immediately, in fact it is going to hurt even more. Because it prevents the average Joe from using a credit card easily and fast.
What is the real good answer? People in the US have to go to work. We have to work hard and for less money, but be extremely productive. Make sure that the services are high quality and that because of the quality we are competitive. It is hard to want to compete by money, specially when everything here is way more expensive than in third world countries. But is going to happen eventually.
On the other hand, the fast easy answer to the symptoms is this: forgive people’s credit card debts. How? Well, maybe a government program that takes credit card debt and slices it by half. As I said though, that won’t help in the long term, is only to treat the symptoms, because you will increase consumption but not value.