Spending Power

“If I don’t stop shopping, I’ll end up a bag lady; a Fendi bag lady, but a bag lady…” – Sarah Jessica Parker as Carrie Bradshaw

My saving grace with regard to spending money is that I was born without the shopping gene. Jeanine, on the other hand, has a feminine side that kicks in full throttle around the holidays and the only way she can convince me to tag along is by dangling the “food” carrot. She learned early on in our relationship that if you promise lunch or snacks as part of the shopping excursion, then there is a good chance I’ll come and help carry the bags.

I’m also there as the voice of budget reason. “Do you really need to buy the $69 sweater for your step-dad when the $34 one is just as nice?” Such was the case on Saturday. Jeanine made a dent in her Christmas shopping list and I was rewarded with lunch in true Pavlovian fashion. The shoppers were out in droves and it makes me wonder where everyone is getting their spending money.

The picture above is in the current issue of Time magazine and I find their shopping enthusiasm a bit scary. The corresponding article by Daniel Kadlec is called The Mind of a Shopper and questions, “why we’re filling the malls even as backbreaking energy costs and other ills shrink our spending power.”

Federal Reserve Chairman Alan Greenspan, in an article by Greg Up in The Wall Street Journal, warned of our reliance on housing loans. “Drawing on new research, he said American consumers have become enormously dependent on borrowing against their homes to fuel their spending, and that a rise in mortgage rates could trigger a spending pullback.”

“Mr. Greenspan’s new data show that borrowing against home values added a stunning $600 billion to consumers’ spending power last year, equivalent to 7% of personal disposable income -- compared with 3% in 2000 and 1% in 1994.”

On top of that, Pedro Nicolaci da Costa from Reuters reported in early December that, “The personal savings rate, the percentage Americans put away after spending, taxes and interest payments, was negative for the fifth straight month.”

They’re saying though that the party is almost over. “Next Christmas, may be a different story for many as the impact of higher costs for food, fuel, medicine and mortgages comes home to roost. And by then, says Mark Zandi, an economist at Economy.com, home prices may be stagnant or edging lower. That’s when the home ATM will shut down and with it, possibly, the spending urge.”

Just another reason to stick to the budget this holiday season!