Small Business Boomers

Black Friday - To Spend or Not to Spend

by Jean on November 28th, 2008

Today is Black Friday.  The official start of the holiday shopping season.  Some are predicting a dismal season.   Lots of bargains will be available, I predict.  But should all of us rush out and spend money or not?

Although it hasn’t been officially announced, we certainly are in a recession.  Defined as two consecutive quarters of negative growth in the economy, a recession is clearly underway. With the decline in home values, the hit we Baby Boomers took on our retirement funds, and the media’s constant bad news, it’s no wonder the predictions are for a dismal holiday shopping season.

According to financial guru Jeff Thredgold (his publication Tea Leaf is excellent) , consumer spending was down last quarter 3.7 percent, the largest percentage drop in 28 years; consumers spent $80 billion less last quarter than the previous quarter.

And consumer spending is the largest portion of economic activity.  In the U.S., consumer spending represents 70% of this activity.  Consumer spending declines = much lower economic activity = recession.

So here’s the question:

• Should we encourage spending, particularly spending via credit, to get the economy moving and get us out of the recession?
• Or should we suggest restraint, less spending, to make a long-term impact on strengthening the economy and stop the spending spiral that caused this mess in the first place?

I first thought “We should tell everyone to SPEND, SPEND, SPEND.  We need to get out of this recession.”  But I decided that is short-term thinking.  I believe we (and I’m talking about baby boomers and all consumers here) need to stop the profligate spending and be more restrained in our expectations.  We don’t all need big new houses.  We don’t need those lavish vacations.  We don’t need to be living beyond our means.  In the long term, the U.S. and world economies will be better off if we spend less.

What do you think?

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POSTED IN: Boomer Businesses in Difficult Financial Times, Customers, Finance, Marketing