Monday, December 1, 2008

Column #88 THE ECONOMIC IMPERATIVE OF CHRISTMAS SHOPPING

(Week 17 - Monday, Dec. 1)

Every year about this time, it seems, the mavens of economic prognostication hold their collective breath until the returns begin to come in on how willing and able people are to show up at retailers, money in hand, ready to engage in Christmas shopping. This year in particular, they are waiting with bated breath. Will the people flock to the stores, and thereby demonstrate a "show of confidence" in the economy (despite losing jobs, savings and home equity), or will their malaise and beggared circumstances be too great for the usually festive air (or patriotic spirit of shopping) to overcome?

This year the early returns are, it seems, "encouraging." A few minutes ago I heard a newscaster on Public Radio report that retail sales on Black Friday (the shopping day after Thanksgiving) were reportedly up three percent from last year. The next benchmark will be "cyber-Monday" when the initial wave of shopping over the Internet is expected to take place.

That this is good news for the retailers and suppliers who produce the profusion of gift items is obvious, but holiday shopping is also billed as a bellwether for the overall economy. If sales are up, so the thinking goes, then the economy is sound; if they are down, it is an indication of "structural weakness." If the grim economic indicators that we have been hearing in the news belie any notion of soundness in the economy, the willingness to shop, especially for non-essential items, is taken as a barometer of "consumer confidence," which in the end, supposedly, is the key to turning the overall economic situation around. Within the context of the present monetary system and culture, there is perceived to be an effective economic imperative for Holiday shopping.

This raises the question, how does this seeming need for shopping reflect upon real economic health? Is it a sign of a genuinely robust economy, or the reckless indulgence of a narcissistic consumerism?

The question needs to be answered in the context of the monetary realities that influence overall consumer behavior. In a "debt-money" based economy there is a constantly felt need for "economic growth" (i.e. borrowing more money into circulation) to expand the economic base against which more money can be borrowed. Without it, an imploding monetary spiral can indeed set in, and present a threat to the economy as whole. The perception of such a need, therefore, is not entirely without cause. If not enough merchandise is sold during the annual shopping binge, the effect will be to cause a net contraction of the economy, and the unpleasant effects of that will indeed ripple out, in whatever relative measure, through all sectors.

Monetarily speaking, the system does not care who does the borrowing, or for what purpose. It could just as well be for the citizenry taking out a Holiday Season loan or laying their credit cards on the store counter for Christmas gifts, as for municipalities building schools, the Federal government requisitioning tanks or the well-healed consumers purchasing luxury vehicles. Holiday shopping is a major factor in the Gross Domestic Product (GDP), and if it is down the economy as a whole does indeed take a hit, the fact that much of the shopping does not make sense in terms of human welfare, or even true giving, notwithstanding.

The question arises, "What sense does this all make in terms of genuine economic life?" I would answer, "None!" As in virtually all other areas of economic life, the imperatives imposed by "debt"-based money have turned genuine economics on its head. From a common sense perspective, it is most advantageous in terms of human life to accomplish the most with the least expenditure of resources. Within a system where money is created and borrowed into existence from private banks, that logic is reversed; i.e. the economy is deemed the healthiest when it does the least with the greatest expenditure of resources.

To illustrate, common sense would say that an automotive vehicle is most economical when it goes the greatest distance on the least fuel. The "problem" is that this is also the condition that contributes the least to the GDP. If a given vehicle burned twice as much gas to go the same distance, that activity would produce, monetarily speaking, twice the economic activity, and therefore contribute twice the amount to the GDP, and therefore cause economic indicators to rise. The net effect of our society's dependence on "debt-money" is to encourage a wasteful use of resources. Indeed, as the amount of "debt" increases the "health" of our economy comes to rely in a peculiar way on gratuitous consumption. That is why, for example, the proliferation of vehicles that cover people's transportation needs via a maximum consumption of resources has been encouraged by the financial order.

Of all patterns of spending, holiday shopping tends (arguably) to be among the most frivolous, and yet it is widely touted as a great engine of consumption that is counted upon to give the economy a yearly boost. This has nothing to do with real human welfare, or even genuine gift-giving, but everything to do with the monetary "need" to borrow more money into circulation so that "interest" payments required to maintain the money supply and keep it growing can be satisfied.

My purpose here is not to be a Scrooge. Indeed, much seasonal shopping is conducted mindfully in the spirit of true gift-giving and satisfying each other's needs. Many people, if not most, would likely agree that this laudable intent has given way to a rampant materialism that has overtaken the original spirit of the seasonal observance. This is a complex issue, and it can be looked at from many perspectives, but I would suggest that the monetary imperative for people to continuously take on more "debt" is major factor that has driven it in the "rampant materialism" direction.

If we were to adopt a public monetary system, the "debt-imperative" fuel would be removed from the holiday-shopping fire. To be sure, merchants and suppliers would still be interested in peddling their wares, but even for them lower overall levels of "debt," much of which they now account for as a cost of doing business, would reduce the urgency of their situation. This would open the door to seasonal celebrations that were sane and not nearly as driven by the need to sell superfluous goods.

Concerning the monetary soundness of the economy as a whole, the yearly holiday-shopping boost itself would become a non-issue. With adjustments in the quantity of money in circulation, the society's buying and selling could be allowed to expand or contract according to real human needs and desires, including whatever level of holiday shopping and gift-giving people might deem to be good and natural for its own intrinsic reasons.

Richard Kotlarz
richkotlarz@gmail.com

The complete set of columns from this series is posted at the following websites.
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm

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