This got to be the latest buzzwords. American shoppers have opted to pay in cash than credit card. There are calls to Asia to increase their domestic spending, hoping to turn them from export economies to import ones. Then, there is another case of over spending (or borrowing to be specific) from the recent Dubai crisis.
In a strict sense, everyone needs to spend to do their part in boosting the economic growth (if it is still real anymore). Otherwise, governments will have to keep pumping money to … (stock markets? I have really no clue where they go but definitely not my pocket) But it is not a simple task. I mean, to spend. I can’t even guarantee the availability of my job and house for the next few months, how can I commit to spend? Sure, I can spend on small, affordable items but when it comes to big ticket items, no way I am taking such risks (even at such a low interest rate). I think everyone will have a happy X’mas this year since it’s still within our means to spend on some gifts. In addition, the pocket money from the governments have benefited us in one way or the other. This is highly dependent on the efficiency of the distribution channels used by the governments.
This is the result of pursuing numbers too closely. When the economy is doing tremendously well, there will be whistle blowers giving warnings of spending too much (based on some numbers they have collected). At the opposite tip of sine wave, governments encourage you to spend when you don’t feel the need to do so. That’s the reality in life. And yet the same scenario happens again and again. We use numbers to forecast and prepare ourselves for such extreme situations but we always can’t avoid going there. Hence, we can deduce that there are always something (such as this) that we can never control no matter how accurate is our forecasting model.
How can an economy that is built on exports be turned into one that depends on imports? Spending alone won’t do the job. There got to be enough purchasing power and level of demand for imported goods first. For the latter, factors affecting purchase decision are more important than just asking people to simply spend. Revaluing currency is an option to increase the level of demand and enhancing the competitiveness of the nation’s goods. But bear in mind, that’s something which everyone can do though they might face resistance from forex traders. Hopefully, we won’t see another collapse in a currency in near term.
Back to the basics, the only way to crawl back to the recovery is to continue to make attractive products at an unbelievable price (but a profitable one). Yes, it is impossible but many have done that. Maybe you will be surprised to know that online shopping is growing. The same for hybrid cars, mobile broadband products and probably netbooks.
Think about the strengths and weaknesses of your trades. How to achieve sustainable competitive advantages in your strongest products should be something you focus now. Don’t just improve overseas sales. Try to give your home a chance as well. You should know your neighbours better. Understanding their needs should be cheaper than doing the same for foreigners.
In short, I am against spending recklessly, especially in times like this. The economy has contracted much by now. There are lots of inventories available. They should come cheap to me, as a consumer now. A good bargain, I should re-phrase. Companies thinking of holding on to these inventories instead of their employees will be put into real tests in the next few quarters. It’s true that many economies are recovering from recession. It also seems to be me that these are the works of the governments, by responding to the numbers and creating a smoke screen. Intention, I feel, is to increase confidence of the general public. However, it is slowly failing due to the fact that unemployment rate is still high. This key number is the main target for many nations now. It is going to be another huge investment and again the distribution channels have to work at the highest level of efficiency.
For me, I would bet on more value-for-money goods than government measures that are based on the numbers.
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