Carol Perry: Christmas debt could last longer than the gifts
For the Nevada Appeal
This season it appears that people are in more of the holiday spirit than in the past few years. Who can really blame them. Even with little to be cheery about, pessimism wears a bit thin four years after the financial crisis of 2008. Shoppers were out in droves on Black Friday and Cyber Monday was the most robust ever for internet shopping sites. In my own neighborhood, there are more lights and decorations than last year and people just seem a bit more animated.
If little has changed, why are folks spending again as if 2008 never happened? How soon we forget how close we came to a complete banking collapse. Our houses keep going down in value while our property tax goes up. Most 401(k) plans have not recovered fully from their losses. There are no new jobs being added to the anemic economy, so what am I missing?
I am not trying to be the Grinch that wants to spoil Christmas, but I do want to remind all of you that there is still a lot of danger out there. The numbers used by the federal government to measure growth in our economy are highly manipulated.
One good example was last week’s unemployment data for November that showed only 8.6% of those wanting a job were still out of work. Unemployment numbers are measured only by new claims for benefits, so you may not know that 315,000 people either lost benefits or just gave up last month, not to mention those who cannot file at all or are partially employed. If you actually measured unemployment by the participation rate, unemployment is actually 11.9%. Among younger people and those without a high school or college degree, the numbers are much higher.
I hope everyone has a good holiday, but can I make a few suggestions that may keep you safe this season? First, do not use credit that cannot be repaid by January in full. Most people do not remember the gift you purchased for them last year, but you remember the credit card bills for months. Second, spend only discretionary money . That means you have socked away at least a six-month emergency fund that covers your living expenses in case you lose your job. Third, buy something that will make a difference in the long run. I make donations for my nieces and nephew to their college funds. These are easy to set up through any brokerage firm.
Toys will be long forgotten, but when it is time for college, that money will really help. Fourth, consider the gift of a gold coin for those who have enough of everything. American Eagles can be purchased in denominations of 1/10 ounce up to 1 ounce.
You can buy gold online or from a reputable local coin shop. Gold will be just beginning it’s run up if the dollar continues to decline. It also makes a great hedge against future inflation. Finally, give the gift of food.
Most people do not keep an emergency supply of food and have less than three days of staples in their home. There are several companies that sell freeze-dried and tasty food that can be stored for years. It is smart to have a few months supply of food even for natural events like earthquakes that could disrupt delivery to local stores. Here in Northern Nevada, most everything is trucked in and often over mountain passes.
Natural disasters aside, I feel strongly that we have two more bubbles left to pop before things start to turn around, and with the failure of the “supercommittee” to arrive at even small compromises, the odds are good that our growing debt and dollar bubbles will blow before we find a solution. We are printing money at unprecedented rates and the Federal Reserve is the largest purchaser of Treasury debt. We have quadrupled our debt in record time and are at a level that is not only unsustainable, but cannot ever be repaid. The Federal Reserve is trying to inflate away the debt by devaluing our dollar, but it is causing inflation here at home now. Eventually all those dollars printed and held by other countries are going to come back to the U.S. and when that happens, inflation will skyrocket. No one will care about that new pair of slippers you bought them this season, but they may be very happy with gold or food. Just give it some thought as you swipe that card for something that will end up in a landfill.
Happy Holidays and Merry Christmas to all of you.
* Carol Perry is a retired financial adviser and has been a Northern Nevada resident since 1983. She can be reached at Carol_Perry@att.net.