|
One of the more
unsettling aspects of the way the crisis has played out so far is how
powerful and far-reaching the fallout has been.
For example, while it
might be obvious in hindsight, I, for one, did not expect the crisis to
transform a country like Iceland from a thriving up-and-comer to an unstable
backwater within a matter of months.
Certain other
developments have been much less dramatic, though are interesting,
nonetheless. These include changes in American's spending habits, whether
voluntary or otherwise.
In "What Else Acts Like Cheap Wine and Cigarettes?" the
Freakonomics Blog gives us a taste of how the new economic climate is turning
what were believed to be necessities into postponable luxuries.
It’s
interesting to see how people’s spending patterns respond to a
(presumably) temporary decline in income during the recession.
Which items are more
or less income-elastic in the short run? A pediatrician friend of ours
mentions that he is seeing less business; when there are three kids with
coughs, for example, a parent will bring in one, get him diagnosed, then
treat the other two the same way at home — thus saving two co-payments.
The Austin marathon,
the biggest race of the year, will not have its usual corporate sponsors, and
thus no elite runners either. I expect that, as in the last recession, there
will also be a large decline in plastic surgeries.
All of these appear
to be postponable luxuries — and I wonder what are other weird
examples? Also, aside from the usual suspects (grocery purchases being the
standard example), what else doesn’t decrease much? Pornography, cigarettes, cheap
wine?
Michael J. Panzner
Editor, Financialarmageddon.com
Michael J. Panzner is a
25-year veteran of the global stock, bond, and currency markets and the
author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes,
published by Kaplan Publishing.
| 
