I read a lot. Almost too much. My biggest challenge with reading is organizing seemingly random thoughts into coherent and useful chunks. Since the credit crunch and resulting recession, I have noticed a few very interesting articles that chronicle changes to everyday life.
The other day, I was reading the Wall Street Journal. The A-hed carried an interesting story about cobblers. Not cherry cobblers, but shoe cobblers. Apparently, the guy in the story has seen business increase by about 50% since the meltdown. His son has even launched a site, American Heelers, to offer Cobbler 2.0, so to speak. Great!! I have been taking my shoes to a cobbler for years. I still have every pair of boots, dress shoes, and loafers that I have ever bought. It makes much more sense to spend the $50 or so to have the shoes resoled. Not that I am happy to see the economy meltdown, but this is a really simple way to save money, save resources and support your local craftsmen. Plus, who wants to have to break in a new pair of shoes anyway?
I absolutely love the blog Get Rich Slowly. I have subscribed for about 6 months and am constantly finding great tips and stories. About a week after I wrote the Inconspicuous Consumption post, I noticed a great story about driving an old car. The long and short of it is that the author has saved over $25000 dollars since paying off his car. Granted it’s a Geo Prism. And he has 140K miles on it. But, he also didn’t figure the additional savings from cheaper insurance and the future value of the money he has saved. This strikes a chord with me because I just paid off my car. I actually received the title this past Friday. Heather and I have decided to keep my old car running for as long as possible. This meant spending about $500 bucks to get the brakes taken care of and we expect a few hundred more soon to repair some front end issues. But still, we’re coming out ahead.
The final piece of information that I have found very interesting is the Personal Savings Rate of US citizens. In early 2000, the rate hovered around 2%. Very low, but comparatively not too bad. In the fourth quarter of 2001 it dropped to almost zero as people were laid off or decided to reduce savings after 9/11. In 2002 it shot up to almost 3% before settling back towards 2% until about 2005. What happened in 2005? Well, it seems that people started getting interested in big screen TVs, GPS for each vehicle, new cars, new houses, etc. The savings rate dipped to below 1%. However, as the economy has melted down in 2008, the rate is back up to almost 3%. Some might argue that this is a bad thing; that by saving money people are reducing the velocity of money and stagnating the economy. To a point this is true. However, we can’t ignore how miserable we are at saving money. The savings rate is much higher in Europe, nearing 14% and staying steady, while it has been declining in the US, Canada, and Japan. There are quite a few other factors that effect thses numbers, the existance of state run pension programs in Europe are just one example. But this doesn’t explain the desparity completely.
I hate to say it, but Americans might learn a few important lessions from this downturn. I don’t think we’ll see the return of small appliance repair stores, but I am confident people will reduce their consumption, make appliances, cars, clothes, and shoes last longer. As evidenced by the savings rate, we have been spending money with abandon lately and have inflated the demand for many items. While this will take years to correct, and it will be painful, it’s intersting to observe the changes to every day life taking place across the country.
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