Local media steps on the gas

While signs abound of serious economic distress in the offing, our local paper of record, The Vancouver Sun, labels personal caution and restraint immoral

by Matt Goody

As 2006 lurches along, fear and anxiety about the fate of the North American economy is growing. As Gretchen Morgenson pointed out in a November 27 piece in The New York Times, the current economy is severely “accident prone” and a financial train wreck could lie ahead if housing prices do not continue to rise and highly leveraged consumers stop spending.

Yet when one reads The Vancouver Sun, it is clear that the editorial board would like you to think otherwise. In a call-to-arms for all cash-strapped consumers, the Boxing Day “Newspaper’s View” editorial declared that shopping until you drop is a “moral imperative” and “staying home and feeling smugly superior to the bargain hunting hoi-polloi is what’s truly self-indulgent—and cold hearted . . . [because] not shopping means a hardship for someone else.” In short, the Sun’s solution for the economy as it hurdles straight into a brick wall is to essentially step on the gas.

While there is much conjecture and debate on whether the bubble will burst in 2006, evidence is mounting to show that the economy is set for a downturn. One need look no further than two telling barometers of the economy—The New York Times and The Economist (two publications that traditionally have gone out of their way to look on the sunny side of life)—to see that all is not rosy. In a January 14 cover story discussing the state of the American economy as former chair of the Federal Reserve Alan Greenspan passes the torch to newly appointed Ben Bernanke, The Economist said that Bernanke was taking over during a time where there “were the biggest economic imbalances in American history.”

Consumer spending and a strong housing market have kept the economy afloat for several years now. Yet as people consistently borrow against capital gains on their homes so they can spend more than they earn, the weight of household debt, a current-account deficit, and a negative personal-savings rate cause a larger burden on the economy. As Morgenson pointed out in the Times, if a financial freefall were to occur in 2006, “few consumers would be able to walk away unscathed.” North Americans are spending more, while earning and saving less, and without increases in incomes, consumers are continuing their torrid spending habits, fueled largely on credit and borrowing against their homes.

Thus, the Sun’s declaration that it is Vancouverites’ moral imperative to spend-spend-spend is both irresponsible and misguided. The editorial states that if enough people don’t shop, “hardship quickly becomes deep and widespread”; yet how is mounting credit-card debt, that arises from frivolous spending, really going to cast aside current poverty when someone is mortgaging their future so they can buy a second car or put a second HDTV in the bedroom?

While it isn’t accurate to group American and Canadian economic difficulties in the same boat, namely because the US is faced with a record high-trade deficit and is more reliant on foreign energy sources, the problems that arise from out-of-control consumer spending are extremely important on both sides of the border, especially as housing prices and new housing starts appear to have reached a plateau.

So while the Sun might like to remind people to “eat, drink, be merry, hit those Boxing Day sales,” just remember that scientists have pegged January 24 as the most depressing day of the year for a reason, and I don’t think it has a lot to do with eating, drinking, or being merry. Credit-card purchases take about a month to show up on payment-due notices.

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