Today is the second day in what is effectively a 'sales week' in the UK. UK residents are used to more holidays than Americans or Asians, though less than other Europeans. Traditionally, though most people are 'at work' between Christmas and the new year, many either don't turn up, develop a mystery illness, or turn up and do nothing.
One sector where this is not possible is retail, however. My mother went out at 6 this morning and was at the homecare store where she has worked for years for eleven hours. I saw her off, as I was travelling back to London today, but was interested to hear how busy the day was.
This fits with the picture from across the country. I was at St Pancras this morning at ten, and the underground was crazy then with shoppers. By all accounts, the provinces were much the same.
My question is quite simple; where is all the money coming from for this? People are spending hundreds.
House prices are beginning what I have no doubt will be a sustained fall. Repossessions are rising, to the tune of some 45000 last year. Interest rates, though historically low, are still relatively high. Money Supply growth on both narrow and broad money measures is down, but not by much. So where is this money coming from?
I wonder if the usual two sources aren't being underestimated. Banks have been creating credit for years now, and, though relatively stable, a growth in M4 of around 14% is really quite high. Note and coin growth is also high. The automatic cash machines don't generally give out £5 notes now. Though economists in the west have traditionally been very wary of government-created money, perhaps our statisticians have taken their eye off of bank-created credit and there is just a lot more of it around than we thought?
Secondly, it is shocking to me how many people are now effectively living off of benefits, and more importantly off of government-assisted purchases of home goods. If you can get on the benefit ladder, government assistance with home decorating, furnishing, lighting and heating as well as generous bonuses and credits seem to be the order of the day in many non-working households.
This accompanies a very large government deficit (much larger than the American one) that is under reported because of various financial accounting tricks. It is, nevertheless, pumping money into the economy.
So maybe there is much more money around, as well as much more credit. perhaps also companies are benefiting from the surplus production of China but not passing on all the savings? Something is happening and I cannot see the economic scaffolding behind it. I find it difficult to believe that everyone has managed their accounts so prudently that they can afford one post-Christmas shopping blowout. Not with average debts in the dozens of thousands they haven't.
Maybe the real story is that shops are getting desperate. Perhaps, unlike my new putney sainsburys, they are not hiding discounted items. Maybe they are desperately discounting everything.
All of this suggests, as all sources have suggested for some time, that the economy is on very thin ice. We could see the return of stagflation next year as rising food and commodity prices combine with desperate attempts to lower interest rates and bring down the pound, or we could see an economic adjustment that will quickly amount to recession.
For all of that, the wilful determination of large sections of England's population to fall for nonsense sales and consumption suggests how empty a lot of lives are, and that the recent Christmas has not readjusted people to any notions of real worth or family or friendship in sufficient numbers that the good life outside of the nonsense of shops and rip-off 'services' is possible.
But then, what is the good life for many in England? I spent some of the day yesterday with some British soldiers and their families, who were related to my sister. They were very British too; bonding through karaoke, watching each others wedding dvds, and videoing their child rather than teaching it to swear or drink or any other family thing. Perhaps, optimistically, that's what the English were all doing at the electronic counters today--acquiring family bonds.
And pigs have wings. Still, what a mystery all this spending is.