It seems to me, the old saw that Christmas improves the economy, is false. Most people believe it is a self evident fact that Christmas shopping is a huge boon to our economy, but that is a pernicious meme that runs throughout out society. The long lines at the stores, the people bouncing off each other vying for the new pet rock, and eating out, all give the impression that if not for Christmas, most retailers would go broke. Yet what is unseen is that all the money spent, would still be spent. People don’t burn their money if not for Christmas, it would be spent anyway, and probably more efficiently. How many ugly ties does a man need that he will never wear? Instead, we should experience the Christmas season as a time to see loved ones, meet old friends, meet new ones, visit our acquaintances and help the poor.
It doesn’t matter if money is spent or saved, both help the economy. I suspect very few people burn their money if they don’t spend it on useless Christmas presents. Money spent increases the velocity of money, which has a host of add on benefits to an economy, and if saved increases the capital stock. Both have economic advantages. When the velocity of money increases, wages go up, demand for workers rises and inventory turns over much quicker. That can only lead to an increase in demand which makes factories run more. When people save, the increase to the capital stock allows firms to expand, people to start businesses, and loans become available for consumers to buy homes, cars, and the means of production. Money is the blood of the corpus economic. However, when it is wasted it is like bleeding, instead of doing it’s job… it covers the ground.
In Things Seen and Things Unseen, Bastiat uses the example of a boy breaking a window. A lad throws a rock and it smashes a shop keeper’s window. The shop keeper then has to get the window replaced. People marvel at the economic activity the breaking of the window causes and laud the boy for creating such economic progress. But in fact, the money the shop keeper used to replace the window would have been used for something else. Clearly the shop keeper wouldn’t have burned it. Perhaps he would have used it to buy a pair of shoes. In that case we can say that the glass cutter’s windfall comes at cost to the cobbler… and the shop keeper will have to wear worn out shoes until he gets enough money to replace them. As we see by Bastiat’s example, money is always used but the difference is, in the one case the economic activity is seen, and in the more efficient way it is unseen.
Debt only leads to economic progress if it is spent on utile things. Take the example of two men, one gets a loan to gamble on the horses, and the other uses his loan money to buy a store. No matter how lucky the first is, eventually he will lose that money and have to pay it back with interest, for zero gain. Which will make every other aspect of his life more difficult. The second will have an income stream with which to pay back the loan and derive income from it. Which will make every other aspect of his life easier and better. Obviously, or maybe not so obvious to some, creating an income stream is “more better” than flushing money down the toilet. Debt is only good if it is used for productive purposes, the worst kind of debt is credit card debt… and that is the form of debt people go into, to buy Christmas presents the recipient might never use.
Christmas is not for spending on useless gifts, it is for gathering with people we love, helping people, staying in touch with those around us, it is a time of celebration for the magnanimity of Jesus Christ, who suffered and died on a cross for our sins, instead the Christmas season has been taken over by calculating people, ignorant of economics, to enrich themselves. So… go visit your neighbors and bring them a hot toddy, call your aunts and uncles wishing them Merry Christmas, donate to charity or cook for the poor. In that way you will be paying homage to the suffering of Jesus Christ, it will improve your human heartedness and indeed you will be a better person for it. Rather than lavish your children with toys, that won’t even make it through the day… lavish them with love. Our economy will be more efficient for it and we will all be better people as well. God bless you, have a very merry Christmas and a blessed new year!