Tue, Oct 07, 2008 page10

• FEATURE: Americans rediscover the value of frugality as financial crisis deepens

  PENNY-PINCHING As Americans tighten their belts, an economist warned that taking it too far could destroy jobs and bring about a severe economic downturn

  • AFP
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  With US financial institutions foundering and credit tightening, Americans are rediscovering thrift as they shop more wisely, forgo holidays and even barter in shops to live within their means.

  “I do the practical things people always used to do,” said Sandra, an unemployed, divorced mother of a 15-year-old girl.

  “I buy on sale. I use coupons. I grow my own vegetables. I do the grocery store once every three weeks, buy lots of stuff and freeze it. I do my laundry after 8pm, when electricity’s cheaper, and use cold water. I use firewood to heat upstairs,” she said.

  “I don’t drive unless I have to, and when I do have to, I plan out the route so I don’t double back on myself,” she said, listing a host of steps she has taken to reel in her personal spending.

  “I’ve even bartered in clothing shops. You’re amazed, but they cut the price for me,” said the 64-year-old who asked not to be fully named.

  A man in a Washington coffee shop, who asked not to be named, said: “My trousers are tatty, my shirts are ragged, my socks have holes in them, but now really is not the time to be spending money.”

  Someone else paid for his coffee.

  Denise, a 51-year-old who also asked not to give her full name, works in the catering industry and has struck an annual holiday off her wish-list.

  “I wanted to go on a cruise, but you have to save money for that and these days, you just can’t save,” the mother of four said.

  “I don’t drive, but my teenage son does, and these days, if he gives someone a lift somewhere, he asks for a contribution for gas,” she said.

  She might forgo buying herself something special, as she usually does at Christmas, and is unsure she’ll be able to make Christmas cookies with her seven grandchildren.

  “The price of baking ingredients has gone up along with everything else,” she said.

  “When the economy goes into recession, frugality returns,” said Martha Starr, a professor of economics at American University.

  She praised Americans’ new-found thrift, but warned against taking it too far.

  “If we tighten our belts too much, we bring on that which we fear, which is a very severe economic downturn,” she said.

  “If we all go back to penny-pinching, we destroy each others’ jobs. If we stop going to restaurants, they have to lay off serving staff. We stop going to the mall, and shop staff get laid off,” Starr warned.

  The US economy lost 159,000 jobs last month as the financial crisis bit deep, and employers in the world’s largest economy have projected a continued decline in hiring for the fourth quarter, according to a survey of 14,000 companies conducted by Manpower, an employment services provider.

  Meanwhile, retailers and service providers were cutting prices, offering free shipping and dangling other incentives under the noses of consumers, to try to get Americans to spend money.

  Retail titan Wal-Mart last week cut the price of popular toys and offered to ship them for free throughout the Christmas season, which it also announced would begin in the coming days.

  “As consumers face higher prices for energy, a credit crunch and food inflation, we’re working to provide low prices on both everyday needs and on things people want so they can live better,” said John Fleming, Wal-Mart’s chief merchandising officer.

  The Society of Leisure Enthusiasts, which organizes holiday home rentals, offered clients US$250 toward airline baggage fees or gasoline costs as part of its “vacation bailout plan.”

  Massachusetts-based KB Toys slashed prices of toys, DVDs and computer games to less than US$10 “to allow consumers to stretch their dollar in these challenging economic times.”

  After years of living in a debt culture, thanks to the ubiquity of easy credit, the financial crisis has rekindled interest in frugality among Americans, whose Puritan forefathers built the US on hard work and sound financial sense, said Barbara Dafoe Whitehead, lead author of For a New Thrift, a report published by the Institute for American Values.

  “Certainly the crisis has got people interested in thrift and frugality and how you can get out of debt and boost your credit rating,” she said.

  “Two to three years ago if you mentioned the word ‘thrift,’ people would laugh at you and say: ‘That’s so 19th century,’” she said.
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