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Some restraint this Christmas

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There are five more shopping days remaining before Christmas. The pace of shopping usually quickens in the few days leading up to Christmas, but with the state of the current global economy, it would be prudent to conserve our resources and refrain from spending extravagantly.{{more}}

Reports suggest that there is a global slowdown as the result of the economic meltdown in the United States of America. In World Bank News #17 October/November 2008, an article captioned “The Financial Crisis; Implications for Developing Countries” states that “Developing Countries at first sheltered from the worst elements of the turmoil are now much more vulnerable with dwindling capital flows, huge withdrawals of capital leading to losses in equity markets and skyrocketing interest rates.” According to World Bank President Robert B. Zoellick, the global financial crisis coming so soon after the food and fuel crisis is likely to hurt the poor most in developing countries. Perhaps this is a case of when the US sneezes other countries catch a cold.

The economies of the world are interconnected and it is not unusual for a downturn in the economy in the USA to have a ripple effect in other economies. Many of the subprime mortgages held by homeowners in the USA are backed by securities held by local and foreign banks. The default in payment of mortgages caused some banks and financial institutions to collapse. It sparked a blame game as banks were blamed for giving mortgages to persons with poor credit history, and sometimes with no down payment, and homeowners were blamed for taking mortgages they could ill afford. The homeowners cried foul because they claim that the process was largely predatory and that the true effect of subprime mortgage and some of the charges associated with it were not conveyed to them. The fact is that when the period of low interest rate expired, many were unable to pay the high rates which were required. Perhaps the problem is that interest rates have been too high, and as the saying goes what goes up must come down. Interest rates are now going down. But the damage is already done and bail out is seen as the way out.

Many businesses have either collapsed or are tethering on the brink because of the resultant credit crunch. As credit is not readily available, many businesses cannot pay their workers, leading to the lay off of workers. For November 2008, as many as 533,000 persons joined the unemployment line. The figure for 2008 has risen to almost 2 million. It was only after the release of those figures that the government admitted formally that the country was in a state of recession, a recession that had started since last year Christmas. Many economists are predicting that the recession would deepen into a depression. The president-elect Barack Obama has warned of hard times ahead.

I do not want to be a messenger of doom and gloom, but we have to wet out houses when our neighbour’s house is on fire. Relative and friends abroad might not be as generous this Christmas. We can still have a good Christmas without a lavish display-new curtains, carpet and furniture, among others. Be discreet with your shopping. Buy only the things you absolutely need. Enjoy your Christmas. Have a happy New Year.

Ada Johnson is a solicitor and barrister-at-law.
E-mail address is: [email protected]