Since 2008 they had been just grinning-and-bearing it. It was un-fun to the n’th degree, but they knew the whole thing would be over sooner or later, and probably sooner rather than later.

But then when the clock struck 2010 (or earlier for some folks), they had just had it — they just didn’t have any more just-keep-your-chin-up/stiff-upper lip remaining in them. They had fallen pray to The Un-Fun Fatigue Factor.

TUFFF.

* * *

I saw this in almost every business I advise. For some businesses, in fact, the coming of 2010 was tantamount to flicking a switch from on to off.

Now each business is unique, so it is hard to say exactly what this was about, but I suspect it had to do with revenue momentum. RM is the answer to the question, If I stop getting new business, how long does it take until things really start falling apart?

For retail businesses, the answer is pretty much right away. That’s one reason why retail sales figures are seen as important indications of economic activity, and that’s why today’s rather dismal retail sales figures are scary (especially when combined with last week’s totally dismal NFP figures)

Retail businesses are small-ticket businesses, in the sense that most retailers have oodles of customers, each of whom spends a small amount at the retailer. Each of those customers can, pretty much at the drop of a hat, stop spending, and that is why retail businesses have relatively little RM.

On the other hand, big-ticket businesses — those with a relatively small number of customers/clients — have a lot of RM. Here, in a happy bit of symmetry, it is often the case that, just as the customer is an important part of the business’s revenue stream, the business is an important part of the customer’s way of existing.

So I saw a lot of small-ticket, low-revenue-momentum businesses up against the un-fun fatigue wall in the fall of 2009, and a lot of big-ticket, high-revenue-momentum businesses sucking up to it in early 2010.

* * *

People, too, are dealing with TUFFF. They are the economic actors on the other side of the retail sales number out today. These days people are TUFFFed enough that they cut back their spending quite a bit from a month ago (though it is still 7% higher than a year ago).

I am a big believer in cutting back. My common refrain of a year ago — after the stock market had fallen by 60%, after we had perched on the precipice of The Great Depression II, after we had watched so many institutions fail, and so many fail us — was, If not now, when? If you don’t cut back on your spending now, then when on earth would you?

The problem with doing so, though, is a collective one: if we all stop spending, then the aggregate demand increase I have been going on about in here will not happen. This is called The Paradox of Thrift (even wonkier article, from Krugman, here). That is, less spending means less economic activity, less economic activity equals less aggregate demand, and, even though more savings (which is the output of less spending) is usually good for the economy, in this situation it is not.

* * *

This, however, is where I draw the line on The Big Us. Yes, we are all in this together, but, no, you should not spend when doing so is bad for your overall financial health, even if doing so would be good for the economy as a whole. Umm . . . don’t quote me on this, but in this context, altruism is for others.

And, assuming that spending is fun (and, other than the mere-sustenance part of it, that’s the whole point of spending, isn’t it? If it weren’t fun, we wouldn’t do it — shopaholics and people with spending problems excepted — would we?), that means more TUFFF for us.

MTUFFFFU.

So, please, just a bit more patience, if you will. It’s out of our hands. All we can do is grin and bear it. And hope.

And remember: there are lots of ways to have fun.

Lots of hugs every day comes to mind.

‘Til Monday, then, here’s to your overall financial health, and may it continuously improve.

718 words. Yay

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The Big Us

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The Great Recession, The Paradox of Thrift, The Un-Fun Fatigue Factor, TUFFF

The JFF Blog

Are We There Yet? — The Un-Fun Fatigue Factor

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