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# Retail madness: Avoid going spastic on the plastic
- URL: https://www.smdp.com/retail-madness-avoid-going-spastic-on-the-plastic/
- Published: 2003-12-02T16:00:00.000Z
- Updated: 2026-10-23T03:17:27.000Z
- Author: David Pisarra
- Tags: Opinion, Promenade, #archive-import

This week starts the rush to declare retail sales as either better than normal, or as indicators of a falling economy. This past Friday was the first day of the traditional holiday shopping season — the annual orgy of buyers and sellers seeking to satisfy the perceived needs of the nation’s consumers. This year there is certain to be a “must have” toy for the tots. It will likely be something that the manufacturers have produced in short supply just to drive people into the stores to buy three other toys to make up for their failure to get the “must have” gift.

Retailers have had a lackluster year this year, and particularly in Santa Monica, they need to boost their year-end sales. The latest draws to the Promenade are on display — those very popular “sculptures” have returned and hopefully with them the crowds of buyers.

A quick trip down the Promenade, however, will prove to even the most jaundiced eye that, times are not so good. Our new governor may have taken office with a flourish, but his presence will not open the wallets of the public into the coffers of corporate America. And frankly, that is good. As a society we need to have a vibrant economy, but there is a difference between a vibrant economy and one that is living beyond its means.

This year, like many years, the push is on to have people buy what they don’t need, to give to people who have far too much already, and to do it with money they don’t have. As a business lawyer, I like to see a lot of shopping going on in stores. It makes for a good transfer of wealth. But it must be based on a solid foundation.

In 2002 there were 1.6 million bankruptcies in this country, the last full year statistics are available. And 2003 is shaping up to be every bit as bankrupt, with 1.2 million filings for the first three quarters. There has been a clear increase in filings over the past three years. That trend is likely to continue into next year. Southern California leads the pack in the number of new filings for Chapter 7\. We are the ultimate, again. But that is not necessarily a good thing in this case.

Americans are paying 14 percent of their disposable debt to service their credit card debt. This is great news for the shareholders of Capital One, FirstUSA Bank and Providian, among others, the bottom feeders of the credit card market, and horrible news for the future health of our economy.

So long as Americans are spending their income on credit card interest and late fees, they are not saving it, investing it and making it work for them. Money that is saved in a bank is used by the bank to fund other projects. It is loaned out to borrowers who then take the money, buy building materials with it, pay their workers and they in turn use it to purchase groceries and hopefully save it for their retirement. This is the cycle of money in a well ordered society. It is actually how money is created. By letting the bank use it to lend out to others, we as a society end up with greater wealth. No one person would likely have the resources to build any of the skyscrapers that dot the landscape. With the assistance of banks, using their depositors’ money, buildings get built, roads get paved and jobs are created.

But when income is going to credit card interest, that money is effectively spent by the consumer, never to be seen again by them. The interest will be reported by the lender as an income item, and at the end of the year, it will declare a dividend based on how much income is left over. That dividend is sent to their shareholders who are likely to take it and save it themselves. This might at first sound like no big deal, but the problem is hidden.

When someone pays credit card interest, they are obviously not saving for their retirement or preparing for their future. They are paying for last year’s spending with this year’s money, which means that today’s spending will have to be paid with tomorrow’s earnings. Thus a perpetual cycle is created whereby they can never get ahead of the curve. Eventually this will come to a halt, when tomorrow’s earnings stop, and the spending hasn’t. It’s like that old saying, “It’s OK to rob Peter to pay Paul, until they meet.”

If people are not saving for their retirement, or to buy an asset that produces income, they will eventually get to the point where they require financial help. That assistance must come from somewhere. They will have to rely on their family for help, or worse, require the government to help them with foodstamps, housing, or medical care. That means that the tax burden will be felt by the working population. So whether or not it is coming from family members or the government, in either case, they are now taking away from someone else’s ability to save and prepare for the future.

Back to the vibrant economy part. We need to have a vibrant economy, but that means people are putting money where it can do them the most good — where people are living within their means and building futures. This year the hottest toy of the season is going to be a seductive choice for many of us. It will likely be one that makes noise, is furry, and causes kids to go spastic. It should not make parents go spastic on plastic, otherwise those kids might be paying for it in their future. And that’s not a very good gift.

*Originally published in the Santa Monica Daily Press print edition on December 2, 2003.* [Read the original PDF.](https://s3.us-east-1.amazonaws.com/smdp%5Fbackissues/120203.pdf?ref=smdp.com)