Ashok Vemuri’s Blog

There are lot of reasons why US economy went bust late last year, but one thing everyone seems to agree on is that we are too dependent on consumer spending. While that worked great for so long, easy money/credit is no longer available. That dries up consumer spending and everything comes down to earth with a thud.

I don’t know if US economy will ever move away from that focus on consumer spending, but I find it interesting how much the consumer is tempted to spend more and more. Here is an example.

My daughter goes to kindergarten. As with most 5 year olds, she loves reading books (or being read to). Yesterday, she came home with a sheet of paper from her school – it’s basically an “offer” to encourage kids to read, in partnership with Six Flags theme park. It goes like this: she has to read books for at least 500 minutes over the next 5 weeks or so. In return she would get a free entrance ticket to Six Flags theme park next summer.

Sounds like a good deal, right? She reads more and she gets a nice present. Well, the catch is, being a 5 year old, she can’t go to the theme park alone. An adult needs to accompany her. Given how we like to do things together as a family, that’s 3 extra tickets to buy! Since they don’t allow outside food to be brought into theme parks, we will end up spending exorbitant money for some lousy sandwiches and french fries there. Besides, the nearest Six Flags theme park for me is about 70 miles from my home; so think of all that extra driving and carbon emissions!

What’s really happening here is that Six Flags theme park is trying to make people spend money that they otherwise wouldn’t have. Everybody gets a cut in that extra spending – the theme park guys, the restaurant guys, the oil company guys, and so on. The schools play a willing partner in this because kids may read more (and who knows, they might be getting a cut too). A nice business strategy that supposedly has a positive effect on school kids.

So what am I complaining about here? After all, I would be helping my kid read more. Besides, I would be doing my bit to lift US economy out of the hole by spending money. Ironic indeed – we got into that hole because we spend way more than we can afford in the first place!

This is just an example of how much people are “encouraged” to spend here, even on borrowed money. I am not saying you should save it all and never spend a penny, but the balance is so heavily tilted towards spending here – you can’t help but wonder what’s happening with US economy right now is probably inevitable.