The Rise of the Credit Grinch

The trickle-down effect sparked by the credit crisis has affected a plethora of business sectors, most notably the financial, property and oil markets. Complex derivatives and a wide array of other incomprehensible financial instruments have undermined economic fundamentals, with the real economy not being eschewed either. High growth rates among developing countries, particularly tiger economies, have been offset by regional multi-billion bailout packages in a bid to overhaul liquidity shortages. China, as the world’s fastest growing economy, has also begun to feel the effects of the crisis through a considerable fall in demand for their export markets. Their main export hub, Guangzhou, witnessed 130,000 job cuts to correspond with the difficult trading environment in addition to the collapse of several key entities. Although China still has reserves within the trillion-dollar bracket, it is evident that their lauded success may not be sustained should their exports markets continue to swivel in decline. Companies who derive their greatest profits from the Christmas season have also been hard-hit as retail sales have fallen to record lows. The Christmas forecasts do not appear to buck the trend either as consumers begin to tighten their belts amid the unprecedented volatility of the global economy.

The prospect of a fairytale Christmas appears bleak, and reality has inevitably succumbed to the dogmas of the infamous Grinch. The credit crisis has paved way for potentially irreparable gloom, ensuing in an influx of negative energy among investors, consumers and all other stakeholders concerned. Our structural ambiguities and social negligence has brought about the rise of the so-called credit “Grinch”, and the question beckons how he will steal Christmas from us this time round. A study conducted by Ernst & Young forecasts the Austrian population to reduce their Christmas expenditure to € 288, down from €326 in 2007. This represents a 12% decline in sales, also reflected by the woes of the retail market. Furthermore, the age bracket of 46-65 years is predicted to spend an average of €338, a hefty sum relative to the €192 forecasted for people aged up to 35 years. It further exhibits the discrepancies in the level of impact for different age groups, and notably the young are bearing the greatest brunt of the current mayhem.

The inability of Christmas, as an emblem for hope and prosperity, to upstage the current economic conundrum illustrates our deep-rooted problem. Conglomerates have got us into a severe mess, with executives cashing out their earnings and deserting their company into insolvency. Consequently, corporate greed has set center stage for our greatest Christmas adversary.