Earliest. Christmas. Ever.

The Apple Store in King of Prussia closed for remodeling at the end of October, and is scheduled to reopen November 16. Just in time for the Christmas shopping season, right? Well, maybe not. By closing for the first half of November, this store might have missed almost half of the Christmas shoppers.

Black Friday, the day after Thanksgiving, is the beginning of the Christmas shopping season according to the traditions of American retailing. Yet Christmas shopping has been getting earlier year after year. Shopping early is especially important now that consumers are comparing online offerings to products they find in stores. Some of the purchasing decisions need to be made by the middle of November so that the products can get shipped to the purchaser and again, in some cases, to the gift recipient. So this year, many retailers started their seasonal discounts three weeks early, and shoppers got an early start.

Today, November 15, I saw heavy traffic and crowded stores and parking lots. It is clear that the Christmas shoppers are already out in numbers.

And so Black Friday, which has not really been the beginning of Christmas shopping for many years, may this year mark the middle of the Christmas shopping season, the point where retailers can figure they are over the hump. Retailers are worrying for the first time this year about how many consumers might have finished their shopping before the Black Friday sales circulars arrive in the mail.

The problems of high energy costs have consumers feeling pessimistic and, according to surveys, likely to spend less on holiday gifts than last year for the first time in years. But a feeling of caution is not the only reason for cutting back on gifts.

All this early holiday shopping is a sign that giving gifts has become an obligation for many of us, something we want to get out of the way so we can get on to the things we enjoy about the holiday season. And if something that was supposed to be an inspiration has become a burden, it makes sense to scale it down to try to bring it back into balance.

I have heard so many stories of people who have given up holiday gift-giving entirely that it doesn’t surprise me any more. It is not that people want to keep their money — in many cases they’re giving it to charity instead, and sending around cards with pictures showing where the money will be used. They just want to avoid the hassles of gift-giving.

I have to imagine that it is the competitive side of gift-giving that is causing people stress. As soon as you imagine that the gifts you give have to be at least as good as the ones you receive, you turn gift-giving into a competitive arena, a sport with winners and losers. It’s no wonder then if it starts to feel stressful.

But instead of giving up gift-giving entirely, it makes some sense to not make such a big thing out of it — to focus on nice, simple, pretty gifts that don’t necessarily have to be valuable, memorable, or perfect. This puts gift-giving back in its original place, as one part of a larger social occasion.

Whether it’s a matter of scaling back, spending cautiously, or a combination of the two, it seems that people are doing less Christmas shopping this year — and they’re getting it done early.

Looking for Real Money at General Motors

General Motors today announced an astonishing financial loss during the latest quarter — a loss so big it amounted to twice the company’s total value.

One of the world’s largest auto makers, GM is worth around $20 billion according to the stock market. GM already had a negative net worth last quarter, so the loss of $39 billion would seem to give it a book value of negative $43 billion — a head-swimming number that you have to look at several times before you realize it is not a mistake. That works out to something like negative $75 per share — again, not a misprint. You would think any company that owed so much would be bankrupt, but GM says no one there is losing any sleep over it. It turns out it wasn’t real money, but a mysterious and hard-to-explain tax-related asset that expired. CEO Rick Wagoner put it this way: “No impact whatsoever on our cash position, no impact on our ability to use the tax offsets in the future, and from my perspective, really no change whatsoever in our outlook or optimism about the future of getting the business turned around.”

The problem with this explanation is that the losses, all $39 billion of them, are entirely real. GM was actually losing money faster than it reported for the last several years. It made its losses look smaller than they were by accumulating this mysterious no-cash-value tax-related asset. They just now reached the point where the accounting rules they follow said they couldn’t stretch out this imaginary asset any longer. So the losses didn’t really occur all at once, but they really did occur. And the fact that these losses occurred does have an impact on cash flow and does cast a shadow over the company’s future prospects.

One reason companies get themselves into trouble is that they start making distinctions between “real money” and “pretend money.” It’s no surprise, then, when the “pretend money” seems to disappear while no one is watching. Yet all money is real. If you have to say it’s there, then it exists. It doesn’t matter if a company tells you they’re only losing funny money or Monopoly money — it’s still money and the company’s managers are showing an insufficiency of skill in losing it rather than gaining.

The world has placed a great deal of confidence in General Motors — that is the only way any company that is $43 billion in the hole can keep going. The sooner the people at General Motors start to see the confidence the world has in them as a real thing — not a mere abstraction, but something they can actually use, as real as the “real money” people have entrusted them with — the sooner they can make the company relevant in the world again.

The Un-Bankrupt and the Lending Crisis

Tightening consumer bankruptcy laws was supposed to be good for lenders. Banks pushed hard for the legislation, which made it virtually impossible for a consumer with a salary to file for bankruptcy. Borrowers could no longer go bankrupt, so they would have to repay their loans — right? Unfortunately, it seems that this is what lenders were thinking, and their overconfidence brought us to the lending liquidity crisis everyone is talking about now.

When the bankruptcy law changes were being considered, there were voices saying that the changes would actually benefit consumers. Bankruptcy is a stain on your reputation, they said. Instead, a penniless consumer could simply stop making payments, and that would be the end of the matter. In practice, there would be nothing a lender could do about it. Bankrupt or not, if a person does not have any money, you can’t get any money from them.

For all its faults, bankruptcy is at least an orderly process. The court finds out who all the lenders are and decides who gets what. By contrast, the new un-bankrupt consumers, financially bankrupt but not allowed to file for bankruptcy, are about as easy to sue as the “un-dead” of zombie movies. The situation can turn into a free-for-all among the lenders involved, fighting it out against each other in court with legal ground rules that are as clear as mud. Lenders who want to take advantage of the tighter bankruptcy laws can spend enormous sums of money on lawyers.

Even worse from the lender’s point of view, the un-bankrupt are not subject to any of the restrictions that bind a person who is legally bankrupt. An un-bankrupt consumer can hide their money, give it to friends and family members, spend it, pay their lawyer anything they want without having to wait for a judge’s approval. The chances of a lender who sues an un-bankrupt person of getting any money before the defense lawyer gets it? Not particularly good.

Others can debate exactly what the standards for consumer bankruptcy should be. The point here is simply that lenders who thought the tighter bankruptcy laws would benefit them were sadly deluding themselves. And it seems many of the largest consumer lenders brashly went out and lent money to just about anyone.

The problem was kept under wraps for a short time by the low initial interest rates of many loans. Sometimes called “teaser” rates, these initial fixed interest rates gave way to market rates at some point, resulting in monthly payments that everyone knew all along the borrowers would not be able to pay.

The problem came to the surface last year in states with job market problems, such as Georgia and Michigan. It is clear now that it has gone national. All across the United States, consumers are defaulting on loans in unprecedented numbers. This is not, as some have suggested, the result of the current economic slowdown. The lending crisis and record high oil prices appear to be the two important causes of the slowdown.

The lending liquidity crisis is affecting banks in various countries, but it is important to note that it is limited to loans made in the United States. It was the United States that changed its personal bankruptcy laws, and the bad loans at the center of the crisis are all located in the United States.

In the short term, the most important thing that needs to be done is to prop up the banking system. Without strategic intervention to prop up troubled banks, the banking system worldwide could collapse, with all the major banks going bust. Governments, central banks, and even money center banks have stepped in in recent months with unprecedented amounts of cash to prop up troubled banks in the United States, Germany, and the United Kingdom, and this will have to continue as new trouble spots emerge.

In the long run, the problems caused by lender overconfidence can be cured with some very simple reforms in lending laws. Lenders need to stop lending money to consumers who do not have the income to repay the loans. It is not necessary to make it illegal for lenders to make these loans, as some have suggested. But when lenders choose to lend money to a consumer who is patently unqualified to borrow it, the lender should be prevented from going to court to collect the money from the consumer. The courts do not exist to prop up incompetent and unscrupulous lenders, and that particular abuse of the legal system could be stopped with a relatively simple piece of legislation.

Of course, most lenders would be very careful not to make any loans that were not legally enforceable, so that change in the law would also ensure that the overconfidence of lenders that led to the current crisis would not come back to create another crisis in the future.

Squeezing the Low End of the Labor Market

I have been hearing stories for the past two months of employers having trouble hiring workers for low-paying jobs, especially in sectors like retail and food that traditionally have high turnover. The fact that this squeeze is occurring during the summer, when the labor market is largest, is a troubling sign for retailers who may end up more than a few workers short later on in the year. There shouldn’t be too much sympathy for the employers, though; there are, in fact, plenty of workers available. But it takes the larger employers a period of time to adjust their pay scales, and until they realize their pay is now too low, and take steps to bump up their wages by around 75 cents an hour, workers could be hard to find.

It is easy to imagine reasons for this change in the U.S. labor market. There are more retail locations open than ever. Some foreign workers have been deported (even pop star Lily Allen was booted out last month — sorry, Lily, I don’t know what our government was thinking) and others have been discouraged from entering the country. In a country that has hundreds of new millionaires every day, more young workers than ever are entering the labor market already wealthy and with little incentive to work at jobs that pay slightly less than a living wage.

Employers can adjust to a smaller labor pool by taking other steps to boost productivity so that all the work can get done with fewer workers. In retail, new, easier-to-use cash registers shorten the lines that form when there aren’t enough cashiers working, and employers may look for similar investments in labor-saving equipment elsewhere. Employers may also look for ways to streamline jobs so they can be done by workers with less training, such as shortening the menus in restaurants — and employers who never took training very seriously may have to start doing so.

One especially encouraging sign is that employers seem more willing than ever to hire high-school age workers, a group that for decades has been mostly frozen out of the job market. It is a sign of the declining influence of labor unions — they were behind the move a century ago to prevent young people from working — that adolescents are entering the job market in large numbers now with relatively little resistance.

It is this last effect that is likely to have the greatest long-term benefit for the economy. It’s a matter of economic development. A 17-year-old with an income has a better chance to buy a vehicle, get a career-oriented education, and have a smooth, productive entrance into the broader labor market. This is a huge step forward compared to those who are forced to start out their adult working lives looking for unskilled jobs within walking distance of home. College is the biggest expenditure that teenagers make, so it stands to reason that more income for teenagers means more of them can go to college.

And this last effect is the reason I think you’ll see more of the corporate conservatives in Washington insist that the United States must let in more foreign workers. Corporations maintain their power in part by keeping workers off balance, and that is hard to do if an ordinary 17-year-old can gain the economic power that comes with a car and a college education. By letting workers get off to a quick start in life, a high level of teenage employment undermines the big corporations’ grip on power. But while corporations can expect to get a small measure of relief from Washington, it will surely not be enough to bring back the depressed labor market of the past.

Those who imagine that teenage workers will blow all their newfound money on handbags and music CDs are sadly behind the times. Teenagers actually spend less on clothing, accessories, and entertainment than the 20–59 crowd, and they save a higher fraction of their income than any other age group. And so even though they face new economic disadvantages, such as the high cost of insurance and college, we can expect most of them to enter the job market ready to get things done. The economy will never be the same.

A Million Dollars in Debt

An AP story this morning laments the recent hesitation by banks to issue new million-dollar mortgages to home buyers. Specifically, the issue has to do with “jumbo” mortgages, those over $417,000. Home mortgages over this limit cannot easily be resold by banks, which are stuck with them if anything goes wrong. Home buyers, according to the lending and real estate specialists interviewed for the story, have picked up on that hesitation and in many cases are not even shopping for a home unless they really need one.

The situation is frustrating to real estate agents, who now find it hard to sell homes that, from the agents’ perspective, the buyers can easily afford. Yet in the bigger picture, this may be a good thing.

Because when you look at what it means to “easily afford” something, it is not really a question of qualifying for a loan and being able to make the biweekly payments. Taking the buyer’s point of view, unless you want the banks to end up owning most of your money, you cannot “easily afford” to buy a home if you have to borrow a million dollars, or half a million, to do it.

This kind of high-stakes borrowing adds to the volatility across the economy because of the economic inefficiencies and losses involved in the occasional bankruptcies and defaults that follow. An economic downturn can trigger millions of bankruptcies, which in turn magnify the economic downturn. The economy, then, is on a more solid footing if these high-stakes loans are kept to a minimum.

Of course, some people need to borrow money to buy a home or other building, but it works out better in the bigger picture if people don’t borrow much more than they really need, and don’t borrow at all if they don’t need to. There are even people who need to borrow money to buy million-dollar homes. But for most people who find themselves in that situation, it makes good sense to put off that purchase for a few months or a year or two so they can save their money and borrow less, or perhaps not borrow at all. Apparently this is what many high-end home buyers are thinking now. They’ll save a small fortune in interest charges and fees and eliminate some personal risk, and as a bonus, it makes the economy more stable too. And even if it took a small economic crisis to get people to look at this approach, the fact that they are doing so seems like a good thing.