Fascinating article on the front page of the Wall St Journal today about the spending and saving habits of Europeans. Here are a few excerpts:

"Residents of the 12 countries using the euro save 10.5% of their disposable income compared with 0.8% for Americans, according to the Organization for Economic Cooperation and Development. (The British, who don't use the euro, are bigger spenders and save less than Continentals.)."

"Weak consumption in the euro zone -- the world's second-biggest consumer market after the U.S. -- means one less source of growth for U.S. exporters. It has thus contributed to the ballooning U.S. deficit in the trade of goods and services, and is weakening the dollar. "

The European culture does not encourage credit buying. The average American spends more than $5,500 a year using credit cards; Germans only $64, and France just $30. [No figures were given for Italy or the UK.]

Some European policy makers are urging people to spend more to boost European economies, but the consumers generally aren't complying. Shopping is not nearly so much a favorite leisure pastime there as in the US -- Europeans would rather be doing things than acquiring new posssessions.

In most of continental Europe, banking regulations don't allow borrowing backed by home equity.

European store hours are often restricted to protect staff from working late, and laws strictly regulate the number and timing of sales, and the types of sales promotions that stores can offer, as well as the value of discounts.

thus the argument by the administration that this will make our manufactured good more attractive (cheap) to Europeans is bunk.

John Mauldin's - Bull's Eye Investing - has a very interesting perspective on the decline of the dollar and why. The fluctuations in the currency market go back to when Nixon cut the dollar loose from gold. The short if it is - the dollar is going to reminan weak - and it has very little to do with making american products more attractive to the European market - and more with getting China in line. Very interesting - though bleak read.

Great information I am going to buy the WSJ to read it.

nonnafelice, this is interesting indeed because this is my experience with friends in Italy at least and also my dear SIL who now lives near me but was born and raised in Rome.

Credit cards hardly ever used. Savings taken much more important than in the US.

BTW, SIL has always been shocked how easy it is for consumers in the US to return purchases for whatever reason.
He still cannot believe it because this is not done in Italy.

Also, your beautiful photos of Italy - I gave the website to my daughter & SIL so they could enjoy them this weekend. Am sure it will make him homesick.

Have a happy and relaxing weekend.

That's interesting (although I haven't read full article) as I do think Americans don't save very much. I know a lot of people who don't save hardly anything and they aren't that young any more--and could save, just spend it on things.

However, I do find it hard to believe that Germans and French basically don't use credit cards at all ($30 a year is about nothing to me), unless that is some odd artifact of the statistics by averaging people who use them with a lot of people who don't even have one.

However, the state that the "European culture does nto encourage credit buying. The avg. American spends more than $5500 a year using credit cards." is a little misleading or a misinterpretation. I charge a little more than that per year to my credit card, but I am not doing credit buying, because I pay the bill at the end of the month. For me, it's just a convenient way to pay for things (you know how much trouble writing checks in stores is) and have one bill each month. Plus, I do get cash back or miles on the cards, so it makes more sense using them to purchase things in a store than paying cash. Besides, I don't like carrying around a lot of cash on me.

The real question is how many Americans carry over balances each months, and how much.

People in Brussels use their credit cards quite frequently, but then many of them are expats or EU types feeding at the public trough.
I did European market research in 2000-2003 and during the run up to the euro conversion, a lot of Europeans pulled out that cash they had stashed under the mattress (figuratively AND literally) and splurged on luxury goods. They then adjusted to the euro and went back to their usual spending/saving habits.

Those figures suggest that the French and Germans must do practically no online purchasing, for travel, books, or anything. Or do they just use debit cards for that? One Ryanair flight would put them over the stated average CC use.

It frustrates me that so many people put huge debts on their credit cards and pay them off with large interest penalties, whereas if they had just saved up the money in the first place they would avoid those huge penalties and have more money to spend in general.

Christina - I'm with you on that one. We put more than double that on our credit cards each year because <b>everything</b> possible goes on them. But, we've never carried a balance, even for one month.

Still, I think we're in the definite minority. I'm not sure I want to see the figures for how many in the US carry a balance from month to month or how high it is. I think it would make me sick to my stomach.

I guess there's nothing to be done about it, but I sure wish more people would be responsible with their money and save first, then spend beneath their means rather than spending all they make and then some.

The article below say that only about 1 in 20 American households owes $8,000 or more on credit cards. Another 31.2% of the households the Fed surveyed paid off their most recent credit card bills in full.

http://moneycentral.msn.com/content/...ebt/P74808.asp

Re credit cards: Debit cards are apparently much more popular in Europe, and there is often in fact a sort of stigma attached to credit cards. Here's a quote from the article:

<b>In France, the evening news repeatedly broadcasts features on the dangers of over-indebtedness, and regulations discourage borrowing to consume. For example, the French central bank requires credit cards to display clearly the words &quot;Carte de Credit,&quot; to distinguish them from more popular, less-stigmatized debit cards, which draw directly on a checking account.

&quot;The consumer doesn't want to show to the retailer that he is paying on credit,&quot; says Herve Kergoat, MasterCard International Inc.'s country manager for France. &quot;In France there is a culture strongly averse to credit.&quot; </b>

[LoveItaly - thank you so much for your nice comments on my Italy photographs. Wish we were back there now ....]

I read the same article and was going to do a post about it too, but %$#@ time difference got me.

Some additional details (don't have the paper in front of me so mis-statements are slightly possible)

- Debit cards are used heavily but don't carry the cultural stigma of indebtedness. In France, credit cards come with &quot;Credit Card&quot; prominently printed on the top of the card, which discourages people from using them.

- In one country (Germany?) the law limits maximum debt on the card to US$1600 or its equivalent (currently around &euro;17.75 I think.) again.

- Shopping is not viewed as recreation to the degree it is in N. America. Of course, shops closing at 6 helps the publicans.

- (In France?) it has been illegal for retailers to sell goods for less than they paid for them. No such thing as loss leaders or teaser rates.

It's articles like this that make me glad I subscribe to this paper, although the editorial page makes me

How does the European attitude towards credit cards affect tourists?

After a few experiences at small stores and restaurants where I wanted to use credit cards in Europe, but was rebuffed or was told I would have to pay an extra fee, I didn't use them at all on my last trip (although I had them if needed). I know some people say they never have problems using credit cards, but I wonder if they have actually tried using them at small, out-of-the-way, downscale, non-touristy places.

If credit card use is uncommon in Europe in day-to-day life, I wonder if they apply this &quot;stigma&quot; (to the extent it exists) to tourists who use credit cards.

One major advantage to the use of a credit card vs. a debit card is that you can dispute an invalid charge. With a debit card you have little recourse if the item or service purchased doesn't live up to its promises, but it's fairly straightforward to dispute an invalid charge if you use AMEX, VISA, or MasterCard.

&gt;&quot;Residents of the 12 countries using the euro save 10.5% of their disposable income compared with 0.8% for Americans,..&lt;

OTOH, Americans pay their taxes through payroll deductions, which is less common in Europe.

WillTravel, I use cash when at small shops, and credit card (for mileage points) when at chains such as UPIM. Family run hotels will usually give a discount if one pays in cash. Am sure you know why.

Do the same thing when eating out. Small family run cafes prefer cash. If it is an expensive restaurant I use my credit card.

I figured there must be some basic difference in the way credit card companies work in Europe vs. US, and debit cards, to make some sense of that credit card usage thing. If European CC companies don't pay any bonuses (like cash back or FF miles), then that is less of a reason to use one, although I still prefer just having one bill that I pay with one check. I don't have a debit card because it seems like a nuisance to me in comparison to a credit card where you pay one bill, and there is no reason to have one in the US.

I don't use a credit card in the US for minor purchases, either, though, so I'm no different in that regard. I only use it for major purchases, hotels, buying online, expensives tickets, airfare, large restaurant bills, groceries, etc. I use it for gasoline as I get five pct back and it's a lot more convenient to stick that card in and do it yourself than dealing with the guy in the booth. I don't use it for small purchases nor even restaurant meals unless they cost over $25.

WillTravel,
I had some difficulty in Germany last year using my credit card when shopping. Some stores would only accept 'EC' cards which I believe is a type of debit card. These were not even small shops, but were places that were geared more toward locals rather than tourists.

LoveItaly, I haven't been to Italy yet, but what you describe is more or less what I expected based on previous experience. I've had the experience where the proprietors look quite unhappy when they see a credit card (if I had no cash, I suppose they would have agreed), and it just didn't seem worth it to force the issue.

One thing I've noticed in some hotel reviews is that when check-out time arrives, the clerk claims the machine is broken, thus requiring cash payment.

Isn't there this paradox in all this?

Personal savings [and believing in the banking/investment &quot;industry&quot;] - - unless you are simply stashing it in your mattress - - is at the heart of capital formation, and leads to the good stewardship of capital. This is the very heart and soul of <i><b>capitalism</b></i>.

So, it might seem that Americans are far less &quot;capitalist&quot; than Europeans (or Japanese, or a number of other nations where personal savings percentages are much higher).

Indeed, perhaps the US is actually less &quot;capitalist&quot; than even intensely (maybe even fundamentalist) Islamic countries - - where it is alleged that there is hatred for the &quot;pro-democracy, capitalist&quot; American system of values, lifestyles and freedoms.

So, this argues that it is &quot;consumerism&quot;, not &quot;capitalism&quot; that is at the center of the hatred. Particularly to the extent that there is such an insidious and pervasive (one might say successful?) &quot;crusade&quot; to import &quot;it&quot; (consumerism) to all corners of the globe.

Of course, maybe I am engaging in armchair don't-know-what-i'm-talking-about global political/economic analysis(/babble?)

Best wishes,

Rex

Rex: Thoughtful comments. I have composed and re-composed my reply to you and everything I started to say I scrapped. Partly out of diffidence: my 2 economics-prof brothers would hoot with derision at my amateur hypothesizing.

My bottom line is that I suspect you are right to this degree: There are many people in US society who are not &quot;part of&quot; capitalism (or any other ism) at all -- except to the extent that they are victims and dupes of its marketing.

BTW: Canadians are prudent -- we save around 5-7% of income I believe. Below Europeans but way above Americans. This may have gone down in recent years

Rex, Islamic countries have issues relating to prohibition of interest. There are various ways of varying effectiveness to sort of work around it within the framework of Islamic law. I'm not sure what secular countries like Turkey do, but I suspect they may not abide by this. I'm actually interested to find out now, though.

I'm sure you're aware of how prohibition of interest, then limited exceptions to prohibition of interest, followed by removals of the prohibition, affected development of capitalism in Europe. (The Merchant of Venice touches on these points.)

If there isn't an efficient mechanism for lending money at interest for business ventures (not necessarily consumer goods), I don't think there can be capitalism. So your hypothesis is intriguing, but needs some fleshing out.