Notes on the Global Financial Crisis

829 Words3 Pages
1. The global financial crisis did not reduce my income, but I think that if I did see reduced income, I would either cut back on discretionary purchases or I would buy cheaper brands. Certainly with things that I have to buy, like food or toiletries, cheaper brands are usually purchased. This contrasts with products that are completely discretionary, where my consumption might be severely curtailed or cut back entirely. The reason for this is simple. When there is less money to go around, and there is a decreased optimism about future income, one must align purchases with the financial situation. Using debt to maintain spending levels is a bad idea when there is an economic crisis that reduces one's expectation of future income. Thus my own spending habits do change when my income levels go up or down, and the same is true for most people, so that in an economic crisis more people are reducing their spending than are increasing it. 2. I believe that many luxury brands will escape the economic crisis without seeing much decline in sales. Global luxury brands like LVMH and Tiffany did not see sales declines (Perocchi, 2011), and this in large part because their customer bases have not experienced the downturn, which mostly affected people in the lower middle classes (Kirkup, 2010). In addition, these brands are often globally diversified, so a slump in sales in one region can be offset by gains in other regions that are less affected by the crisis. As such, those global
Open Document