December is filled with magical holiday events - office parties, family gatherings, concerts, annual correspondence with friends, decorating and festive reminiscences of years gone by.
          But for those of us focused on money, the most important event is shopping.
          Buying presents, flying cross-country to visit relatives, having special dinners and parties: Consumers spend more money in the three months before the new year than at any other time of the year. In fact, retailers often make about half of their annual profit during this time, according to the National Retail Federation.
          Deloitte LLP recently published its 2009 Annual Holiday Survey, which gauges consumers' expectations about the year-end holidays, the economic climate, and related spending and purchase patterns. A total of $810 billion is expected to be spent this year on holiday-related items. The full report may be found at Deloitte.com
          The average consumer will spend $1,145 on items associated with the holidays. About $452 of that will go to gifts, $102 to decorations and holiday home furnishings, $243 for socializing away from home, $201 for entertaining at home and $147 for clothing.
          The U.S. Bureau of Labor Statistics reports average consumer income to be $63,500. Holiday spending is about 2 percent of the average consumer's annual expenditures.
The National Retail Federation also publishes an annual report on holiday retail sales. The report is online at nrf.com.
          At the risk of feeding festive domestic discussions regarding comparative spending habits, or for possible personal comparison, the NRF is expecting the following expenditure levels in these categories: gifts for family, $387; for friends, $67; for co-workers, $19; other gifts, $35; decorations, $41; greeting cards, $27; candy and food, $90; and flowers, $17.
          However, it's not just the amount of money spent that makes for a robust economy; it's how fast it moves. Or in this case, it's not just the one-time expenditure made by a single consumer purchasing a fruitcake that fuels the economy; it's where those dollars go after that transaction that creates the multiplier effect.
          Re-spending, not simply spending is what propels economic stimulation. As the money moves along the commerce chain, part of it will be retained by the recipient, and part of it will be re-spent by the next person or entity, multiplying the money's original effect.
          For example, if there is an 80 percent re-spend rate, of the $27 you pay for a box of greeting cards, the retailer from whom you bought cards will pay $21.60 to the distributor, who will pay $17.28 to the wholesaler, who then sends $13.82 to the printing company, which then pays $11.06 to paper manufacturers, and on and on.
          Thus a single purchase of a $27 box of greeting cards is "multiplied" into more than $106 of monetary activity. That's economic stimulus - with one very important caveat. The re-spend rate must be maintained throughout the chain.
          What can alter the re-spend rate in this series of transactions? Financial intermediaries, which are people or institutions between the producer and consumer that don't directly provide proportional value. They're brokers, processing agents, consolidators, re-sellers, arbitrage players, credit-card companies, the private label in front of the credit-card companies, retail lenders, wholesale lenders, pipeline financing structures underneath lenders, insurance companies, etc.
          If borrowed money is involved, there are intermediaries. Too many intermediaries sabotage the positive effect of the multiplier.
          It follows then that any activity, from government stimulus spending to our own $810 billion holiday extravaganza, will be most effective when it avoids intermediaries that don't contribute to the authentic production of good and services. In other words, give your holiday money to those who will pass it on.
          One key to making this year's holiday spending truly stimulating is to spend without intermediaries. Past wisdom supported some borrowing for holiday spending. After all, it did place money into the financial systems through the multiplier. Today we know this is a fragile assertion. Too many parasitical intermediaries siphon off the process.
          This year, the lasting positive effect of holiday spending may be not so much in how much is purchased, but what is purchased and how.
          The less involvement by financial intermediaries, the greater our own personal holiday economic-stimulus package will be.