The central fact is this: consumers in the real economy are coming to the end of their capacities to keep spending. They can't take on any more debt. And with the costs of energy, food, and health insurance all soaring, they're doing the only thing they can. They're pulling in their belts. They're leaving the malls. They're not buying a new car or TV or anything else they can do without.
For years, regardless of the business cycle, American consumers were the Energizer Bunnies of the world economy. Their spending kept it going. But now the Energizer Bunnies have turned into scared rabbits, and they're going back into their holes.
Yes, we need better regulation of Wall Street in order to avoid the sort of bubbles and distrust that have generated a credit crisis. But even more than that, we need to get money back into the pockets of average American consumers -- including major investments in infrastructure, affordable health care, and a more progressive tax code.
Thursday, October 9, 2008
The DOW in free fall
What does it all mean? Robert Reich explains,
Subscribe to:
Post Comments (Atom)
3 comments:
"The central fact is this: consumers in the real economy are coming to the end of their capacities to keep spending. They can't take on any more debt. And with the costs of energy, food, and health insurance all soaring, they're doing the only thing they can. They're pulling in their belts. They're leaving the malls. They're not buying a new car or TV or anything else they can do without."
As far as I'm concerned this is a good thing, and about damn time. If you don't have the money to pay for it, you don't buy it. It kills me to hear all this talk about the credit market and how people aren't able to get loans. Well, maybe they shouldn't be asking for loans at this time. Seems rather simple to me.
re-posting Johnny's comment,
better regulation wouldn't have stopped what's going on. We need better regulation, but not because of what's happening now. The market is far smater and faster than Washington, and every segment has issues, but you're not going to be able to effectively regulate the market to a point where you don't have bubbles and bursts. Even the strongest regulation can't do away with bad management, which is really fundamentally why we are in the situation we are in.
Part of this is that government just doesn't want to spend the money to regulate- if you pay people 50-75k to be regulators you're going to regularly get the least sophisticated regulators who just can't keep up with the markets. If you want good regulation, and you want smart regulation you've got to be willing to pay for it. FINRA is a good start, but there's a lot more to be done.
One of the best steps that the federal government could have taken to prevent this craphole, even though they wouldn't have really prevented it, would be to federalize mortgage lending standards and to remove state level enforcement. Then there's an even playing field and no one goes from state to state to fly under the radar. I can give you more if you want :)
Johnny said,
The market is far smater and faster than Washington
I ask, did you type that with a straight face?
Look the markets and the people who work with in them will always seek maximum profit now and not concern themselves with potential long term risks when left to their own devices.
You try and separate management from the market and regulation when in fact they all work in concert. You can't say "better management would have done the trick" and pretend that regulation wouldn't be a part of that. Tougher regulations save management from their own short-term gain instincts.
Post a Comment