You CAN'T force people to spend!!!!! $600 is NOT enough!
What if you owned a business and wasn't sure you were going to have any customers tomorrow? What if you were an employee and wondered whether your turn was next on the chopping block? What if you saw your assets, your perceived wealth,... crashing in value? If you own a home, or shopping center, or office building, or bonds....or even stocks over the past year....your assets are likely falling in value....and materially. Coupled with your assets falling in value, what if everything you spend money on was going up in price?
You think you would cut back spending?
Auto sales tanking in June. Fewer booking airline tickets. Fewer shipping goods. FedEX is even affected. How are June's retail sales? Restaurants are begging for customers. The problem is the problem is getting worse....income is going down and debt is going up!!! How do we stop this downward spiral?
WHAT IF EVERYONE CUT BACK SPENDING AT THE SAME TIME?????
More evidence of a dramatic June slowing??????
From the LA Times:
“With gasoline prices racing to new highs weekly, it’s crunch time for many gyms. Consumers looking to tighten their belts are giving up on tightening their buns in gyms, yoga classes and personal training sessions. Instead, they’re exercising the old-fashioned way: sweating for free at the beach, parks or on the street.”
“‘I know it’s next to nothing, but when you’re a starving artist, every little bit counts,’ said Ashley Brooke Moore, an aspiring dancer and actress in her 20s who canceled her $36-a-month membership at Bally’s about eight months ago. She then signed up for yoga classes, but when that got too expensive, she quit those and started going to free yoga classes at Runyon Canyon Park.”
“Money is tight because the catering company she moonlights for hasn’t been doing many jobs recently. ‘Everything’s a little bit slower, and gas prices are ridiculous,’ she said.”
Remember as spending slows. Revenues slow. Income slows. Taxes Slow. State officials are commenting that they have never seen anything like this before.
And tonight, AMBAC and MBIA downgraded? You think they were downgraded because their paper is strong? Trillions in counterparty obligations to be cut in value? If banks' balance sheets weren't bad enough from defaulting debts.
How many straws can the camel take?
Now that we know about the problem, aside from a good bloody mary, what can we do about it?