The Collapse of Consumption?

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Deeply embedded in the core of the American economy are automobile economics and automobile culture.
Showroom visits by potential buyers are down 50% this month as compared to last year, and sales of new automobiles by General Motors, Ford, Toyota, and other dealers are down by 33% on average when compared to last year.
On some levels, this could have positive effects. America needs to figure out a way to secure happiness and a high quality of life without manic consumption — but these consumption drops are probably going to reverberate throughout the economy.
And this has almost nothing to do with the bailout proposal that will be voted on in the U.S. Senate tonight. I do acknowledge that many regular consumers can’t secure loans to buy new vehicles in this climate — but there is something more substantial at play here.
This is about consumer confidence — the absence of it.
We have moved from a turbo-charged, just in time money economy where Americans used to feel that they could secure just in time cash and just in time jobs — where they trusted the system — to a high fear economy where folks change behavior. Watch for savings rates to start to shoot up.
People will begin saving like crazy because they think their future is full of risk.
— Steve Clemons

Comments

37 comments on “The Collapse of Consumption?

  1. Sweetness says:

    Thanks. I see you’re point and will check out Planning.

    Reply

  2. rich says:

    I’m saying honest cost/benefit analysis is leads municipalities and now businesses to invest in transit, healthier neighborhoods and denser cities. And that it doesn’t take an dogmatic free marketeer to realize this. So much so, that even businessmen (Salt Lake City) are insisting that progressive investment in infrastructure like light rail has become the norm in many places. In the past, you’d hear conservative sectors refuse, adamantly claiming that highways and sprawl are the only route to prosperity. That’s not really the market so much as political pressure to commit good governance.
    YOu should check out the current issue of Planning magazine. Balanced article on infrastructure there.

    Reply

  3. Sweetness says:

    Okay, “no market freak,” even if I’m not sure what that means.
    But it does kinda sorta sound like you’re saying “the market” is
    moving many municipalities in a certain direction.
    I mean…
    “Salt Lake City built light rail because its Chamber of Commerce
    and business community forced the issue. SLC knew they’d never
    be able to compete with other western cities—Denver,
    Portland, etc., unless it could offer efficient, world-class
    transportation. ”
    …what is this but the market impelling the SLC CC to force the
    issue so they could “compete” with other Western cities?
    Anyway, I’m not going to belabor this any more. Needless to say,
    I’m happy you’re reporting that the general tide is turning in the
    right/good direction.

    Reply

  4. rich says:

    Sweetness,
    I’m not a market freak.
    I’d suggest that DC’s inability to turn the ship of state around any faster than you can turn an aircraft carrier is no indicator of the speed other municipalities are capturing economic and ecological efficiencies. Call it the bureaucratic excesses of the center of empire.
    So opportunists have outcompeted those who can’t make a difficult but necessary political decision. Partly that’s a function of rapid growth in DC-VA-MD. But that metro area is well-aware of solutions and has been implementing them. Not much sympathy commuters to McLean, VA or other exurbs. Sprawl brings traffic, and you can’t build your way out of that with more highways. Point is, those metropolitan areas will bear the costs of those mistakes. Other regions will eliminate those capital expenses (& time, congestion, etc.) while capturing economic gains.

    Reply

  5. Sweetness says:

    Rich, this is your area, so I accept what you say.
    The “market,” in effect, is working and those who don’t get
    onboard will sink like a stone, you say.
    I’m not sure, though, this is accords with my, admittedly
    layman’s and inconstant read, on this group of issues.
    Here in the DC metro area, there’s been talk and wrangling over
    building an extension of the metro subway system to Dulles.
    Probably for over a DECADE. And we are choking on traffic. Still
    no earth has been overturned.
    As travel around the area, there seems to be little abatement in
    the building of “corn rows” of large, ugly homes built on
    denuded former farm fields.
    I think, though I’m not sure, we’re still in a pitched battle over
    whether to widen Rte 66 going West to, of course, accommodate
    the increasing traffic to these exurbs (if that’s the right term).
    On the other side of things, we do have painted in bike lanes all
    over the place. There is light rail in Baltimore, but no real talk of
    it here, though we do have a fairly robust (natural gas-powered)
    bus system.
    I have to say, though, that even here in Arlington, in the nearest
    of near suburbs (I can get to parts of DC faster than some DC
    residents) one sees a lot of cars with one person in them and the
    buses aren’t full, except in the poor neighborhoods.

    Reply

  6. rich says:

    questions,
    Changed attitudes are not just ‘already happening’, but implementation has been accelerating over the past three or so years.
    Some will never get on board, but I don’t really need to “move people’s thinking and feeling in the right direction.” They’re already there; those that aren’t will find currents of history and cultural tides overtaking them.
    People already share many of the same values, but disagree on how to proceed, whether to change.
    How to change minds? Money. Faith. Community. Cool Gadgets. Green Grass and High Tides Forever. 😉 Seriously, though, there’s great enthusiasm for authentic solutions where people have something they need to accomplish.
    One example: Note which cities are building light rail systems for the past 5 or so years. Does Dallas, Houston, Salt Lake City, Minneapolis really “need” light rail? Well, yes. But not if we accept your take on/ perception of stick-in-the-mud thinking. These cities didn’t move ahead of the suburban /old-city do-nothing resistance to change by accident.
    Salt Lake City built light rail because its Chamber of Commerce and business community forced the issue. SLC knew they’d never be able to compete with other western cities—Denver, Portland, etc., unless it could offer efficient, world-class transportation. Businessmen were losing time in traffic. That applies to America, in spades, on the global playing field.

    Reply

  7. Sweetness says:

    Interesting discussion…
    Rich, I don’t know this area the way you do obviously, but your
    argument seems to depend on having people of good will who
    are able to “calculate” what their TRUE best interests are (rather
    than what they seem to be).
    Isn’t that assuming what you need to achieve? IOW, for every
    serious problem out there, there are reams of good logical
    solutions. The problem is always, IMO, getting folks to
    recognize them as such and adopt them. That’s the hard part.
    (And of course there are the entrenched economic interests,
    e.g., developers, who are pushing in the opposite direction.)
    So I’d be interested in hearing how you would propose to move
    people’s thinking and feeling in the “right” direction. How do
    you take/encourage them to move their thinking from here to
    there? Realistically, not just theoretically, where people adopt
    the right position because, well, it’s the right thing to do.
    Just off the top of my head, we Americans have a huge store of
    beliefs and feelings about “wide open spaces”…not getting
    fenced in…an anti-intellectual bias against the “intellectual
    cities”…even a residual longing for Jefferson’s agrarian economy
    that gets expressed in folks moving to the outer suburbs.
    It’s well known that people buy things for emotional rather than
    rational reasons (and then back up their decisions with reasons).
    So I guess I’m wondering how you work with people’s emotions
    to get them to see that the right thing is also the right thing for
    them.

    Reply

  8. kovie says:

    questions,
    Good points, but all of which have solutions, I believe.
    First, full disclosure. I grew up and lived most of my life in NYC, which has an excellent (if badly in need of maintenance) public transit system. I now live in Seattle, which has a decent one as well. And I’ve almost always lived within walking or biking distance of most shopping needs. You need a car in both places, of course (unless you’re one of those Woody Allen-type nuts who almost never leave Manhattan except when work demands it), for large purchases, going out, recreation, etc. But it’s not as essential as it is in the suburbs and beyond, or many other cities with horrible transit systems and urban layouts.
    However, none of this can’t be fixed without serious investment in transit, and changes in zoning and tax laws. The solution to transit in suburbs is a network of park and ride hubs that interconnect residential, shopping and work hubs, and nearby cities, with light rail and buses, supplemented with local bus service. And by changing zoning and tax laws, and investing in urban development, people can be encouraged to move back into, or closer to, cities.
    But I understand how, given that much of this is missing today, people have no choice but to drive, because it’s simply too hard, if not impossible, to commute by transit to work. And they move to suburbs for the reasons that you cited. So while I continue to believe that it’s a problem at the individual level, in that many people make a consious choice to drive when they could walk or take the bus, or live in places where there could more easily do this, I also believe that it’s a government issue, in the form of truly horrendous zoning and infrastructure planning over the past few decades, that encouraged sprawl over sustainable development.
    Conservative policy at work, basically, whether driven by ideology or just greed.

    Reply

  9. Tahoe Editor says:

    The U.S. democratic-capitalist model is on trial.
    No schadenfreude, please.
    This week the demands of American democracy clashed with those of American capitalism.
    And China’s premier smiled.
    http://www.guardian.co.uk/commentisfree/2008/oct/02/congress.useconomy

    Reply

  10. Ron Ron says:

    It’s over mate; capitalism that is. It’s as dead as a Dodo, and rightly so.

    Reply

  11. rich says:

    questions,
    Problem is, bedroom-community suburbs can’t cover the cost of governance, even when they’re built-out, on property taxes alone. Without a functional city center, without an actual productive economy, they can’t keep pace with costs. It’s like an arm, a leg and a butt trying to figure out why the blood’s not pumping.
    So the crying about property taxes has to be considered in the context of a suburb that refused to welcome, generate or capture revenue-generating businesses. Like they think they don’t actually need a, you know, economy.
    Refusal to cooperate is common b/c it’s easier to take political advantage than solve problems. Some realize if the solutions benefit everyone, you become a political hero pretty damn fast.

    Reply

  12. questions says:

    rich, you sound so much more positive than I feel — I hope you’re right in your outlook and I’m way off…. I haven’t seen much evidence of cooperation on budgeting, land use, or across any other conflict zone, but the shock doctrine can presumably work both for the right and the left, so a lefty shock would be something. On the other hand, it looks so far like the right won on the bailout bill….
    I’m still, glum me, not at all convinced that zoning shifts are easy to arrange — especially the kind of zoning shifts that allow multi-unit dwellings, low income/subsidized housing and all the services that need to be coupled with such shifts. People who have invested in mid distance burbs do not generally welcome apartment buildings next door, nor break ups of those pricey quarter acre or larger lots, nor sidewalks, nor shopping and small businesses run in basements….
    And as for purple curtains and the like, planned subdivisions ban such things all across the country and what is taken to be unAmerican is disobeying. Even my sort of-fairly progressive community has had issues with backyard use issues. There are communities that ban clothes lines. These bans are all put forth to keep property values up and that’s as American as you can get….

    Reply

  13. rich says:

    Re transit. These ‘conflicts’ you mention are really opportunities. In terms of funding, we have a limited dollars in the pot, and highway interests continually grab the whole kitty. That’s zero-sum, but it mis-describes the whole system and the real set of choices.
    Such conflicts disappear in any authentic functional transportation system, because we need all the options. It’s a both-and endgame, not a conflict-ridden lose-lose problem. The issue is arranging the set of transportation options so that each community and land use is well-served. That has to be driven by land-use decisions, not vice versa—which is the problem—and it’s no longer possible to ignore the fact that land use and zoning must change to make cities, suburbs and transportation infrastructure sustainable. Which at this point is an economic, competitive, and ecological imperative.

    Reply

  14. rich says:

    questions,
    That unwillingness exists, true. But it’s no match for sudden, intractable budget problems.
    Just as inner-ring suburbs declined due to that same move-further-out disinvestment strategy, so too will new suburbs flounder and fail. Actually, that’s already happening. Tastes and buying habits have already begun to shift, as have pricing.
    We’re gaining a “green sea”–a functional and authentic one–not losing superficial lawns. Fifteen years ago we ripped out not just our lawns, but the grass terrace btw street and sidewalk. Installed prairie flowers and wetland plants.
    Population projections dictate that we’ll need to increases density in central cities AND adjacent suburbs. Affordable housing will be stitched into each neighborhood, across municipal boundaries. Prices have and will increase in the urban core, but that won’t stop people from ‘traipsing back’ to the city.
    As a progressive, it’s plain that codes prohibiting purple doors, mismatched curtains and choice landscaping options are downright unAmerican. Private property rights, dontcha know.
    I disagree the ‘unwillingness’ you cite is a real obstacle. Zoning is easy to change—and those cities that refuse will be left in the dust, and will be corroded by disinvestment within 15 years. Flexibility, efficiency, creative expression, and ecological design will dictate which cities rise, and which fall. People will seek opportunity all right. But sticking with a failed model won’t capture any competitive advantages.

    Reply

  15. questions says:

    Alternatives to game theoretic conflict situations are certainly welcome in the world! And in a way, I think that social contract theory is trying to present one by unifying the sides of the conflict into one so that the conflict is deferred at some level. As much as I have disliked game theory and rational choice theory (which are bundled together in my brain), I’m not so sure that their insights can be quite so easily disposed of as I’d like. Cities are sites of conflict on every level, and the burbs were one answer to that conflict, just not a very stable answer. Transit also is a site of conflict — commuter rail vs. center city rail, bus vs rail, dedicated bus lanes vs. cars, locations of stations and bus routes and train lines for access to low income neighborhoods, numbers of seats and seat configurations on trains are an issue, cost and subsidy are an issue, paying by distance or per ride is a conflict, city vs county vs state or federal funding is an issue…. So we don’t really get away from gaming. We just change the terms of the game. I don’t think the endlessness of conflict is a reason to give up, but it’s worth noting that conflict is endemic so that we don’t stray too far into utopian solutions.
    Not sure if I’m merely rambling or actually addressing some of your post…. Let me know what you think!

    Reply

  16. WharfRat says:

    questions,
    sorry if you were made to feel misunderstood by my comment. obviously, no disrespect intended. i merely wanted to rep that book for the readers of this blog. When I suggested it presented an alternative worldview to the game theoretic one, I thought it provided an alternative way of conceiving problems outside of the conventional language of a balance between individual and community interests. A book like that gives us a vocabulary to talk with our Republican uncles (or mothers) who like their suburban lifestyles and have two big fears: blacks (unspoken) and taxes (constantly bemoaned). If we look at a problem from the Progressive standpoint (as opposed to the Liberal one), then it isn’t actually a problem of making government balance individual and community goods (a conversation, you rightly note, that is unlikely to produce any movement in the unpersuaded). The Progressive standpoint says, “Look, the suburbs suffer when urban spaces suffer.” It says, “Your stocks plunged because of a decade of economic policy that only took account of the experience of the wealthy half the population.” It’s not confrontational, and doesn’t suggest to people that they must give up something, or change their values or priorities. I find that it tends to create healthier conversations, and saner solutions.

    Reply

  17. questions says:

    Again, I agree with you except around the edges — changing zoning isn’t easy — encouraging mixed used development, higher density, the right to park several cars out front, to have mismatched curtains, a purple front door, sidewalks… I don’t see its happening in many many suburban areas. I don’t see developers’ being willing to give up tax breaks on land use, I don’t see burb governments’ not trying to subsidize road and sewer building…. And I really don’t see Americans’ giving up on the green sea. I’d like it if people were to do so, BUT, then city costs would jump and lower income people would be exiled to the burbs w/o transit…. So really, we need added suburban density more than we need everyone to traipse back to downtown. Not gonna happen, in my view, without pretty massive economic depression — take in borders to meet payments kind of depression.

    Reply

  18. rich says:

    questions,
    Relax, I’m not assigning you a position.
    The required zoning changes are not difficult. Improved transit is easy where cities have that power. Regional shifts in power won’t be easy—as long as selfishness and provincial thinking rules the day.
    Yes, cities need to be greener, more attractive places to live—that’s what I do for a living—but suburbs consistently lack those same features. In fact, the ” ‘pricey’ amenities” you cite aren’t costly at all, but revenue generators. The suburban features you mention impose a very high price tag, and only ‘outcompete’ if those costs don’t matter. You cite income, but you can earn the same salary and live in the city. If you want more roads—a sin—then I guess suburbs are fine. The lack of diversity, vast parking lots, etc. are all drawbacks. The ambience of security belies the facts–suburbs are not safer than cities.
    Zoning and permitting processes have to be streamlined. But those suburban amenities are possible only because of a refusal to invest in existing communities. Disinvestment sucks the tax base into the suburbs, which benefit from high-income urban jobs but don’t pay back into the same system of governance. All depends on which city, of course.
    Ending highway subsidies is an across-the-board requirement, and recalibrating transportation funding to emphasize urban transit is necessary not simply to deal with congestion, but to meet economic and environmental imperatives as well.
    When Turkey, Morocco and Vietnam have high-speed rail, but America doesn’t, just who’s a Third World country is open to question. But then, we haven’t been outcompeting global rivals for a couple decades.

    Reply

  19. questions says:

    Rich and WharfRat, somehow I feel misunderstood — I’m urban but I know many many people who feel deeply uncomfortable with urban life. I’m not defending “rational, utility maximizing actors” — in fact, I don’t think they are really rational or really utility-maximizing. I think, rather, they see themselves this way because of the incentive and fear system we live in (for Hobbes, by the way, these are twinned emotions). And in terms of benefiting all to benefit each, I absolutely agree — but this message doesn’t play well for many people who really have a deep attachment to their own and not to others. (Check out the Republican uncle in your family and see what really worries him….)
    What I tend to think needs to happen is a wholesale shift in zoning and transit and subsidies. But moving political power from the soccer-burbs to the stick-ball city isn’t going to happen without a huge push. Obama is probably part of the push, but only part.
    Cities need to be inviting places, clean, easy to navigate, loaded with pricey amenties like schools and recreation, places to stick kids much of the day, and so on. But the burbs can out-compete on income, school quality, road building, low density, shopping, frequent lack of diversity, places to park mini vans, quiet, an ambience of security, soccer fields….. If these kinds of qualities matter less, OR if zoning and subsidies change so that developers no longer find it cheap cheap cheap to build out, then we’ll do things differently. Gas prices will contribute to in-migration as will the real estate bust, and maybe the dying off of the baby boom will help, but there are still strong out-migration forces.
    But I tend to think that there’s an intense fantasy of a zone of no death that makes suburban living very attractive. And this fantasy is primal and therfore hard to beat.

    Reply

  20. rich says:

    WharfRat,
    Thx for the rec; I haven’t read Place Matters yet. Will check it out.
    I’ll return the favor by recommending Timothy Beatley’s Native to Nowhere.
    Anyone interested in creating cities as distinct and healthy places, where people belong and can positively impact the world around, will find Beatley’s work indispensable.

    Reply

  21. Bill says:

    Maybe if we stop buying, we’ll – finally – start dancing.

    Reply

  22. WharfRat says:

    rich and questions,
    there’s a great book put out on University of Kansas press a couple of years ago. It’s called “Place Matters” by Peter Dreier, John Mollenkopf, and Todd Swanstrom that lays out a progressive urban policy agenda. I don’t have my copy with me here in Mexico, but I highly recommend it to all readers (and authors) of this blog. The book is practically a roadmap for local policy practitioners on what needs to be done to right the sinking ship of state. What I particularly like about it is that it couches things in different terms than the (I think) silly game theory problematic, wherein it is assumed that individuals are rational, utility-maximizing actors that need a changed incentive structure. Rather, as I recall, the book does a great job of demonstrating that the policy proposals aren’t actually sacrifices of the individual for the common good, but rather suggests that the only way to protect the individual good is to ensure that everyone in society benefits from prosperity.

    Reply

  23. rich says:

    questions,
    It’s an unwillingness and a refusal to fix the central cities and urban infrastructure that we already have. The feeling it can’t be fixed is just a cop-out. Like you can ever actually buy into a new community.
    The added costs you list are factors that kill cities, so dont’ figure into the equation here. Paying for the “cost of private schools” is, again, a refusal to fix public schools. That’s a matter of choice–whereas people have to live and work–and it’s also another cop-out. Choosing to walk away from the common good, rather than abandoning it, is the root of the problem. Your list doesn’t re-calibrate the H + T calculation.
    The privatization of public spaces via suburbanization has has been well-studied (Kenneth Jackson, Robert Putnam, Robert Fishman, etc.), and drains the life from cities and kills the built-in security features intrinsic to healthy civic spaces. Contrary to perception, data shows suburbs and small towns are not safer than central cities.
    The “race/class undertones” you cite are no secret, but rather consist of blatant, overt discrimination structured into the FHA mortgage lending directives and zoning codes. See Sundown Towns by James Lowen for a history of the eviction–ethnic cleansing–of black Americans from towns across the south–and north. Post-WWI, why live up to American values by forming a more cohesive society across racial lines when you can move to the suburbs and suck the tax base right out of the city?
    Re “local issues” there’s no bubble to prop up. We have the tools to fix any city; always have. But there is an issue of political will, resources, and the broader willingness of individuals to contribute to solutions across metropolitan regions and in the urban core. Rather than running away from them. Driving across the city limits and into your driveway does not make you less a part of the overall problem. The region is still one urbanized organism.

    Reply

  24. questions says:

    rich,
    I don’t much disagree, but I’d say that it’s less about refusing to “fix what we already have” than it is about the feeling that it can’t be fixed.
    Note also, that it’s not just housing and transit — you have to factor in, for many at least, cost of private schools, cost of irrational anxiety, cost of escape from crowding, lack of nearby category-killer/big-box shopping….
    Privatization of recreation — backyards instead of parks and public pools, basement rec rooms instead of community centers, patios instead of porches — all of this makes the burbs feel safer and cleaner. And certainly there are race/class undertones here. Lots of scholarship on all of this, at any rate.
    The real question at this point is how do we undo what we’ve done with minimal damage. Given that zoning and transit and schools are local issues and given that rationally, propping up whatever bubble there is serves local interests, I don’t see an easy way to shift how we live. It’s supposed to be the role of government to deal with these kinds of game theoretic situations — where the whole would do better with cooperation, but individuals have an incentive to defect, so defect we do — but the Repubs have so defanged government that we cannot seem to deal with the problems.

    Reply

  25. rich says:

    questions,
    Even before the price of gas shot up, commuters who drove long distances were paying more, not less, for housing & transportation costs combined. It is about perception, and most people never factored in transportation costs in choosing to drive until housing prices drop.
    The Center for Neighborhood Technology put together an Affordability Index that indicates residing in suburbs costs more, not less, when transportation costs are factored in.
    Great mapping tool here:
    http://htaindex.cnt.org/map_tool
    You can pick your region, and click to look at maps of housing costs or housing + transportation costs. Shows suburban H + T costs are greater than 48% of household income—while city H + T costs are less than 48% of household income.
    Moving to the suburbs is about refusing to fix what we already have, that makes cities one more thing our throwaway society can abandon, trash, refuse to contribute to.
    Problem is, stretching out a city horizontally is like drawing and quartering it. Cities are efficiency tools, and you lose social capital and rupture social networks and social cohesion, and lose access to the economic efficiences and opportunities that make cities great economic engines. Killing livability really hurt cities; and the see-saw flux of residential choice is inevitable, but running away just isn’t a solution.
    And, btw, perceptions of crime are also off-base.

    Reply

  26. anIRprof says:

    Public policy implications aside, I’m kicking myself for having bought a new car in mid August — had I waited two months there’d have been some awesome deals as dealerships get desperate.

    Reply

  27. questions says:

    Kovie,
    It’s not necessarily obsession — distant burbs are often the most affordable places to live, with decent schools, low crime, physical space, well-paved streets, and a general feeling of “having made it”. Cities with transit can feel run down, scary. Neighborhood schools are underfunded and often lousy. People LEAVE cities. And when they leave, they have to go far. And then they have to commute back in.
    We need vastly different settlement patterns, different building incentives, different zoning incentives. And we need 20 or 30 years to change all of this. And we need to recognize the steep loss in property values that occurs when people make these kinds of transitions. Of course, the 16% loss we’ve just gone through is a nice start — and look how devastating that’s been. It’ll get much much worse. And I don’t know that public transit can actually connect really distant burbs to the city and one burb to another in any effective way.
    We really didn’t trust planning at all, and we need planning.

    Reply

  28. kovie says:

    I’ve owned and driven the same car for over 16 years, and barely have 65k miles on it, despite having driven it cross-country several times and commuting with it for several jobs, and having gone on many road trips. I just don’t drive it when I don’t need to, and when I do need to, I combine errands to save on gas, wear and tear and time. Forget about MPG. I’ve never understood the simply unreal number of miles that many people put on their cars, like commuting 100 miles a day, driving to the store to pick up 1 or 2 items instead of making a list, or when it’s only a few blocks away. This country is obsessed with cars and driving. It’s unreal.

    Reply

  29. Mr.Murder says:

    He didn’t fire everyone, he just closed 13 of 18 auto franchise locations in a MSA.
    There’s a silver lining to this dark cloud!

    Reply

  30. Carroll says:

    Get ready for a beer, bread and lipstick economy.

    Reply

  31. questions says:

    Hard to save money if you’ve been laid off.
    Hard to buy a car if you can’t get financing.
    Hard to build cars if no one’s buying.
    So you lose your job.
    The duct tape industry might do well — tape fixes everything!

    Reply

  32. Michael Gormly says:

    I just heard you on the radio in Sydney, Australia Mr Clemons. Well
    said! Love your blog and the comments. A small ray of sunshine in
    a bleak landscape.
    I hope others are listening.

    Reply

  33. erichwwk says:

    “And this has almost nothing to do with the bailout proposal that will be voted on in the U.S. Senate tonight.”
    Agree. I am shocked at the Senate incompetence. (If you had told me last year about Jeff Bingaman’s take on the financial crisis, I would not have believed you.)
    “I do acknowledge that many regular consumers can’t secure loans to buy new vehicles in this climate — but there is something more substantial at play here.”
    There sure is. Americans are discovering that the “wealth” created by Wall Street financial folk was illusionary. As Dean Baker has written:
    “The main cause of the economy’s weakness is not insolvent banks and lack of credit; it’s the loss of $4 trillion to $5 trillion in housing equity as a result of the bubble’s partial deflation. Families used their equity to support their consumption in the years from 2002 to 2007, as the savings rate fell to almost zero.
    With much of this equity now eliminated by the collapse of the bubble, many families can no longer sustain their levels of consumption. The main reason that banks won’t lend to these families is that they no longer have home equity to serve as collateral. It wouldn’t matter how much money the banks had, they are not going to make mortgage loans to people who have no equity.”
    The US bet the farm on the military’s ability to confiscate trillions of dollars of foreign hydrocarbon’s. It will indeed be hard to accept that we have traded a healthy population, a decent educational system, a viable transportation and communication system for a dry hole. Decisions do have consequences, and eventually REALITY, and not what can be temporarily spun as reality, matters. Ask the Russians.
    And the sad thing is, the housing bubble is just the tip of the iceberg, as Paul O’Neil reiterates what Marshall Auerbach detailed so well at the JPRI last year, about this time.

    Reply

  34. hayduke says:

    With all due respect, this idea of saving is noble, even reflects some prior experience in history.
    But as jobs are lost, which is continuing and touching all corners of America, no one in “real” America is going to have any extra money to go into savings. Have ya’ll been to the grocery store lately? And this does not even touch into the job opportunities for 50 somethings. They get $10-$12 an hour with no benefits. And this means medical.
    So maybe others can save during this stressful time. But it is not the folks I know.

    Reply

  35. Mr.Murder says:

    The largest north american steel coil producer also had no orders yesterday.
    Wonderful voodoo economics.
    Trickle down recession. Drop by drop. Businesses drop like flies.

    Reply

  36. Mr.Murder says:

    Apologies, I should have spell checked.
    The largest Chevrolet dealer in a tri state here laid off 150 maintenance and staff employees.

    Reply

  37. Mr.Murder says:

    The largest Chevrolet dealer in a tri state here laid off 150 amintenance and staff employees.
    Bush economy(or lack thereof) at work.

    Reply

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