Foreclosures, bank failures, layoffs and bailouts may dominate the headlines. But the decisions that will make or break the economy won't be made on Wall Street but on your street, where American consumers contribute 70 cents of every dollar spent in the U.S. economy........ Of course spending hasn't stopped. People may even indulge their tastes for luxury, Rist said, but where and how they spend has changed. Instead of dinner at a fine restaurant, they might cook a candlelit dinner at home. Or if they shop for a couch, they'll do more research and perhaps even spend more, to buy a quality product for the reassurance of value.
Rist said impulse buying and conspicuous consumption are out - at least for now.
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/10/05/MNAM13B0M4.DTL&type=printable
Nathan also wanted to know if the US needed loans from foreign governments to finance the splurge and our ongoing budget deficits. And he wondered if America's government was still AAA credit. I've been wondering that myself. But it was eye opening to be asked that from a journalist from one of America's strongest allies. If the Israelis are wondering if our country's credit is any good, what are the Chinese and the Sultans thinking? http://seekingalpha.com/article/98560-america-needs-a-turnaround-plan?source=headline1
Will the rescue plan now pending in Congress solve the crisis? "My answer is no," Eichengreen said. "It is best seen as a holding action. We have had a year of holding actions so far where the Federal Reserve has flooded the markets with liquidity and that hasn't solved the problem. The credit markets have shut down. The commercial paper market has imploded; inner bank markets have disappeared; companies are meeting their payrolls by charging their credit cards ... Maybe TARP (troubled asset rescue plan) gives Treasury the wiggle room to surreptitiously do what is necessary - recapitalize the banking system by paying too much. It would be better to be up front about what they're doing. I think there will have to be a Plan B." http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/10/03/BUFU13AJK4.DTL&type=printable
