Why The Economy Will Get Worse
November 14, 2008 / 11:27 am • By Dr. Melissa ClouthierI’m just full of joi de vivre. The economy will get worse. It just makes sense. Car companies are in long term trouble because people can drive older used cars. Retailers are in long term trouble because people can buy cute enough clothes at Wal-Mart and Target. The housing market won’t rebound for a while because people are already in more house than they need.
And as all these businesses constrict, people will lose jobs because their employers can’t pay them.
Everyone, lenders, businesses and individuals are holding onto cash and paying down debt. Why? Because the rate of return for paying off the debt is greater than the market. The market will hurt for a while. Maybe.
The New York Times has an article about the economy:
But even as worry about gas prices fades, it is being replaced by fear about the broader economy. Each 10-cent drop in gasoline prices puts $12 billion a year back in consumers’ pockets. Instead of spending that cash, people are trying to save it or cut their debt, many said in interviews.
“All that money is going right into paying off my credit cards,” said Jose Martinez, 33, as he pumped gas into his Dodge Charger at Ohio Gas Station No. 1 in Cleveland.
Moreover, the fall in gasoline prices is not translating into improved fortunes for automakers, at least not yet. Consumers said they remained wary of gas-guzzling cars on the theory that prices would rise again.
Can you blame consumers for battening down the hatches after all the fear talk? On the other hand, it’s not really so awful that Americans might be getting back to more reasonable spending. However, as people lose jobs, they’ll live on credit cards deepening the crisis.
And it’s a worldwide phenomenon, lest the Germans engage in too much schadenfreude.
Cross-posted at RightWingNews and the Houston Chronicle
3 Responses to “Why The Economy Will Get Worse”
November 14 2008 / 12:40 pm
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I wonder if that’s so bad. People have been living beyond their means for years, maybe it’s time to wake-up. It might take 2 or 3 years for this cycle but I’m sure we’ll be fine. I don’t think we need any more so called goverenment help.
November 14 2008 / 3:38 pm
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Yes, totally agree that economy will get worse. This is probably necessary since we are totally living beyond our means, and we can’t continue to use our home “equity” to prop up the economy. Our government is trying to prevent the inevitable. Just hope we don’t end up having the lost decade like Japan.
December 12 2008 / 9:31 am
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excellent ,Thanks for the post