An Economy in Freefall
I have been following the grim news of the failing economy as reported in the newspaper and on the news. But it was only in the last couple of days that I started to sense it just about everywhere I went.A couple of days ago I saw a sign at Pentagon City announcing that Linens & Things was going out of business. Yesterday when I took the old Volvo in to be serviced, they said they had worked on only two cars the previous day. Today as I shopped at Bed Bath & Beyond, REI, Ann Taylor Loft, and even Safeway, I was virtually the only customer. These stores were fully stocked for the impending Christmas shopping spree that just may not happen this year.
Today we are going to Detroit for our niece’s wedding. It will soon be a city of unheard of unemployment if the auto industries are allowed to fail. I am sure we will sense the fear that hangs over the city.
The only good news is gas prices are plummeting. My Volvo mechanic reported gas at $1.75 a gallon in Prince William County. Isn't that the same gas we were paying more than $4 a gallon for just a few months ago? I would like to understand what’s really driving the price of gas. I would worry that people will be rushing out to buy SUV’s once again, but no one is buying cars of any sort right now.
At this point I am not so much afraid for myself and my family, but I am afraid for society as a whole because we have just seen the tip of the iceberg of what’s to come. Hopefully we will come out of this downturn with an economy that has new regulations to prevent such a disaster in the future. But it’s going to be a long time before we can feel good about the economy of our country and of the world.
posted by Barbara at 7:59 AM
9 Comments:
maybe the stores would be busier and people if would be going about their business if we all didn't read the paper and listen to the tv and radio? Could part of the problem is hearing how bad of a problem it is so it is becoming a self fulfilling prophesy?
People hear the bad news get scared stop spending and then voila! downturn in businesses which lead to layoffs, and business failure?
I bought boots yesterday...they were 1/2 price though. It was for the economy...well rather it was for keeping the feet warm for the all day outside in february wedding that my crazy son has planned!
I've been spending money like it's my job. I can only hope it helps.
I'll present a few flip sides:
1. Every time we've had an economic downturn, it was followed by an upturn. Smart folks are out there buying up assets (whether they be stocks, houses, or barrels of oils) pretty cheap right now.
2. Consumers finally stopped spending money they don't have. I don't know what it took, but for decades, consumers piled up credit card debt, bought houses they could not afford, watched those tv commercials and bought those expensive sneakers, expensive Starbucks lattes, etc. when they couldn't afford it. If it takes this kind of economic shock to get people back to sensible, even thrifty, household spending, that's a good thing for the country long term.
3. We're going to get some sensible government regulation of big business. The experiment of deregulation (meaning no regulation) and letting big businesses "regulate themselves" has been tried twice (under Ronald Reagan and now George W. Bush), and has been exposed as a cruel joke. Now the argument isn't regulation of business vs. no regulation, it's over how much regulation we should re-establish.
4. Cheaper gasoline prices may be enjoyable, but the steep decline is a dangerous symptom of deflation and a complete halt of all kinds of economic activity. Plus, the steep price declines may decrease pressure to come up with alternative energy sources and more energy-efficient cars and products, and that's a poor tradeoff.
I am starting to feel the effects of all this as well. Our school is currently on a spending freeze and the program I teach through at Fordham just folded (more details on that in the future).
I hear Mayor Bloomberg saying that NYC has no money. Where does that leave city employees like me? We will always need teachers, right?
They will always need teachers, but the economy can get bad or worse and we will have to flow with it. My dad has stories of when school districts didn't have enough money to pay teachers, so they issued script, which, though, worth less, allowed them to bargain with stores and such. I was listening to an older gentleman on a talk show talk about the depression and how the banks were closed for THREE MONTHS. Can you imagine what would happen if the banks were closed for three months and you couldn't cash a check, make a mortgage payment or use your bank-owned debit card?
But, because the world DOES revolve around me, I'm sure that as soon as we buy our new house, there will be an upturn in the economy and housing prices will raise again. Sorry if it's taking us so long!
Gas prices are low here too, but I still drive as little as possible, needing the money I would have spent on gas to buy groceries. Christmas will be reduced to small gifts for the grandkids and letters of love to the rest of the family (which is fine with all of us). If I cannot find a job to replace the summer one I lost to the economic downturn, I will not be able to pay my bills for the two and a half months I will be without a check. I will hoard every penny I can between now and June but I'll still be short. I don't think not paying attention to the dismal economic news will make everything okay; I am cutting my already austere budget and looking for ways to make do or do without so that if things really get much worse, I will still be able to manage.
Media Concepts makes very valid points. Here are a few more:
Unless we return to scrupulous regulation of our financial sectors, we face more problems in the long run.
We have also allowed corporations too much latitude, with the idea that increasing profits would help our country. Most of those corporations threw ethics to the four winds, grew enamored of the bottom line and now ship jobs overseas. Corporate and business leaders need to be held accountable for this strategy as well as their tendency to swell the pockets of CEOs with fat bonuses.
Consumers need to be held accountable for relying too often on credit, not saving enough and spending more than they earn. Our grandparents or others who survived in the Depression did so because they set priorities, worked and paid things off.
As a nation, we need to look at our habits, individually and collectively, and understand the difference between "wanting" and "needing." Too many of us equate frugality with cheapness or poverty when it can make people wealthy in terms of time, money and the ability to live life on their own terms, according to priorities not defined by "stuff."
We also need to examine and re-vamp our retirement system so that 401k's and other savings vehicles can be at least somewhat buffeted by volitile market swings.
And, we need to look at our priorities. We have become consumers rather than producers.
Our transportation systems, bridges, roads and many other things in this country need to be overhauled and we should have the means to get around without relying completely on gas guzzling cars. This would help green the planet and make our cities more liveable for everyone.
We also need to accept responsibility for electing politicians who have allowed these things to occur and get rid of those who do not serve the needs of everyone. That means keeping track of how they vote, writing or calling or e-mailing when we want something or don't and not settling for poor answers or none.
IE-Why have predatory lending practices been overlooked?
Also, why do we want to give money to automakers who have consistently shown poor thinking and bad business models?
I could go on, but I think that's more than enough for now...
Everyone -- Thanks for the insightful comments. I will respond to them when I get home from Detroit. A lot to think about...
I tend to go with the philosophy that all is cyclical - and so is this current downturn ... I remember the long car lines at gas stations in the 70's and all the talk about alternative energies.
I remember the extreme wealth boom of the Reagan years and silicon valley / dot.coms.
I lost my job when the Gulf War started - as I was in the construction sector and virtually all building came to a halt - governmental and otherwise.
With the stock market crash in the mid 1990's we lost half of our entire investments - all the money we had hoarded by living in a foreign company while an oil company paid for all expenses.
Easy come, easy go? I'm with Pauline, however - I'm being prudent with my funds. Asking myself if I truly need whatever item I am contemplating .....I was planning on purchasing a new, smaller car. But, now I think it might be best to pay for the cheaper repairs and get another 100,000 miles on the engine.
Moving house helps a lot - you realize how much money (or I've realized) how much money I have wasted on 'stuff.' Stuff i don't need ... stuff that fills up space. I'm looking forward to paring down, though it is a concept my children are having trouble grasping at the moment.
If my situation were different, I would have packed one suitcase; locked the front door of the house; and never looked back.
In the end, it all is the detritus of a certain lifestyle that eventually tanked - much like the economy.
My weakness, however, are books - and i've already trimmed back half a library full .... sigh.
Have a wonderful trip to Michigan!
xxx
rdm
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