Wall Street just woke up to the fact that the US consumer is done consuming. The latest bad news is not people defaulting on their mortgages, it is people defaulting on their consuming.
The central fact is this: Consumers in the real economy are coming to the end of their capacities to keep spending. They can't take on any more debt.
Robert Reich has his take on why the Dow is dropping as much as it is...
Many interpret it to mean that the stock market is finally reacting to the credit crisis. A more accurate assessment is that it's finally catching up to the consumer crisis.
That's right ladies and gentlemen we, the consumer, can no longer consume. We just can't afford it. We are paying for health care, food, gas, heat and all the other stuff life entails. We can't afford a new IPod, a new HDTV, a new cell phone(I haven't renewed my every two because I can't afford a new phone with Verizon), a new car. We just can't afford it.
For years and years we watched our wages stay stagnant in this country and we used our credit cards to buy things we wanted. We can no longer afford it. And it doesn't help that the credit card companies are doubling the minimum payment, this diary touches on that.
We need to put money into the hands of the middle class, the middle class is the engine that drives the economy.
We need to cut payroll taxes immediately.
Freeing up some credit in hopes that the middle class will borrow some more is a joke.
We need more money!!
Not more Credit!!
Reich concludes...
Yes, we need better regulation of Wall Street in order to avoid the sort of bubbles and distrust that have generated a credit crisis. But even more than that, we need to get money back into the pockets of average American consumers -- including major investments in infrastructure, affordable health care, and a more progressive tax code.
If Barack Obama really wants to make the next debate a memorable one he proposes a payroll tax cut, the first thing out of his mouth after thanking everyone for hosting the debate should be I would cut your payroll tax immediately, and put 30 percent more of your income in your pocket America.