Monday, July 21, 2008
Last week, for the first time, the average American woke up to the fact that our economy is in trouble.
Despite Bernanke and Paulson's pep talks, despite the happy talk by the talking heads, despite the cooked earnings reports desperately being put out by the banks and others, last week people still got - on a gut level - that the economy is in mortal danger.
The failure of IndyMac and the fact that Freddie and Fannie are on the ropes are what finally woke people up. The cracks in our financial system have become so big that the crew trying to maintain the facade simply can't paint over them any more.
Everyone I talk with - from the construction manager, to the baker, to the lawyer, to the doctor - are now all are in a holding pattern . . . They're all just waiting to see what happens with the economy.
None of them are making big purchases, or starting new ventures, or jumping into new investments. All of them know that there are big problems with the U.S. economy, but are hoping that it turns around.
So what? Who cares what the people I'm talking to are doing?
Because the same thing is happening all over the U.S. That means that the economy is quickly freezing up. And that means a depress . . . er, a very severe recession.
And everyone you're talking with is saying the same thing, right? (That's probably why you're reading this . . . you already know its true from your own experience).
As Reuters puts it:
"The nightmare scenario for U.S. economic authorities is here: confidence in their ability to rescue the country from a housing-led financial panic is now at its lowest level since the crisis began.Last week was a huge turning point, when the average American could no longer be tricked by the fast-talking ponzi scheme salesmen. Last week was the week that America woke up to the economic crisis we've been facing for a long time.
This means losses for investors, already totaling nearly half a trillion dollars, could mount even further over the next few months, with implications for business investment and the overall health of the economy.
***Saturated with bad news, investors appear to have thrown in the towel. As they do this, the risks that both consumers and businesses will face further retrenchment at the same time is growing."
On a positive note, everyone I speak with now finally understands that the war in Iraq is a large part of why our economy is sinking like a stone. And see this. Once they get that, the pressure to get us out of Iraq will become very strong. Hopefully, the economic crash will help wake people up in other areas as well.