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Economy in Shambles, Times are Tough: Oh Really?

This article was written by in Economy. 13 comments.

Yesterday, the Dow Jones Industrial Average lost 514 points, making October 22 yet another day among the top ten worst days on Wall Street. But it’s the credit crunch that we’re feeling on Main Street. Until the banks start lending to each other again, it’s difficult for small businesses and individuals to find loans necessary for their needs and other businesses are finding it difficult to raise capital. In all likelihood, we’re in a legitimate recession.

Here in the United States, our investments in stocks are down and some of us are reportedly losing jobs. We might have less extra money to play with. Foreclosures on property are rising.

But when we need food, even if we are eating out in restaurants less, we are not in danger. As always, we can walk or drive to the grocery store or the farm market. The shelves are full. Food is still plentiful in this country, and it no less affordable than it was one year ago.

There is no crisis here. Some of us might have to deal with a little less spending money, but the recent financial downturn has had little effect on our ability to survive. That’s not the case everywhere in the world, however. For example, Zimbabwe is suffering due to economic mismanagement. While Wall Street here mismanaged the financial industry and the government mismanaged regulation over the past decade or so, these issues cannot be compared to situations around the world.

Farmers are without seeds, fertiliser and fuel. Next year’s harvest is already being written off as a disaster as well…

Some Zimbabweans get by on one meal a day if they are lucky, but there is a growing sense of desperation. One consequence is that thousands of children are said to be dropping out of school to look for food… Wads of cash are needed to buy what food is available in towns…

One villager in Mashonaland West pleaded for help before it was “too late.” “If we don’t get help now, most of us are going to die. Nearly everyone here is starving.”

Back here in the United States, many lives may be uncomfortable in this recession. Keep in mind, however, that there is no food shortage and no gas shortage. Children will still receive Christmas gifts from their families this year and will not be forced to quit school in order to earn money to support their families.

Life in this country is quite good, even though it’s easy to forget that, with no help from the financial media. But looking deeper, the real story is not much different than always. I was invited to write an article for PC World Magazine about finding deals for “Black Friday.” If the economy in this country were truly in trouble, I’d either be writing about how to find food or not writing at all; comforts like internet access and magazines would be abandoned in favor of the necessities for survival.

With this in mind, I’m still investing in the United States.

Photo credit: rosemary_mcd
Zimbabwe starves as despair grows, Peter Biles, BBC News, October 23, 2008

Updated January 16, 2010 and originally published October 23, 2008.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 13 comments… read them below or add one }

avatar 1 Anonymous

Spot on. You don’t see 8 year olds running around with AK-47s in civil war, either.

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avatar 2 Anonymous

I wish Congress would tell us something that we don’t already know. They like to duck and dodge questions, tell us stuff that even true, and even come up with all of these different kind of bailout plans that they know aren’t going to work. They need to just all sit down with the largest corporation CEO and come up with a real plan to implement other than coming up with them in one day.

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avatar 3 Anonymous

I cannot agree with you more! We are so blessed in the United States and most people are STILL looking for ways to support their MORE MORE MORE lifestyles; that behavior got us ALL into this mess in the first place.

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avatar 4 Anonymous

Your comments:

“But it’s the credit crunch that we’re feeling on Main Street. Until the banks start lending to each other again, it’s difficult for small businesses and individuals to find loans necessary for their needs and other businesses are finding it difficult to raise capital. In all likelihood, we’re in a legitimate recession.”

Something to think about:

Total Bank Credit at all U.S. commercial banks at an all-time historical high of almost $10 trillion as of two weeks ago (October 8, 2008). Commercial loans are at an all-time high through October 8, consumer loans are at an all-time high through September, and even real estate loans are at an all-time high through September. Where’s the credit crisis?

See Data Here:

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avatar 5 Luke Landes

Lance: Those are compelling charts that definitely show that overall, credit, like mortgages, credit cards, and long term business loans are available. (And these charts have certainly seen a lot of press on blogs lately.)

It’s a segment of that credit, short term lending, that is feeling the crisis. Banks and companies often use commercial paper for liquidity (payrolls, etc.). Check out the month end changes for September for outstanding commercial paper. October is not looking good so far, either.

Commercial Paper Outstanding, Federal Reserve

Though you might not trust mainstream media, here’s an article from CNN (published a half hour ago) that shows that commecial short-term lending has dropped again: link

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avatar 6 Anonymous

You’re right October is not looking good so far. Thanks for the links!

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avatar 7 Anonymous

The economy has definetly softened but I still see thousands of jobs posted on employment sites.

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avatar 8 Anonymous

I agree that things aren’t as bad as they seem. While the market and real estate are down significantly, it’s creating more opportunities for investors, and it doesn’t seem like the unemployment rate has really taken a hit.

That being said, I’m glad I’m not a new graduate looking for a job right now. Even if companies aren’t firing anyone, most have definitely slowed down on the hiring.

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avatar 9 Anonymous

Flexo, I’d like to respectfully disagree.

Sure, there are lots of people in this country who can still afford to eat out. Yes, there is still food on the shelves and gas to pump. My own family is doing just fine and we’re certainly not worried about losing our home or putting food on the table. I live in the suburbs and the economic downturn, for most of us, is still pretty much a news story.

There will, by the grace of God, always be places in this world that are far worse off than America as a whole. But to not understand that this country has a large — and soon to be much larger — population of destitute citizens is either fantasy or willful ignorance.

Your entire article is written from the perspective of a comfortably middle-class perspective. There are children in this country who will receive no Christmas presents this year; people who will go hungry for lack of money for basic groceries; people who don’t have homes to return to after a hard day’s work; seniors who won’t be able to buy their medications; and people who can’t afford to put gas into cars they can’t afford to own.

Everyone today is talking about “main street.” It’s easy and so much more convenient to talk about the residents of “main street” who lost money on paper in their 401(k)s than those “side street” citizens who already lived marginalized lives.

I find it very frustrating to read pf blogger after pf blogger looking out their front window and proclaiming our country’s financial crisis to be vastly overrated. I suggest that you leave the comfort of your home and your internet access and venture into the inner city for an afternoon. Talk to someone earning minimum wage and no health insurance or a family in a shelter who just lost their home.

There is a crisis here. It remains to be seen how high on the economic ladder the financial pinch will rise and it remains to be seen how long the crisis will take to resolve. The events that led to the Great Depression did not happen overnight. Just as when the Titanic hit that iceberg, I’m sure there were plenty of middle-class citizens sitting around convinced that their great and noble vessel (the US) was simply too big to sink.

Our country’s economy has grown so incredibly bloated on literally a house of cards. We’re a nation whose wealth is tied up in a whole bunch of counterfeit paper. It’s true that we, as a nation, have a whole lot of real assets to fall back on but I think the fall will be a lot longer and a lot harder than you do.

It’s my hope that, at least for a while, the majority of our citizens — including some of our leaders — will learn to be a little more fiscally responsible. My husband lived through the Great Depression. I can assure you that he learned lessons that he has never forgotten (a large reason that our family is as financially sound as it is).

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avatar 10 Anonymous

@ Suburban Wife

While I can agree with the various circumstances that you mention, children without Christmas presents, someone earning minimum wage with no insurance, etc. I can’t agree that the current economic conditions is the sole driving factor for those circumstances.

Someone making minimum wage before the “crisis” is still making minimum wage now. It’s about taking personal responsibility. This “crisis” didn’t take away that inner city individual’s health insurance. If you are living in a shelter because you lost a house you couldn’t afford, then it is your responsibility, your signed up for the trip, it was your decision, no one forced you to take out that loan.

You are correct in stating that “this country has a large population of destitute citizens” but I would argue that the population you are referencing was destitute prior to this “crisis”.

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avatar 11 Luke Landes

Suburban Wife: Yes, my point of view begins with middle class worrying about whether I’m invested properly rather than whether I’m going to be able to afford food next week. I admit that I skipped over a very important point — that there are many people within the United States struggling financially and for whom luxuries like holiday presents are out of the question. I skipped over this fact and wrote about poor outside the United States, which was my goal for this article.

I still maintain that the credit crunch has not had a significant effect on the quality of life for citizens here. As Lance wrote above, those on the “side street” which you mentioned were on the “side street” last year, when the stock market was hitting all-time highs. Those who were comfortable a year ago are still comfortable.

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avatar 12 Anonymous

@ Flexo,

Yes, to a large degree, those who are currently marginalized are those who were already marginalized before the crash. Some of them have been marginalized for years; some their whole lives. But the ranks of the marginalized in this country will swell as a result of the economic and market conditions. It’s not an overnight reaction. The Great Depression wasn’t an overnight phenomenon either. Slipping into a Recession or a Depression takes time and getting out takes time.

Economics is a social science. It’s a guessing game. This spring the housing bubble burst and the number of foreclosures started to rise. This fall we saw the stock market stumble, fall, stumble, try to recover …. It’s not done doing what it’s going to do. I think we’re seeing the tip of the iceberg, guys. Just the tip. I think we’re seeing just the beginning of some very tough economic times.

I’ve never been a big Reaganite in that I don’t believe that wealth trickles down very effectively even in the best of time. But misery trickles down very quickly because it’s passed down through the layers of society like a hot potato. Some very large companies are announcing some very serious layoffs. Each one of those layoffs represents another family being marginalized. These are working-class people who will join the ranks of those who can’t make their mortgage, can’t buy Christmas presents. Both their non-discretionary and discretionary income are being taken out of the constant flow of consumer cash. The businesses they used to frequent will unquestionably feel the effects. Small businesses and sole-proprietors will be hurt first. If they’re lucky, they’ll only cut back on their discretionary spending but that’s unrealistic. As their business slows, they’ll order few supplies and tighten their own belts. It is a ripple effect.

Add to that belt tightening the middle class like you and me. Barring any huge disasters of a medical nature, our family is pretty high up on the food chain. Still, I’ve tightened our financial belt. My husband and I have re-considered several purchases and put them on hold — a new car, a new computer, etc. Christmas will be very small this year. My son needs new pants but I’m holding out for better sales. No vacations on the horizon and we’ve scaled back on home-improvement plans.

Together all of that belt tightenting will effect the economy.

@Lance — There’s a huge part of me that has no sympathy for most of the people caught up in this current economic mess. I’ve been angry for years over the obvious abuses in questionable mortgage and lending practices and the resultant housing bubble. My husband and I were finally able to buy my first house 5 years ago. It was tough because our area’s property values had been destroyed by incoming Californians. Still, we took the responsible route, bought 1/3 of the house we qualified for, and chose a 30-year fixed-rate VA loan. And we’ve always lived below our means and never bought anything we couldn’t afford.

If we could isolate all of the greedy, irresponsible, and unethical players in this economic mess, I’d support rounding them all up and sending them collectively to some undesirable location, like Texas. Personally, I’d like to see anyone who bought or sold an interest-only mortgage lobotomized.

My point is not that lots of the people who are hurting didn’t bring it on themselves; my point is that the American economy is in for a very rough ride and if you don’t see it, you’re not looking far enough out of your middle-class window. I’m just hoping I built my own economic house high enough on the hill and that we’re looking simply at a flood and not a tsunami.

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avatar 13 Anonymous

@ Suburban Wife
Very good points.
I especially like (and agree with): “If we could isolate all of the greedy, irresponsible, and unethical players in this economic mess, I’d support rounding them all up and sending them collectively to some undesirable location, like Texas.”

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