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November 12, 2008

The Consumer Spending Slowdown Is NOT Because Of Credit

-- by Dave Johnson

On The NewsHour today Alice Rivlin said that we need to free up the credit markets so people can buy cars. She said there are "credit-worthy" people waiting to buy cars and trucks who can't because they can't get loans.

Then, on the NBC News tonite the reporter said, "Without access to credit, shoppers are tightening their purse-strings."

This is just wrong, and these are people who move in in important policy and reporting circles who should know what is going on! It tells me that rest of the people in these circles also don't get it.

The credit crunch is not the consumer spending slowdown. Big companies are having trouble getting credit. But if you go to a car dealer tomorrow to buy a car, and have an income and good credit, they will bow down and kiss your feet. If you can't find a loan (if you have an income and good credit you CAN find a loan) the manager will loan you the money out of his or her own pocket. It is PREPOSTEROUS to suggest that people with incomes and good credit can't get loans, and that this is why people are not shopping up a storm!

The consumer spending problem is that consumers are "tapped out." Incomes have stagnated for decades, consumers have used up their savings and then resorted to second mortgages and credit cards.

Decades of predatory capitalism have sucked the average working person dry. That is the consumer spending problem. That policymakers and reporters don't know that tells a sad story about how this has come to pass.

Limit executive pay and use the money to hire more people for fewer hours, pay them more, give them health insurance and let people start unions if you want to see consumer spending recover. That's not rocket science.

Posted by Dave Johnson at November 12, 2008 6:24 PM


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