| | Last week, I wrote about the danger of the economy falling into a "deflationary spiral" in which layoffs -- and the fear of being hurt by the economic mess among those whose jobs are secure -- cause people to rein in spending, which causes the supply of just about everything to outstrip demand, which leads to lower prices, which hurts firms' profits, which leads to even more layoffs and even greater insecurity (see the story below). This week, we're seeing more evidence that the economy may -- and I should stress the word "may" -- be heading that way. New data released today show that, in the words of the Washington Post, "Businesses cut prices at a record rate last month, builders started fewer new homes than anytime on record, and last week more people filed for new unemployment benefits than in any week since 1992." I read a lot of articles on economics, and one thing I find fascinating is that in the traditional media, an enormous amount of attention is paid to the problems plaguing the credit and payment systems, but very little to the other side of the coin: household budgets. After 30 years of stagnant wages, rising prices and declining savings rates, there are simply fewer people who qualify for credit to purchase new cars, homes, or even trinkets on the old Mastercard. And it's not just credit-worthiness -- the average amount of equity in Americans' homes is at an all-time low, and most have few savings to tap in order to maintain their lifestyles during a period of economic distress. This part of the crisis is almost never mentioned in the reports I read. - Joshua Holland
Editor, Corporate Accountability and Workplace | |
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