We did it again this weekend. We bailed out the top and not the bottom. I truly don't understand this. (Caveat: I studied poetry and novels in college).
Walk me through it, if you will. The consumer is responsible for 70% of the US economy. The consumer has been scared spitless by what's happening all around him in the last six months — by the election, by the bailout, by the media, by the inability to get loans, by the layoffs around him.
So what does he do? He does what my "friend" does: he screeches to a halt on his spending. No toys for the dogs, no fancy side dishes for Thanksgiving, no unnecessary driving in case gas prices go up again.
Never mind that my friend has six months of emergency money, a 401k, a good business, and a working spouse. Do you see what I'm driving at? He's frightened.
One class I did take in college was psychology. We had these rats and we put them on grids and shocked them randomly or fed them randomly. They couldn't figure it out: when was the shock going to come? When the food? They ran back and forth for a while on the grid, trying to avoid the shock and get the food. And then…they gave up.
They just did nothing.
That was Psych 101, and I didn't have to take Economics (The Dismal Science) after I took that. Psych 101 was all the training I would ever need to understand this economy.
Consumers, subject to the 24-hour media cycle, are paralyzed. They've been shocked too many times to know what to do, especially since our disintegrating education system does not teach financial literacy.
What would be the problem with attacking the meltdown from the other side? Why do we persist in ignoring what SHOULD be done — renegotiating mortgages to their current market values and providing a new source of jobs, either energy or infrastructure or both?
I'd let the banks and the bankers go down right now (and I know that is shortsighted and impossible, but that's how I feel) and make their CEOs and execs give back the bonuses they got over the past three years after they changed the laws to make their atomized fantasy financial products legal.
If they've been playing in an alternative universe for the last eight years, why should they be using the currency of the "real" world?
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I couldn’t agree more! I’ve become one of those rats and I don’t like it and I have no confidence in big business or the government to find better ways to solve the economic crisis. Trickle-down didn’t work for Reagan and it isn’t likely to work now. Empowering the people may frighten the big cheeses, but it is the very concept that formed this country and helped us evolve into one of the biggest economies on Earth. Start with the consumers and, of course, a trickle-up effect will certainly follow as the 70% percent is happy, confident, and creating a self-fulfilling route to wealth building.
I’m listening to Barack now, and he seems to make sense.