by Hans Eisenbeis
I never understood why people raised their hands on a rollercoaster. Why increase the horrible feeling of your stomach doing flips as the coaster plunged to Earth? A lot of people are groping for that safety bar right now, as the crisis in global financial markets pitches us all for a very wild ride indeed. Consumers are losing their appetite for this kind of excitement.
The macroeconomic picture is too complicated for most consumers to understand, and that’s actually made them angry. Many assume — correctly — that a lack of transparency is what got us into this mess in the first place. Indeed, many consumers now believe that deliberate obfuscation and complexity was used to create huge amounts of fake wealth on Wall Street (true), and that we’re all going to get stuck with the bill (also true).
The good news? Three key shifts in consumer buying behavior have already taken root. First, last summer we saw the single biggest spike in the personal savings rate ever recorded (Federal Reserve Bank of St. Louis 6.27.08). Second, reliance on credit is also declining as consumers shift to cash and debit cards (FinancialTimes.com 8.20.08). Finally, we’re now all spending less and trying to live within our means.
In the long run, these strategies are the only things that can truly bail out the economy.
