It is far too easy to blame in bad times, or thank in good times, Wall Street, the government, or super-rich and powerful financial entities. In actual fact it is always the spending of money by the general population on consumer products and services – housing, cars, or investments – that drives the economy. The core problem is that the public does not act to serve its own interests but, instead, takes its cues from the external world and puts its trust in the wrong people and entities.
In other words, besides all the blame that rightfully can be heaped on others for the current recession, it is also true that the public, through its dollars, drove the nation and the world into the current meltdown, mostly by borrowing too much money. They got suckered into using easy credit.
True, in many cases, they acted on incorrect and intentionally misleading information and were taken advantage of. But, so much of this consumer behavior was driven by greed or stupidity. Confidence was placed in government regulation, Congress, mortgage and other financial companies, banks, and more generally in the plutocracy that runs everything that matters.
Consumers Control the Economy
Consumers control over two thirds of the economic activity of the nation. Millions of consumers could threaten to cut their spending in order to get action, like stopping the Iraq war or impeaching George W. Bush. But without leadership consumers just kept borrowing and spending, maintaining the delusional prosperity that they themselves propelled. Now they must act to fix things.
Now that the economic meltdown has hit very, very hard, it is critically important for people to understand that depending on the usual power groups to turn the economy around is dumb. Thinking that President Obama, Congress and various federal agencies, in particular, will save us is continuing the delusional thinking that has been like a chronic disease.
American consumers must understand that literally within days and weeks THEY themselves could turn around the economy. According to the Federal Reserve, even after the grotesque economic meltdown, there is presently a historic amount of cash in bank and money market accounts, an astounding $8.85 trillion.
Relative to all the government bailouts and likely actions to stimulate the economy, that number is remarkable. That humongous amount of cash (not the value of homes and investments) comes to about $29,000 for every man, woman and child in the nation, or roughly $88,000 per household.
The more cash you have, of course, the greater your potential power to push economic recovery. We often hear about consumer confidence — whether people are in the mood to spend or whether they have become too afraid for their personal financial security, causing them to spend as little as possible.
To turn the stock market and just about every segment of the private sector around, 10 to 20 million Americans must grab their inherent consumer power and start spending and investing with gusto, from home appliances, to computers, cars, clothing, furniture, new homes, travel, and so on.
The stock market would immediately start to climb, retail stores would stop closing, the automotive sector would resume producing cars, companies would start rehiring, and the news media would start pumping out good news that, in turn, would trigger still more consumer confidence and spending. Suddenly, a positive spiral of economic activity replaces the hoarding of cash that has driven the negative economic spiral.
Positive consumer confidence can feed on itself psychologically, become a viral message that shoots the economy forward, reverses unemployment, makes stocks and mutual funds and, therefore, retirement accounts more valuable, and so on.
The nation needs consumers to avoid still more massive federal deficits and borrowing and inevitable tax increases. People must do much more than vote; they must use their dollars to save our own financial health. Unless we shift our thinking and spend, we will stay in economic hell for a long time. We are the economic stimulus solution we’ve been waiting for.