December 5, 2008
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News: Unemployment & Low Pay Weaken Everything Else
It all hinges on a healthy balance between ‘Consumer Confidence' and ‘Supplier Confidence'. That's the minimum foundation for our economy. We must have an abundance of consumers with good pay and abundance of suppliers who will hire these consumers with good pay so they can buy from the suppliers. Take either one away and the cycle is broken. Economy fall down – go boom. We faked it for a while with bad pay and good credit. We can only expect the credit card industry to hold just so much weight, however. They themselves are very fragile on Wall Street and to their own lenders. Declines in payrolls and excessive credit card lending have dried up our buying market, so there goes supplier confidence. Declines in payrolls and excessive credit card borrowing have dried up our buying market, so there goes consumer confidence. So, right now, we don't have either one.
But, the real kicker here is the ‘exacerbation effect' (read carefully). Because of the reliance on replacing good pay with credit cards and the inevitable outcome, buyers will remain skittish on buying and suppliers will suffer. Because buyers are skittish about buying, our suppliers will remain skittish about providing good paying jobs. President Bush's policies about sending us out shopping, even with low paying jobs, has locked us in the doldrums. Perhaps he isn't capable of understanding the harm of encouraging credit card spending without the funds to back it up. What's in his wallet?
Americans do well to be skittish about charging on credit cards until they are provided with the means to pay off those charges timely. American business needs to learn the harm of this Bush philosophy and tighten its belt for a society that only lives within its means. We need a little balance here. As things stabilize here, employers need to invest more in their workers with better pay. Forget about CEO greed, even they lose in the extreme.