---

Why Consumer Spending in an Economic Depression Isn’t Enough to Stabilize the Economy; Game Rigged by Banks. 

---

Over and over these days politicians and economists talk about how stimulating consumer spending is the only way to end the current economic crisis.

The 800 billion dollar stimulus bill contains a lot of provisions that are supposed to stimulate consumer spending and kick start the economy.

But is any amount of consumer spending in an economic depression going to be enough to pull the country out of this depression?

Since other countries are now experiencing their own recessions and depressions based on the fall of the U.S. economy how can U.S. consumers possibly spend enough money to get the economies of the entire world flowing again?

They can’t, not without some serious changes to the economic system.

The entire basis of the U.S. economy is consumer spending, but that presupposes that the consumers will have money to spend.

When a financial disaster like the current economic crisis happens consumers have no money to spend and the meager influx of cash generated by the government won’t be enough to get consumers spending freely again.

When the gas crisis hit and the price of gas averaged more than $4 per gallon consumers stopped driving.

They started riding bikes, carpooling, walking, taking public transportation, or using other methods to get where they needed to go.

Now that consumers are losing their jobs left and right and have no way to pay their bills every month they are not going to be spending money in the huge amounts necessary to stimulate the economy.

Consumers will put off buying goods like furniture and cars.

They will stay in their current homes rather than buy new ones.

They will cut up their credit cards, if they have any credit left.

Consumers have been living beyond their financial means using credit, home equity, and other financial capital for a long time and they are tapped out.

That means that consumer spending in an economic depression will drastically slow down.

The only money that consumers are going to be spending is on necessities like food and utilities.

---

---

Economic Prospects for 2009

---

Less Money Available

One of the reasons that politicians are foolish to think that consumer spending in an economic depression is going to fix the depression is that consumers will simply have less to spend.

Economists are basing their predictions about consumer spending habits on the last few decades when consumers tended to have steady employment, good employment prospects, and lots of easy credit.

These days millions of people are out of work and employers get thousands of applicants for every job opening they have.

Jobs are being outsourced to other countries in record numbers and after the mortgage crisis lenders are being very tight with credit.

Consumers simply won’t have any money to spend and won’t have access to any credit.

No matter how many provisions designed to stimulate spending are added to the stimulus bill a small injection of cash isn’t going to change consumer spending in an economic depression.

---

Government Intervention, Taxpayer Money

Another reason why depending on consumer spending in an economic depression to fix the crisis is short sighted is because the billions of dollars that the government is using to shore up corporate interests and stimulate spending is coming out of the taxpayer’s pockets.

It’s mind boggling how politicians can expect the taxpayers to bail out huge corporations and pay executive salaries and at the same time expect them to spend the cash that they get from the stimulus funding to give more money to corporations.

Not only are taxpayers expected to now pay employers for the privilege of working they are also expected to put more money into the CEOs pocket by buying the goods that these companies produce.

The consumers didn’t cause this economic crisis, but they are being asked to pay for it twice over.

---

Limit Corporate Spending

If the government really wants to stimulate spending they should start limiting the compensation that CEOs and other corporate executives can receive.

They should also put these large global companies on a tight budget. Since these companies are receiving taxpayer money they should be accountable to the taxpayers for how that money is spent.

A recent editorial in the NY Times newspaper decried the proposed salary cap of $500,000 for executives proposed by the government saying that it would be impossible for an executive who was used to living a certain lifestyle in New York City to have that same lifestyle on $500,000 a year.

That would mean no million dollar apartment, no car and driver, no high end private school for the kids, no house in the Hamptons, no nanny, and giving up other accoutrements of the very wealthy.

Paraphrased the article implied that living on $500,000 in New York City would be like an ordinary family attempting to live on $30,000 in some city in the Midwest.

Most taxpayers would probably much rather that their money went to that family living in the Midwest than to some corporate suit whose self esteem would suffer if he couldn’t send his child to a $35,000 per year school or vacation in the Hamptons.

---

---