Earlier I wrote that there is a problem lending to people who are not “credit-worthy.” Banks are looking for people to give loans to, as long as they can be pretty sure they will be paid back.
Today Warren Buffett said,
“We have fear which leads to people not wanting to spend, and not wanting to make investments. And that leads to more fear.”
OK, I can see how one of the richest people in the world thinks that people are just afraid to spend, and that’s the only problem. But from where I live it looks a lot more like people are tapped out — savings depleted, income stagnant or lost, debt up to the ceiling. And that is why they aren’t spending anymore, because they can’t spend anymore.
We have to come to terms with what happened. All the money went to the few at the top, wiping everyone else out. And so the economy finally stopped.
Trickle-down economics just doesn’t work. THAT is why we are having a financial crisis. The few people who make a lot of money just can’t see that. Until they do, their solutions and predictions will continue to be just wrong.