But, after a decade or so of spending outside their means, Americans seem almost to feel guilty right now about spending money. This is exactly the opposite of what the economy needs. The structural problems of the financial sector are liable to take a long time to untangle, but if consumers signal that they’ve weathered the storm and are prepared to start consuming again, then jobs and investment capital will follow.
That is exactly the wrong approach to this entire problem. Why are we having massive problems in the housing market? Because the American public as a whole is indebted to the hilt. We have a negative savings rate in this country. The last fifteen years have been a veritable orgy of unfettered consumerism and we are just beginning to have to pay the piper. So for the love of god, if you have extra money SAVE IT. Stick it in savings account, a CD, or some T-bills.
Increased savings will help to recapitalize the banks, which might actual get commercial lending starting again. It will help counteract the massive account deficit the USA is going to have to get out of this recession/depression. Spending more money right now is just throwing more fuel on the every growing fire. Nate should stick to political prediction, since this advice is about as bad as it gets.
Update: I just have to say. 70% of the GDP in this country was consumer expenses. There is NO WAY such a percentage is maintainable. If all you do is buy things (and not make things for others to buy), there is going to be an eventual liquidity crisis. The only thing that kept this giant Ponzi scheme going as long as it has was the Fed monkeying with interest rates to create the housing bubble. We need to seriously reduce consumer expenditure and bring our GDP percentages back into whack. Asshattery.