Inflation and the Credit Crunch. Wake up America, before it's too late.

We've heard a lot about 'credit crunch' and people who just can't make ends meet because of the resulting/coinciding inflation. In response to the AP news article on living paycheck to paycheck, and the Carpetbagger's blog post Paycheck to paycheck in Bush's America, we make this response.

Wake Up America. Most of us have put ourselves here, and those who didn't fall prey to the initial 'easy credit' craze are still going to feel the bite of it.

The real problem is the people who have overextended themselves with 'easy credit' in the past few years. This includes sub-prime loans, credit cards and 'pay nothing now' deals we saw on television not too long ago. People snapped up that easy and/or 'free' credit and now they've come up against a wall of people wanting money at a time of inflation. Prices are going up on some key commodities - which raise prices for businesses and for consumers. Employers are laying off or downsizing to keep competitive and in the black.

The Scenario:
People who depended on those jobs are suddenly unemployed or underemployed, and still facing the same main cause, inflation, with much less money in their pockets. They're crowding into lines at food banks because they no longer can pay their bills, pay rent and buy food. They may have closets of designer clothing, an SUV and a huge home they can't make the mortgage on - and not enough income to even feed their kids this paycheck. They have a houseful of stuff, but nobody wants to buy their big screen TV because they probably also have one at home or never wanted one in the first place. Their expensive SUV is a gas guzzler and they can't trade it in for anywhere close to the amount they still owe on it. These people are newly poor because they have bills due but no worthwhile assets or collateral. If they miss a payment on their maxxed credit they lose what things they do have of monetary value (home, car etc...) and will have to pay MUCH more to get back where they were. They're trying to skid by until things get better, instead of changing the way they live and planning for the long run. It makes sense case by case, but it doesn't help them out of the situation, it just keeps things afloat.

I'm guessing most of these people are still planning on buying big gifts for Christmas. For many of them, it's not an option - Christmas will come, and they'll take whatever credit they can still get to buy the things they think they (or their kids) need to have. They might have a few hundred dollars tightly saved for it already, thinking things will get better. And - if this 'Holiday Shopping Season' doesn't meet expectations even more people will be laid off or fired and start a whole new round of the same thing.

So, What do we Do?
It's a wake up call - and it will cause a chain reaction through our economy at many levels, and in different ways.

The American people have to sit up and realize what is happening, plan for a long bad time to happen, but also try to keep the economy moving and productive.

If we all do nothing but 'business as usual', things will get awful.
AND - if we all try to conserve, they'll still get awful, because the economy will tank at ALL levels.
It's too much of one, not enough of the other, that has put us here and will continue to dig the hole deeper if we don't change our methods.

We should work for moderation, productivity and durability in goods and services. Hopefullly, we will be able to crawl up back out of this while keeping the necessary parts of the economy going. Luxury services and unnecessary products (like Tickle Me Elmo or $4 gourmet coffee or whatever the latest fad is) will falter some, but they'll come back after the 'crisis', when people have more time, money and energy to spend on unneccessary things.

Stay tuned... this is an interesting time in America, and we are all players in a cast of millions.