September 28, 2008

Will the Wall Street bailout fix the ailing U.S. economy?

Nope, says an excellent piece by McClatchy's Kevin Hall:

A principal risk now for the American economy is that the spate of bad news will feed on itself, creating a downward spiral.

For example, the wave of bank failures and mergers is sure to lead to large layoffs in the financial sector, and already computer makers like Dell and Hewlett Packard have announced job cuts in the expectation of a worsening sales environment.

As the number of jobless grows, the number of delinquent home loans grows larger. And defaults on car loans rise. More consumers will fall behind on credit card payments, restaurants will shutter their doors because of fewer diners, and fewer restaurants will cut demand for farm and processed food products. It's all inter-linked and becomes a spiral.

Kinda like the spiral already caused by the collapse of the housing bubble. Which, of course, many of the architects of the current bailout plan didn't see as a problem.

You can read the full article here.

Posted by Magpie at September 28, 2008 04:07 PM | Economy | Technorati links |