In tough economic times people live on very tight budgets. Worries about wages, jobs, and when interest rates on outstanding debt will rise if the economy takes a huge nosedive tend to slow consumer spending down amid fear the world may slip back into a financial free fall. The most vulnerable will choose to save rather than spend to prepare for the worst; instead they count on the big boys to drive economic growth. So why are the big boys not stepping up?
A cynic may say for the private sector it boils down to greed, that the rich are fine and simply don’t want to take the financial risk of investing in tough times; while governments stand paralyzed by divisive rivalry as in the U.S. or in Canada’s sense by blind ideology. Politicians and central bankers are consistently making announcements in the media that to keep from slipping back into recession as Europe appears to be heading straight towards, people must continue to spend. But talk is cheap from those with money who refuse to make investments, or set aside political gain to prop up the economy. Choosing to blindly ignore the facts or refuse to compromise on any idea to boost economic growth does absolutely no one any favours and only adds to consumer depression.
The U.S. central reserve Chairman Ben Bernanke has openly warned another recession is coming if politicians stateside don’t set aside differences and agree to some plan of action; Canada’s central bank has not painted that bleak a scenario but warns what happens in Europe or the U.S. is going to hurt here too. But instead of fighting to prove these top economists wrong, politicians continue to pick fights and blindly ignore economic realities. On top of that these same central bankers are simply criticizing government inaction without making bold plans of their own. How can a regular consumer have confidence things will get better, to choose to increase their debt with big ticket purchases; when the institutions with access to all the money aren’t doing anything with it?
In Europe there is at least action to try and stave off the worst impacts of a recession; the Bank of England is pushing money through to consumers and businesses by offering banks lower interest rates the more they lend. Credit checks still need to be thoroughly completed to avoid bad debt; regardless, this is a plan to stimulate the economy in Britain something that is seriously lacking on this side of the Atlantic. The U.S. central reserve refuses to make a bold commitment to keep central interest rates at record lows for a long period of time, while Canada’s central bank has hinted rates will be going up in the short term. By refusing to keep rates low for longer periods when economic growth has slowed to a crawl, bankers are only feeding consumers’ fears costs are going up at a time when wages will freeze and jobs may be lost altogether.
If stimulation is the plan and it should be, threatening higher rates while relying on consumer spending means there is no actual plan to prop up the economy; fear is driving the entire world with action like this. Those in charge need to take a step back, return to reality, get in touch with regular consumers, and come up with a plan that helps support those in most need. Continued fighting only means continued inaction as we watch the world teeter on the brink of financial disaster all over again.