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Will meltdown's impact hit Main Street?
Main Street sign
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KAI RYSSDAL: The headlines are coming from Wall Street. But arguably this story's going to play out far from there -- out where the rest of us live and work. We went to Cleveland and Philadelphia today and asked passersby how they're feeling.
TOM STANTON: What worries me the most is the population panicking. I think people have to learn to start saving again. I think it means a lot of personal self-sacrifice and people to look inside themselves.
MARGARET RUBLE: I really don't know what got us here. I don't know how we are going to get out of it. And I don't know how the new presidency is going to work it.
RICK DIPIETRO: I feel for everybody else, too, you know? It's a tough world to live in right now. And I really don't know how they're going to get out of it, to tell you the truth.
That was Tom Stanton and Margaret Ruble in Cleveland, Ohio, and Rick DiPietro in Philadelphia, Pennsylvania.
Their worries are understandable. We're hearing everything from this is all going to lead to a horrible recession to, perhaps, the second coming of the Great Depression. There are others who say this too, shall pass. But try telling that to people worried not about their investments but about their livelihoods. Marketplace's Mitchell Hartman reports.
MITCHELL HARTMAN: There's no doubt that regular people are affected to a certain extent by what happens to the Dow and the Nasdaq.
But Kimberly Clausing, an economics professor at Reed College, says, in many ways, Wall Street operates in a zone separate from the rest of the economy.
KIMBERLY CLAUSING: If stocks go down now, it's not clear that that's automatically going to be a problem on Main Street.
Clausing says there can be ripple effects when people start to worry about all that bad news from Wall Street. Consumer and business confidence can tank. Right now, the folks on Main Street are just staring at the wreckage and wondering what it's going to look like when the dust settles.
CLAUSING: Perhaps their bank or insurance company is going under. That might cause them to feel uncertain about the future and clamp down on their spending.
That could cripple the economy. But John Mitchell, former chief economist at US Bank, says, for now, the economy's still strong.
JOHN MITCHELL: We tend always to underestimate the resilience of the U.S. economy. Some of us can remember 1987, for example, where you had, percentage-wise, a much more significant stock price decline, and we sort of just blew on through it. A few months later it was like nothing happened.
Mitchell points out that broad areas of the economy are still cooking along: Exports are up, commodity prices -- including oil -- are down.
Still, Mitchell does not think this is a few-month hiccup. There are fundamental problems in housing and credit. The market hasn't solved these problems, and it's not clear that government intervention will turn things around
I'm Mitchell Hartman for Marketplace.
Kimberly Clausing is obviously not retired or near retirement otherwise she would understand the direct connection between investments and income for many who are retired, or soon to be. My friend in Palm Springs, CA sees immediate drops in spending when interest rates drop (lower returns on CD's) and stock market drops. For retirees they now have less cash coming in or less capital from which to draw. There is a very real connection between Wall Street and Main Street. This connection will get even stronger as a the percentage of our population who are retired increases.
Few people seem to understand what's happening in a realistic way. Even Mitchell, the reporter, says "There are fundamental problems in housing and credit" -- as if house prices returning to normal after the bubble is the problem, or credit returning to normal conservative standards after the credit bubble is the problem.
Until reporters actually understand the situation more thouroughly, confusion in the public will predominate.
House prices returning to normal isn't the problem. The problem is that so much of the economy was created around a bubble in housing, so that this large part of the economy of course was thus built on false ground, so to speak. In other words, the problem isn't now so much as constantly from 2002-2010, including both the bubble formation along with it's bust.
When you fall on a slick floor, you don't say that the act of falling itself is to blame for falling, but rather instead you blame the original cause.
