All indicators are that people have stopped spending money, particularly on big ticket items. Today, the Fed is expected to cut a key interest rate to 0.5%, hoping that it will get people spending again, but from what I understand, experts are saying it’s unlikely to change any spending habits soon. Best Buy just announced major cutbacks due to the lack of consumer spending.
My (rhetorical) question is this: if the federal government does indeed give the auto industry the $15 billion or so they say they need to keep going through the year, why will this encourage people to buy new American cars? People have stopped buying TVs and DVD players, despite dropping interest rates. Why would people buy cars? And why American cars when many foreign cars have better engineering and fuel efficiency (to say nothing of being cheaper)?
And if people don’t buy American cars for a while, what good is the bailout?