Financial advisor Paula Gomez usually works half days at this time of year. Her stable of well-heeled clients have all filed their taxes, and their diversified portfolios have been built for long-term growth. But over the past few days her phone has been ringing off the hook as panicked clients seek advice and reassurance.
"Frankly, I don't know what to tell them," she admits. "Everywhere you look there's a catastrophe and who knows who's going to fail next. So the best advice I can give them is keep a diversified portfolio. But just in case, get some money out the bank in case the whole shebang goes belly-up."
Gomez's bewilderment is easy to understand and widely replicated across the country, after the crisis of confidence on Wall Street since Monday - the product of bank failures, government bailouts and fears of more bankruptcies on the horizon. And the housing crisis that sparked the meltdown is still showing no signs of a bottom.
Meanwhile companies are cutting jobs at record levels, prices at the pump remain high and economists warn of the looming spectre of inflation. Then people read headlines like one that appeared Wednesday in the Washington Post, which called the recent events "the greatest loss of wealth ever" and predicted a scary future for the American economy: "The US is in the process of being forced by its foreign creditors to begin living within its means."
With this unprecedented crisis coming amid a fiercely contested general election, it's no wonder that the average American is feeling jittery. Those nerves could exacerbate the economic problems. At the upscale Capitola Mall in wealthy central California, stores were almost devoid of shoppers mid-day Thursday. Many shops tried to lure customers with 50 per cent price cuts but there were few takers.
"I've never seen it so quiet," said a shop assistant at trendy teen fashion house Aeropostale. "You wouldn't think our customers would give a hoot about Wall Street, but no one wants to spend money at the moment." Of course Americans aren't stopping spending altogether. At thrift stores and online marketplaces like eBay and Craigslist sales are booming, according to a survey published Thursday in the New York Times.
The paper said that some store sales are up between 5 and 10 per cent this year, even as donations have dropped up to 25 per cent as people hang on to their old clothing. "Young women are looking in their closet and saying, 'You know, I'm going to wear that a little longer instead of giving it away'," said George Hood, national community relations and development secretary for the Salvation Army.
The financial crisis has also impacted the election campaign, which until recently was dominated by the surprise candidacy of Republican vice presidential pick Sarah Palin. But with economic issues at the forefront of the news cycle, the initiative has swung back to the campaign of Democratic presidential hopeful Barack Obama, with polls showing the US public identifying his Republican rival John McCain more closely with those responsible for the financial debacle.
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