Average Joe Asks Fed to Wake up and Smell the Economy

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Wake up and smell the economy. At least that’s what the Chief Executive Barista of Starbucks Howard Schultz said Wednesday to about 6,000 shareholders at Starbucks’ annual meeting in Seattle, according to a report on Bloomberg News.

“You have an economy that really is in a tailspin, and many would say the consumer is in a recession,” Schultz was quoted as saying. “We are dealing with things that we haven’t seen before in terms of how people are responding to how tough it is.”

As the country’s prime caffeinator, Schultz sees the economy from a unique perspective. As consumers cut spending, Starbucks experienced its smallest gain in two years–a revenue rise of 17 percent. Its customer base has also dropped for two consecutive quarters.

I guess that as spiraling prices at the gas pump take more and more of a chunk out of consumers’ wallets, and the housing slump ripples into other sectors of the economy, more and more people are going without those lattes and cappuccinos.

Schultz told shareholders, “We began to see a slowdown in traffic that we believed was economy-driven. As we look at the balance of calendar ‘08, I don’t see any reason to believe that we’re going to see a change.”

But Starbucks aficionados who have been decaffeinating cold turkey don’t need to worry much longer: Schultz said Starbucks will introduce a rewards program in mid-April. Customers can earn free syrup or milk alternatives for their drinks, or free refills on brewed coffee if they use their Starbucks card.

This is on top of last month’s deal by which Starbucks Card holders get two hours of free wireless Internet access a day. Free wi-fi and nearly free coffee is a lot more than what the Fed is offering the average American, according to a report I saw on CNN’s Money.com. Despite cutting the Federal Funds rate to 2.25 percent, the Fed is not helping homeowners as the slumping housing market continues to take a toll on homeowners.
Despite the nearly rock bottom interest rates, banks are still not lending money. As banks cut themselves off from the crack cocaine of loose and easy borrowing to build up cash, consumers are caught in the middle.
Peter Cohan of Peter S. Cohan Associates, a venture capital firm, said lowering the Fed Funds rate is like a tax on the middle class because this drives up inflation, bringing the dollar down, and raising the price of oil “almost immediately and squeezing the middle class.”
I guess a lower Fed Funds rate and a quarter will just about get you a cup of coffee nowadays.

Post written by DebtHelp.com

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