Consumers Capitulate

Krugman: To appreciate the significance of these numbers, you need to know that American consumers almost never cut spending. ..So these data are basically telling us what happened before confidence collapsed after the fall of Lehman Brothers in mid-September, not to mention before the Dow plunged below 10,000. Nor do the data show the full effects of the sharp cutback in the availability of consumer credit, which is still under way. So this looks like the beginning of a very big change in consumer behavior. And it couldn't have come at a worse time.

It always does come at the worst time.