In the Arena

Decoding the Credit Crunch

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David Leonhardt of the New York Times continues his excellent work with this look at the car rental business. He concludes that while the credit crunch is real for some firms (especially those, like Avis, that were traded about by investment bankers for huge fees, which saddled them with inordinate debt), the more pressing problem is that people just aren’t spending money on things like vacations, business trips and so forth–which cripples firms like Hertz and Enterprise that have the ability to get loans to buy new fleets, but don’t want to use it. The AIG bonuses have focused our attention on the bank bailout, which is significant and necessary, but the real determinant of Obama’s success or failure may be the efficacy of the stimulus package. As long as people aren’t spending, the downward spiral continues.