Layaway: Pay Now (And More), Get Later

Some time back, I mentioned the layaway programs of the thirties as a precursor of "buy now, pay later," the extension of consumer credit to those with modest incomes. Today's New York Times has an article putting layaway in its historical context. The article explains why Wal-Mart's recent announcement that they are reinstituting layaway is not good news for consumers.

Some economists are describing the recent economic downturn as a "balance sheet recession." This means that people are spending less not only because they are unemployed or underemployed (as last Friday's jobs report shows), but also because wages are declining, along with the value of the most valuable household asset, the home itself. So banks and corporations are rolling in dough, but won't lend to consumers. And consumers, in turn, are desperately trying to pay down debt instead of incurring new obligations.

So Wall Street's excesses are hurting Main Street and indeed contributing to the reduction in aggregate demand that is contracting the whole economy. No wonder demonstrators have decided to occupy Wall Street.