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The dramatic drops in the stock market are a result of people's fear and lack of confidence in the economy, Dylan says. "The stock market, unfortunately right now, is a reactive mechanism," he says. "You are not seeing the stock market predict some grand future outcome. You're seeing the stock market saying, 'Listen, we're concerned that the people in America are not going to be able to pay their bills and as a result the banks will be stuck with those bad debts.' If you don't pay your bills, that just doesn't go away. That goes to a bank ... and if the bank can't handle it, you know where it goes? To the government. And the government then takes it out of the taxpayer," he says. "All you are seeing in the stock market right now is a reaction to the fear that we have."

It may take a while for American banks to be able to lend again in a way that's healthy for us all, but Dylan says once the economy stabilizes and Americans feel more confident, the stock market will improve.
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FROM: The Thriftiest Family in America
Published on October 08, 2008

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