Things are looking up -- at the pawn shop

Things also aren't getting any better for people who believe in squirreling away cash for a rainy day. All those rate cuts are taking their toll on savings accounts, money-market accounts and certificates of deposit.

That's not to say your money is going to disappear, even if your bank goes belly-up. The Federal Deposit Insurance Corp. insures ordinary accounts up to $100,000 and retirement accounts up to $250,000.

On the other hand, six-month CDs and money-market accounts are currently paying an annual rate of less than 3%. The cost of living, by contrast, was up 4% last month from a year earlier.

That doesn't bode well for savers like 19-year-old Brittany Green, who attends Pasadena City College while also raising an 8-month-old daughter. She told me she had about $1,500 in savings and wasn't sure what to do with it.

I told her that by slashing interest rates, the government basically wanted her to do one of two things: go out and spend it or invest it in the stock market. Either one would give the economy a little boost.

Green shook her head. "I'm not spending it," she said. "And I wouldn't put it in the stock market. That's like playing the lottery."

Back at the Crown City pawn shop, Robinson, the owner, said his vantage point on the economy suggests that people need money just to get by, but they're having a hard time getting it from banks.

"People have used up their available cash and credit," he said. "We loan to people that the banks do not. If you bring in something worthy of a loan, we'll make the loan."

Robinson said about 89% of his loans last year were eventually redeemed by customers, despite the sky-high interest rate. He said he wasn't so sure about this year. People just might not have the money.

In that case, though, Robinson said, he'd just sell off whatever was left as collateral -- a Rolex watch, say, or a pair of diamond earrings.

The government can be doing more to cushion people from the economic downturn. For one thing, why aren't lower rates for banks to borrow money being passed down the financial food chain in the form of lower rates for consumers?

Whether that takes a gentle nudge from the Fed or more overt regulatory action, it would help convey that we're all in this together.

It'd also be nice to see more concrete measures to help people who are either losing their homes or in danger of being turned out on the street. The government did this during the Great Depression and it could certainly provide a helping hand now.

Bush may be right -- things will be fine over the long haul. But for the moment, things seem quite grim.

Down the street from Crown City, I encountered Chad Pratt, a 44-year-old lawyer, who said his business was also thriving, thanks mainly to the desperation of many of his clients.

"There are more evictions, more divorces," he observed. "People are losing their homes, their jobs. You can feel how scared people are."

I replied that it was kind of sad that Pratt was doing so well off of other people's misery. He nodded his agreement.

"I'm a bottom feeder," he said with a what're-you-gonna-do shrug. "I'm a predator. This is how it is."

And no rate cut's going to change that.

Consumer Confidential runs Wednesdays and Sundays. Send your tips or feedback to david.lazarus@latimes.com.



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