(snip)"Discretionary Spending "
"No one (well just a few of us deflationists) expected to see price drops. Well here they are, first in housing and now in restaurants. What's next? I expect we will see all kinds of drops in the price of goods and services. Someone emailed me just a few days ago about a price drop at the nail salon from $10 to $9. Hmmm. Is that a 10% drop? Why yes it is. Discretionary spending in all kinds of things is likely to go out the window. Prices will drop with falling demand, and it will not matter one iota what input costs are doing. Ask yourself if Bennegan’s is paying 37.5% less for ground beef that it was last week. Did it matter? Think this through one step further. What will that mean for home prices, the value of businesses unable to pass on cost increases, the stock market, jobs, etc? It will be interesting to see just how much we overbuilt retail stores, nail salons, Home Depots, and restaurants of all kinds.
Psychology is shifting from consumption to saving in the US and from saving to spending in Japan. What we are really talking about is a SECULAR change in "Time Preference". There is likely to be a lot of pain associated with that change, especially in the US.
Bernanke’s worst nightmare took another big step forward today with these price cuts. If those price cuts do not attract consumers, job cuts will follow"(snip)



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but my tips havent changed) and her fellow higher earners also seem to have experienced no change in their earnings. OTOH the gals that historically were on the lower end (200-300 a night on average) are now struggling to walk out with $100 after tipouts. 
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