A hot economy can't stay hot forever. Eventually, there's a break in the heat, brought about by the high cost of money. With higher interest rates on home loans, car loans, credit-card loasn, you name it, fewer people can afford to buy houses, cars, and so forth. So they stay where they are and put off buying the new house. Or they keep their old clunkers and put off buying a new car.
Suddenly, there's a slump in the car business, and Detroit has trouble selling its huge inventory of the latest models. The automakers are giving rebates, and car prices begin to fall a bit. Thousands of auto workers are laid off, and the unemployment lines get longer. People out of work can't afford to buy things, so they cut back on their spending.
Instead of taking the annual trip to Disney World, they stay home and watch the Disney Channel on TV. This puts a damper on the motel business in Orlando. Instead of buying a new fall wardrobe, they make do with last year's wardrobe. This puts a damper on the clothes business. Stores are losing customers and the unsold merchandise is piling up on the shelves.
Prices are dropping left and right as businesses at all levels try to put the ring back in their cash registers. There are more layoffs, more new faces on the unemployment lines, more empty stores, and more families cutting back on spending. The economy has gone from hot to cold in a matter of months. In fact, if things get any chillier, the entire country is in danger of falling into the economic deep freeze, also known as a recession.
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