THE BLOG
05/02/2008 05:12 am ET | Updated May 25, 2011

And the Latte Indicator Says...Economy Screwed

How bad is the economy these days? So bad that one of the nation's largest purveyors of custom-made addictive drugs is slashing its forecast yet again as customers tighten their belts.

In the salad days, of course, many Starbucks fans argued that $5 Mocha Frappucinos and $3 coffees were no longer "consumer discretionary" items (stuff we choose to buy when we're feeling flush) but "consumer staples" (stuff we have to buy in thick or thin). Alas, now that the economy is tanking and gas prices are soaring, many consumers are wisely choosing to pump the $4 into their gas tanks instead of their stomachs.

On the back of a recent stock-market rally, you hear rumors that the Fed's emergency injection of cash into the crashing financial system has saved the day--paving the way for an economic recovery in the second half of the year. Don't bet on it. Wall Street may have staved off a Bear Stearns-like fate, but Main Street, which accounts for 70% of spending in our economy, is just beginning to feel the pain.