And, as a sign of how widespread the housing meltdown is, turn to page A12 of today’s Wall Street Journal, “Foreclosure Trouble Spreads to Those Who Bet the Farm”. The home foreclosure crisis started in cities and suburbs and has now widened its reach into rural America. According to the WSJ, default rates are soaring across rural America, where homeowners were just as vulnerable to subprime loans and often refinanced existing mortgages to take out cash or pay off debts.

A freeze of 401(k) withdrawals
Many funds in 401(k) plans lend their portfolio holdings to other investors. In return, they receive exchange collateral that is invested in safe, liquid holdings to generate a small reliable return to offset fund expenses. However, now many of these collateral investments have collapsed , forcing money managers to actually restrict withdrawals from 401(k) plans. This is highly deflationary stuff. For more, see page C1 of today’s WSJ, “401(k)s Hit by Withdrawal Freezes”.

More on the new frugality
We caught this gem on page D1 of today’s WSJ, “Want to Save? Put It on the List”: “You know times are hard when the shopping list makes a comeback. As the recession takes hold, consumers who used to shop impulsively are seeking ways to rein in their spending, and many are finding that sticking to a list can help them navigate through stores and limit their purchases. Until recently, Eileen Burke’s main goal when shopping was “to get in and get out” of the supermarket quickly. But now, financial worries have Ms. Burke working to trim her shopping bill. Using a shopping list – which she organizes on her iPhone by category and updates as she shops – has helped her buy “the food I need, but not in excess.” With the list, as well as coupon-clipping and careful attention to store circulars, she has trimmed 20% to 25% from her weekly food bill in recent months.

Drinking coffee at home puts a floor under prices
In this new era of frugality, consumers are more likely to brew coffee at home than buy a cup from a coffee shop. This phenomenon has kept a floor under coffee prices. See page C10 of today’s WSJ, “At-Home Brewing Boosts Coffee”. According to the National Coffee Association, 80% of US coffee drinkers said they had coffee at home the day before, up from 75% in 2008 and the highest since 2003.