EDITOR’S NOTE: Liz Peek is a financial columnist.

You know the economy is a little rocky when folks stop lining up for their double skim iced caramel macchiatos. I don’t know about you, but I am completely addicted to my morning coffee. Who could imagine this was a discretionary purchase?

It turns out that high gasoline prices, faltering confidence and slowing income growth are causing people to forgo all kinds of things – new washing machines, expensive handbags, and even their favorite high-priced java jolt. Or at least leading them to trade down.

That’s apparently what led to weaker-than-expected first-quarter earnings at Starbucks, one of a number of consumer outfits that disappointed investors this week. McDonalds, UPS and American Express also showed signs of lackluster consumer spending. Starbucks’s management pointed out that business was softest in Florida and California where, not so coincidentally, housing problems are the most severe. This was no great surprise, but served to keep the spotlight on the mortgage crisis, which is ongoing.

You may have tuned out the bad news on the housing front, and who can blame you? It’s not fun to watch our most important asset wilt. Sorry to say, the downtrend continues; in March, the median price of a new home suffered the worst year-over-year drop in nearly four decades. Ouch. Also, the Commerce Department reported that new home sales dropped last month to the lowest level in 16 years.

The stock market, which has trended a little higher this week, seems a little bored by the bad news about housing and the credit markets. Who isn’t? Most of us have digested the concept that it’s going to take a while for housing to turn around; we’re ready to move on. Unfortunately, the aftershocks to the financial services industry, and to consumer spending, aren’t likely to disappear anytime soon. Bank of America started off this week by announcing a 77 percent drop in income, and National City Bank chimed in by lowering its dividend and raising $7 billion in cash.

The response to Bank of America’s misery was ho-hum; National City’s stock, on the other hand, was clobbered. Why? Because the company issued new stock at a huge discount, which will prove dilutive to shareholders going forward. This will not be a one-off. Almost all the banks and investment banks have raised new capital, and will probably raise more. The first wave was emergency funding for the likes of Merrill Lynch and Citigroup, to offset balance sheet losses, and many of the infusions came from sovereign wealth funds in the Middle East and China.