Monday, December 27, 2010

Black Friday, Black Monday, Black Crude or Black Thursday (1929)

A lot of noise is being made about how retail sales will set a new record or at least match the last year before the collapse. They point to empty shelves for some items as if this were proof while not mentioning that retailers slashed inventory drastically for this season from past years to avoid doing any real discounting. Saying something is half off from a price that was doubled to begin with, well you know how this works but most people never really catch on.

Some electronics are down sharply but this has to do with what is considered normal reduction in prices by manufactures as new product innovations “mature” into yesterday’s old hat. There is also an over supply of flat screens as production facilities that began construction right before the collapse are coming up to full speed.

While retailers were building consumer confidence early in the fall by announcing how many thousands of temps they were hiring for the Christmas season the November jobs report showed retail sector jobs actually declined by 26,000. This fits into the current corporate practice of firing staff and replacing them with low paid temps. This is what keeps the weekly jobless claims high despite total employment numbers remaining fairly steady or even gaining a few thousand jobs each month.

The retail sales numbers trumpeted in the news not only reflect higher prices but are also getting a boost from rising gasoline prices. The higher prices are being driven by speculators using the free money they are getting from the Federal Reserve. It’s the increase in the money supply and not any decline in supply or increase in demand. We actually have always produced more gasoline in the US then we can use and export billions of barrels to Africa. If the oil refineries didn’t have that market they would need to burn it. 40 to 50% of a barrel of oil is gasoline depending on the source, refineries could be built to convert gasoline into other products but this type of refining isn’t cheap.

We are actually more dependent on the other elements in oil like diesel and jet fuel as well as heating oil and trace chemicals. Even the Obama stimulus for shovel ready projects had to scaled back because of a shortage of asphalt. Ending our dependence on oil is more complicated than plugging in a bunch of electric cars, that would just mean we would export or really re-export more gasoline. This would likely make oil more expensive and not cheaper, not that we shouldn‘t move ahead, but it requires a much broader changes (this revamping might even create some jobs).

So what will the New Year bring? Higher profits for large retailers most certainly. They are keeping prices up and wages down, a capitalist success story. Very soon a lot of temps will be out of work again and probably not eligible for unemployment. The number of retail units sold wasn’t up all that much so there will be no real boost for manufacturing jobs, not in China where most retail goods are made but especially not here. Expect higher prices for food and fuel thanks to the Federal Reserve. There will also be continuing pressure to cut wages and at best a flat jobs market.

The new talking point from the Republicans is to change Federal law to allow the states to go bankrupt as well as local governments. The purpose of this would be to void all union contracts and renege on pension plans all in the name of austerity. There are about a dozen conservative Democratic Senators so this is a real possibility if enough panic can be generated over deficits. Cutting wages in half was how President Hoover solved his economic crisis. Everything would have been rosy if FDR hadn’t plunged us into the Great Depression by spending too much money and by imposing his protectionist trade policies. (No really, ask any Republican)


SanMigMike said...

Uuuhh...maybe that will be real change. It will be interesting seeing Republican political figures unwilling to really do even symbolic action on their own retirements (not to worry about them, I am sure that their masters will take care of them) while they are telling millions of people (many that were stupid enough to support them) that they have no retirement, no Social Security, no Medicare...what will happen to stores, hospitals, Doctors and the whole system when there all of a sudden there are next to no consumers. I'll hope they will have a high price to pay for "leading" us (selling us down the river for their rich masters) into this mess.

I see no reason to doubt that a collapse is coming as well as a very sudden end to our empire. We are following in the footsteps of other empires but I think our rise and fall will set a record for shortness...a hundred years or so compared to the more typical 250 years?

Yes I know we have been around a lot longer than a hundred years but as a real world power and an empire...I'd say not until the first World War could we be considered a world power and really started to build an empire. A case could be made for the Spanish American War as our start toward an empire but Spain was really no longer a world power at that point. The fact we beat them with our rather meager forces shows that all too well. Even with that we were not really a first class power at that time.

Anonymous said...

My buddy says he is the "working poor" he can only afford 1 flat screen TV. 1 I-Pad and only 1 car. .. life is so rough now.

prairie2 said...

Right wingers always "know somebody" to fit into their pointless story. His friend describes himself as "working poor"... How is that relevant to the actual poor? Is your imaginary friend named Harvey and have long ears? The point anonymous, is that you are next to become one of the working poor and it won't be imaginary.

Anonymous said...

People pick and choose. I drive a Jag...a fifteen year old one. Cheaper than a Kia or almost anything else. Don't have a big screen TV, fancy stero, go on vacations, eat out much. We do eat well by watching where we shop and how we shop. I've known people that choose to spend their little money on such things as travel at a back packer level, racing a very old racer, doing a bit of flying through a club and so on. What you do with your money is to a large degree is your own business.

Given the way that America runs on unbridled consumerism, we among other people are not doing our part by buying the latest and greatest on credit, "needing" a bunch of TV's and cable and so on...but while I dream of an older Ferrari (they are just so darn pretty) in some ways I'm pretty content.

Some poor spend their money in bars, some on food, some on trying to survive in an apartment with no insulation (while the snow is about three feet on the ground...been there done that).

I always admire the Republican view that since one person "cheats", unions, unemployment, Medicare, Social Security Disability and on and on ... are bad, evil and un-American. But they don't have any problem with the corrupt companies selling us toxic food, "investments", bribing politician, screwing their workers, cheating the people that buy their products, cheating their workers and on and on. They still believe in "trickle down" when the evidence is obvious that it doesn't work, never worked and really was meant to work in the way that it has, trickle up, take from the poor and the middle class and give to the rich. Socialism is bad for people but great for big business and rich people. Better to put work to a company that pays and treats their workers like crap...but pays their CEO and other high management millions than live government things to the government and pay the same or a few more workers decent pay and pay no one millions. I like number two myself.

I like profit and innovation but now we have a system that rewards innovation in figuring out new ways to rip off people, not figure out real innovation or real adding value. Medicare gets money out to Doctors for less than 3% overhead and the for profit providers of insurance have no problem with an overhead of 35% and feel it should keep rising. What innovation there except new and "better" ways to rip off the people that use (get screwed) by their services.

Republicanism...not working since Saint Ronnie but still tossing the same old BS.