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Saturday, June 28, 2014

Don't mind the man behind the curtain. I am the great and powerful OZ. GDP doesn't matter. Deficits don't matter. Structural Unemployment doesn't matter. Wage growth doesn't matter....

The virtues of ignoring GDP

Dropping a bad habit

Jeroen van den Bergh | April 13, 2010
It is now widely recognized that GDP has many shortcomings as an indicator of social welfare. It is time for macroeconomists and policy makers to finally take action.



Here’s Why a Decline in GDP Doesn’t Matter One Bit

The details weren't bad, and the data was old, so investors should look ahead


Why GDP doesn’t cut it anymore

By Heather Gautney, Special to CNN

CBS Tries To Spin ‘Nasty’ GDP Data; ABC, NBC Ignore -2.9 Percent Drop

Despite dramatic economic downgrade, ‘Evening News’ gives little more than a minute to GDP.
After downplaying bad economic news for months, the broadcast networks continued their head-in-the-sand approach once again.

The Bureau of Economic Analysis (BEA) revised earlier growth estimates sharply downwards. It announced on June 25 that found the U.S. economy actually shrank at an annual rate of 2.9 percent during the first three months of 2014. Despite this grim statistic, only CBS’ “Evening News” covered it, of all the broadcast network morning and evening news shows in the first 24 hours after the data was released.

CBS only spent one minute and five seconds on the news. It worked desperately to find a silver lining, predicting “brighter days ahead” and a “strong rebound in the second quarter.”
Anthony Mason, senior business and economics correspondent, pointed out that it was the “worst quarter since 2009.” The first estimate, on April 30, found that economic growth had declined from 2.6 percent in the fourth quarter of 2013 to an estimated 0.1 percent for the first quarter of 2014. That was already revised downward to -1.0 percent on May 29. 

ABC and NBC have consistently ignored GDP data in recent months. Only CBS covered the weak GDP after both previous estimates.

On June 25, CBS dismissed the troubling estimate, pointing to strong jobs, housing data and auto sales for the next quarter. Mason assured his audience that, “the latest numbers suggest we’ve had a strong rebound in the second quarter which ends Monday.” While Mason admitted the economy was “vulnerable,” anchor Scott Pelley said, “but brighter days ahead at the moment.”

Friday, June 27, 2014

COOL STUFF DEPT;

Ancient coin that could explain murder of would-be king fetches £78,000 at auction

  • Darrin Simpson found the 1,200 coin while sheltering from a heavy storm
  • The coin collector tested his metal detector and investigated the sound
  • The coin had a guide price of £20,000 before it was auctioned in London
  • Mr Simpson will share the sale price with the farmer who owns the land where the coin was discovered


A rare silver coin has fetched £78,000 at auction – because it could be a clue to a 1,200-year-old murder.

It was struck in the reign of East Anglian ruler Aethelberht II and describes him as king – the only time this title has been found on a coin of his.
His ambition may explain his beheading in 794 on the orders of Offa, the more powerful king of Mercia.

Darrin Simpson, who found the coin in a Sussex field in March using a metal detector, will split the sale price with the farmer who owns the land.
'It’s fantastic, an amazing result. I am really quite shocked,’ said the 48-year-old.
The Anglo-Saxon coin went under the hammer on Wednesday at London auctioneers Dix Noonan Webb with a guide price of only £20,000.
A spokesman said: ‘This coin could easily have been destroyed by a plough or a digger or just a shovel.
‘We don’t know when it went into that field but it was probably well before the Battle of Hastings. It’s miraculous that it has survived.’
The rare Anglo Saxon silver coin, pictured was sold for £72,000 after an auction exceeding its guide price due to its possible link to a 1,200 year murder
The rare Anglo Saxon silver coin, pictured was sold for £72,000 after an auction exceeding its guide price due to its possible link to a 1,200 year murder


A spokesman for international coin and medal specialists Dix Noonan Webb said 'This find by Darrin changes our knowledge of Anglo Saxon coinage. 
'Saxon coins weren’t just used for day-to-day transactions, they were a way for rulers to project their image.
'If Offa thought Aethelberht was getting too big for his boots, that might be why he was so brutally murdered.'
According to legend, Aethelberht’s severed head later fell off a cart and rolled into a ditch.
After the bloodied head was found, it was said to have restored a blind man’s sight, resulting in the dead king being declared a saint.

Thursday, June 26, 2014

GDP DROPS OFF A CLIFF AS RECOVERY CONTINUES TO PICK UP STEAM:

Worst Q1 GDP since recession

Q1 GDP fell 2.9% in the first quarter, but don't freak out, the economy is looking better.

 

Economy in freefall? 1Q revision shows shrinkage of 2.9% 2Q should look much better

 

Thursday, June 19, 2014

TECHNE: Timeless Art


http://www.gold-stater.com/images/greek/082MSCARTHAGESTATER.JPG
The Greek word for art is Techne.  Yet "art" is a very poor translation of Techne.  In English, the word "art" has no real definition.  It's one of those many words, like "pornography" or  "authenticity" wherein the modern sophisticated human is content to just "feel" they "know it when they see it."

For the Greeks, words had very specific meanings.  Just as sentences had enormously complex yet very specific structures.  The Greek word Techne meant "great skill."  For the ancient Greeks, an Artist was one who had developed tremendous skill at any discipline.  This could apply equally to oratory, painting, horse riding, play writing, weaving, what have you.

Modern sophisticated humans like to think that one can have great skill simply "as an artist."  To the ancient Greek this would have been an absurd tautology, akin to saying one has "great skill at having great skill."

This type of sloppy thinking is endemic in the "art world" which celebrates "artists" that have no discernible skills at any discipline save that of "making art."  Which is why "artists" like Jeff Koons can make hundreds of millions of dollars selling pieces that require no particular skill at any discipline.

The Art of the Ancient Greek Engravers was a showcase for their tremendous skill.  One need have little art historical training to appreciate the technical brilliance of these artists.

And now that modern sophisticated humans can purchase the Ancient Greek artworks that have been certified as genuine and unaltered, they are finally beginning to attain values commensurate with their technical brilliance.
http://www.gold-stater.com/images/greek/IMG_0004herc.JPG

There's no inflation in the Fed Model. Too bad we don't live in the Fed model




Good thing there's no inflation, huh?



As long as you don't need food:


On the rise: The seasonally-adjusted price index for meats, poultry, fish, and eggs hit an all-time high in May, according to data from the Bureau of Labor Statistics (BLS) \

EDUCATION
 

 HEALTH CARE:






















FUEL:







Sunday, June 15, 2014

Who believes in the world recovery myth? Not the World's Central Banks.

The “WHY” Of Negative Rates

The fear of sliding into a deflationary spiral currently outweighs concerns about future inflation. In moves similar to those taken by central banks in the UK, Japan, and the U.S., the ECB has pumped liquidity into the markets in an effort to stimulate their economy. But, much of this liquidity has never made it into the marketplace and, instead, has been locked away in the vaults of the major banks. According to the Financial Times (June 6, 2014 edition), European banks held €120 billion ($163 billion) of excess liquidity on deposit at the ECB. Unlocking these funds by putting them back into the system to be exchanged and “recycled” would certainly give a lift to European Gross Domestic Product (GDP).

That is what these central bankers are trying to do with the negative discount rate – to try and increase the “velocity” of the money they have placed into the system in order to get more bang for their bucks (or rather euros).

The St. Louis Fed defines Money Velocity as, “a ratio of nominal GDP to a measure of the money supply (M1 or M2). It can be thought of as the rate of turnover in the money supply – that is, the number of times one dollar is used to purchase final goods and services included in GDP.”1
 

By charging banks to park money at the central bank, the ECB hopes to convince them to lend these funds out, putting them back out into the economy and increasing the velocity of this money. But, the question remains: will there be enough loan demand from credit worthy borrowers? After all, banks are interested in making money and the easiest way to do this is to lend funds at a greater rate than they are paying depositors. I would think that if there was existing demand from credit worthy borrowers, these banks would be making loans instead of parking funds at the central bank at the previous rate of 0%.

Will They Migrate West?

Another question that comes to mind is just how long will it be until our own Fed joins in this experiment? The U.S. economy is not recovering as quickly as many of our leaders would like. True, the Federal Open Market Committee (FOMC) continues to taper their latest round of quantitative easing (QE), but I will remind readers of the Daily Pfennig® newsletter that, according to the minutes of the FOMC, this taper is not because the U.S. economic recovery is gaining steam, but, instead, because the bond buying was “not having the desired impact.” If the U.S. economy stalls out, Fed Chair Janet Yellen will be searching for a “new and improved” way to try and stimulate it. Investors could potentially be weary of another round of QE; so negative deposit rates may be something that the FOMC would consider.

Portrait of a stalled economy, dependent on Central Bank largesse:


Source:Federal Reserve Bank of St. Louis
(Click here to view a larger image.)
 
As illustrated by the above chart, the velocity of money in the U.S. has steadily dropped since peaking in January 1981. This graph from the St. Louis Federal Reserve measures MZM (money with zero maturity), which is the Fed’s broadest measure of the money supply. This measure best determines the frequency at which financial assets are switching hands within the economy.

As shown, the velocity of money here in the U.S. has steadily decreased over the past 30+ years from a reading over over 3.5 to the current reading below 1.5. This means that every dollar “created” by our Fed in an effort to stimulate our economy has much less of an impact when compared to prior years. Like the ECB, our Federal Reserve would love to figure out a way to turn this trend around and start to increase the velocity of money. Negative interest rates may just make their way across the Atlantic.

What would this mean? First, negative interest rates would typically lead to lower currency values as individuals search for countries and currencies which can offer better returns (and higher interest rates). I believe this was actually one of the unstated goals of the ECB’s recent move; they wanted to try and drive the value of the euro lower in order to make their exports more competitive.

However, the longer term consequences of these negative rates are still a mystery.   

But five years after near total collapse of the world financial system, world GDP is still anemic to non-existent.

Certain outcomes: 

Competitive devaluations of currencies continue.

Wages remain stagnant.

Cost of living continues to skyrocket.

Thursday, June 12, 2014

Japan: an early warning sign:

Abenomics is the name Western economists give Japan's program of Fed-style intense money printing and zero interest rate policies.  It's been hailed a a miracle for the Japanese economy.  Meanwhile savers and seniors are beginning to starve.

Abenomics Spurs Most Misery Since ’81 as Seniors Scrimp

Jun 6, 2014 1:45 AM ET
Save
Photographer: Junko Kimura/Bloomberg
A customer browses packaged beef at a Seiyu GK supermarket in Tokyo, Japan.
Mieko Tatsunami finds Prime Minister Shinzo Abe’s drive to reflate Japan’s economy hard to digest.
“The price of everything we eat on a daily basis is going up,” Tatsunami, 70, a retired kimono dresser, said while shopping in Tokyo’s Sugamo area. “I’m making do by halving the amount of meat I serve and adding more vegetables.”

Tatsunami’s concerns stem from the price of food soaring at the fastest pace in 23 years after April’s sales-tax increase. Rising prices helped push the nation’s misery index to the highest level since 1981, while wages adjusted for inflation fell the most in more than four years.

With food accounting for one quarter of the consumer price index and the central bank looking to drive inflation higher, a squeeze on household budgets threatens consumption as Abe weighs a further boost in the sales levy. The prime minister may be forced to ease the pain with economic stimulus, cash handouts or tax exemptions championed by his coalition partner.
“Price hikes without confidence that wages are going to rise will hurt appetite for spending,” said Masamichi Adachi, senior economist at JPMorgan Chase & Co. in Tokyo. “Abe has to raise people’s belief that the economy will improve.”
Photographer: Tomohiro Ohsumi/Bloomberg
The price of food in Japan is soaring at the fastest pace in 23 years after April’s sales-tax increase.
Food prices rose 5 percent in April from a year earlier, with fresh food climbing 10 percent. Onions soared 37 percent, and salmon -- a staple of the nation’s lunch boxes -- jumped 30 percent. Abe lifted the sales tax by 3 percentage points on April 1.

Wednesday, June 11, 2014

Yellen: Exit Strategy? We don't need no stinking exit strategy!

Fed Prepares to Keep Record Balance Sheet for Years to Come

Bloomberg Jun 11, 2014 6:36 AM ET

Photographer: Andrew Harrer/Bloomberg
Janet Yellen, chair of the U.S. Federal Reserve, walks out after a Financial Stability... 
Federal Reserve officials, concerned that selling bonds from their $4.3 trillion portfolio could crush the U.S. recovery, are preparing to keep their balance sheet close to record levels for years.
Central bankers are stepping back from a three-year-old strategy for an exit from the unprecedented easing they deployed to battle the worst recession since the Great Depression. Minutes of their last meeting in April made no mention of asset sales.

Officials worry that such sales would spark an abrupt increase in long-term interest rates, making it more expensive for consumers to buy goods on credit and companies to invest, according to James Bullard, president of the Federal Reserve Bank of St. Louis.

AND THIS FROM CHUCK BUTLER:
For those of you keeping score at home, Personal Incomes haven't risen in a few decades, but the cost of living just keeps rising. We as Americans can't seem to dig out of the hole we're in, and then we have the Gov't piling loads of debt on top of us. YIKES! What's a poor boy to do? Well, making certain that a portion of your investments are allocated outside of the dollar, so that you can recover the lost purchasing power of a weak dollar, would be the place to start!




Tuesday, June 10, 2014

Finally a Banker Confesses to the Obvious:

What If the Fed Has Created a Bubble?

36 Essentially, the Fed has been pushing stock and bond prices up to "bubblish" levels, in the expectation that they will inspire the kind of consumer spending, physical investments and hiring required to subsequently justify them.

The hope is that the convergence will occur in the context of full employment and inflation near the Federal Reserve’s target of 2 percent. So far, though, the wedge between asset prices and economic reality remains large, as last week's juxtaposition of new stock-market highs and still-anemic wage-inflation data demonstrated.

The danger is that the economic recovery will ultimately fail to validate artificially high asset prices, leading to significant financial instability and adverse “spillback” for the economy. The more comfortable the authorities are in their ability to counter -- and, if necessary, contain -- such potential instability, the greater their appetite for maintaining the stimulus that markets so love.

The key question is whether the recent strengthening in macro-prudential regulation (stress tests, capital requirements etc) is sufficient to warrant the risks that the Fed is taking with respect to future financial instability.

Given the number of moving pieces in the global economy, I suspect that few are in a position to answer this question with sufficient precision and conviction. After all, the regulatory framework is still evolving, bank behavior has yet to adapt fully, some institutions remain too large to fail and manage, and some activities are migrating outside the direct purview of supervisors and regulators.

Macro-prudential progress, while notable, has fallen short of what national authorities initially envisaged, and international coordination has fallen short of what is needed to make it all work globally. Investors would be well advised to take this into consideration in making their Fed-driven trades, especially if they involve positions that will be difficult to sell or unwind in more volatile markets.

Monday, June 9, 2014

Riddles page:


The Roman marble bust of the Emperor Hadrian that sold for €900,000 (£775,860) at Tessier Sarrou & AssociĆ©s.This bust of the Emperor Hadrian dated as contemporary to his reign (mid second century AD) just sold recently at the Sarrou and Associates auction in Paris,















This "selfie" snapshot taken by Andy Warhol just sold at a Sotheby's auction in New York.


NBC News

















One of these sold for 1.5 million dollars.  The other sold for 30 million dollars.

Guess which is which?

Hint:
Hadrian ruled over the world's most enduring empire at the absolute apex of its power.  He was a great aficionado and collector of Greek art, and he employed the greatest Greek artists of the era, one of whom certainly sculpted the masterpiece above.

Warlhol took lots of neat photos of the biggest pop celebrities of the 1960's - himself included!  And he also had the "concept" to take "ironic" photographs of pop icons like soup cans and cereal boxes. 




Sunday, June 8, 2014

KLEPTOCRACY: ACT ACCORDINGLY



Yesterday I went to the bank to pay for the purchase of hard assets in Europe.  The Chase Bank charged me 3 percent to transfer funds from US dollars to Swiss Francs.  THREE PERCENT.

A dealer in hard assets generally charges about 5 percent to procure an item for a client.  On a hundered thousand dollar item, you make $5000 for facilitating a transaction.  This facilitation requires weeks of ground work, negotiation, and years of study, accumulated experience and networking.

The bank takes 3/5 of that hard earned profit in a service that takes no expertise, no knowledge, and requires 5 minutes of work, done mostly by a computer.

How can they steal almost all your profit?  Because they have a monopoly on these transactions given to them by the government.

They steal because they can.  They steal because they believe it is good business to steal.

Of course, you can charge your client 8 percent to make up for the bank's unconscionable greed.  But that necessarily slows business and will ultimately wreck certain transactions.

And this is what our economy has come to.  Any transaction that the bank can destroy by taking as large a bite out of it as they possibly can, they will.  And then they will pat themselves on the back for being so sharp.

On a much large scale we see the banks destroying entire industries by jacking up the price of commodities like aluminum and copper by buying the warehouses and the shipping lines and manipulating supply and cost so that their own traders can bet on the direction of the costs they control.  In so doing they destroy the cost structure for hundreds of industries reliant on these commodities.  The costs are then passed on to tax payers.

The same holds true in so many areas of the world economy it would take a tome to list them all.  Look them up yourself.

The result is to destroy the  business activity they are supposed to be promoting.  The result is that 5 years into a 'recovery' from a crash caused entirely by unbridled bank greed, real GDP is still non existent. 

This is to say nothing of how they've turned the entire world paper financial market into a giant rigged casino.

And then there is ZERO INTEREST RATES which benefits the banks trading operations while stealing money from every tax paying saver.  And in Europe this has become NEGATIVE INTEREST RATES.  It will soon be the same here.

Meanwhile NOT ONE SINGLE MEDIA OUTLET WILL TOUCH THIS ISSUE.  Not NEWSCORP.  NOT COMCAST.  NOT VIACOM.  No - they spend all their time talking about Liberals and Conservatives  in a cynical infotainment side show.

I would like to point out that the job of the banking system is supposed to be  to EFFICIENTLY ALLOCATE CAPITAL.

It is now to STEAL CAPITAL.

ACT ACCORDINGLY.  Get you money out of bank controlled paper and into hard assets.


Thursday, June 5, 2014

Bad News is no longer good news. Now Horrible news is Great News.

 

Revised figures for US GDP growth in the first quarter of 2014 show the economy actually shrank (- 1 %). But the trend line is still up, and experts don't think this points to new problems.

S&P 500 Tags Another New High On the Heels of GDP, Jobless Claims Data

Fed's Lacker: Expect a positive GDP reversal in the second quarter.

Draghi Takes ECB Deposit Rate Negative in Historic Move

The European Central Bank cut its deposit rate below zero and said it would announce further measures later today. President Mario Draghi reduced the deposit rate to minus 0.10 percent from zero, making the institution the world’s first major central bank to use a negative rate.

U.S. Stock-Index Futures Gain on ECB Policy Action (bloomberg)

 

Home prices decelerate, but that doesn't spell end to US housing recovery (bloomberg)

Retail sales slow, but growth outlook still upbeat (reuters)

 

Meanwhile, in Europe, they can't seem to get with the program: (Stupid furners)

 

 "US economy goes into reverse as fears grow over recovery"


 

Deutsche Bank Economist Smashes The Myth That A Big Recovery Is Right Around The Corner


Tepid US recovery – it’s the middle class, stupid

When most of the gains of growth are going to a small slice at the top, little of the money is spent

 

 

 

 

 

Wednesday, June 4, 2014

Piketty's Critics agree with him 100 percent:

"Buying Time" Doesn't Fix Financial Crises, It Makes the Next One Worse   by Charles Hugh Smith.

The strategy of "buying time so the financial system can heal itself" by protecting a systemically destabilizing financial sector has failed because it could only fail. 

 

The core strategy of central states and banks to fix the Global Financial Meltdown of 2008 was to buy time: take extraordinary emergency monetary and regulatory measures to save the parasitic too big to fail banking sector and the rest of the crony-capitalist Wall Street parasites, and initiate an unprecedented transfer of wealth from savers and Main Street to the banks and Wall Street via zero-interest rates and credit funneled to the very players who caused the crisis. 


The idea was that the system would "heal itself" if authorities simply "bought time" by saving the financial sector from its own predation. The second phase of "buying time so the financial system can heal itself" was to institute policies (ZIRP, etc.) that restored the financial sector's obscene profits and socialized its losses by transferring them to the taxpayers. 

The terrible irony in the official strategy of "buying time so the financial system can heal itself" is the policies prohibit healing and guarantee the next financial crisis will be greater in magnitude than the last one.
 
There is only one way for any financial system to heal itself: enable the open market to discover the price of capital, credit, assets, collateral and risk. When participants finally discover the market price of their assets and collateral are much lower than the valuations claimed in credit bubbles, the market clears itself of bad credit and overvalued collateral in a market-clearing event in which overpriced assets are marked down, firms that overleveraged weak collateral are declared insolvent and liquidated, and creditors who can no longer afford their loans are declared bankrupt and their remaining assets liquidated to pay their creditors.
There is no other healing process but this one: enable transparent, open markets to discover the price of capital, credit, assets, collateral and risk and let those firms and individuals who overleveraged and made bets that blew up go bankrupt. 

What "buying time" has done is destroy the market's ability to price capital, credit, assets, collateral and risk, stripping the system of the essential information participants need to make rational, informed decisions. By crushing the market's ability to generate accurate pricing information, central state and banking authorities have insured the system cannot possibly heal itself while maintaining perverse incentives that guarantee the next financial crisis will dwarf the previous one. 

The official policy of "buying time" has another fatal flaw: it maintains a parasitic financial sector that expanded to a structurally unhealthy dominance over both the political and economic sectors. Once financial profits ballooned from a modest share of corporate profits to dominance, this enabled financiers and bankers to buy political protection of their skimming and scamming:

The strategy of "buying time so the financial system can heal itself" by protecting a systemically destabilizing financial sector has failed because it could only fail. The policies that "saved the financial system" only saved it from the healing process of the market discovering the price of capital, credit, assets, collateral and risk.

Tuesday, June 3, 2014

the PIketty controversy

The Piketty controversy sweeping the economic press is amusing considering there's almost nothing in the main of his argument that's at all in dispute:

A) "Jump-starting economic growth has relied too much on the Federal Reserve and not enough on fiscal policy," said French economist Thomas Piketty, author of the book on wealth inequality "Capital in the Twenty-First Century."  

B) "Those who are gaining from all this printing of money are not the people that you'd like to gain," Piketty said Monday on CNBC. "You certainly need to ask more of these top income groups who got between two-thirds and three-quarters of aggregate income growth over the past 30 years in this country."

C) He did acknowledge the important role the Fed, and central banks around the world, played in preventing a complete collapse of the financial system following the 2008 crisis. "But we've been asking too much of creative monetary policy."

















D)"If the growth performance of the U.S. economy had been exceptional, you know, 4 percent growth rate, 5 percent growth rate, then it would be OK. Everybody would get something," he said.
"But if you have relatively mediocre growth performance … and three-quarters of [the wealth] gets to the top, it's not a good deal for the middle class and the rest of the population."

So where's the controversy?

Piketty said his research shows that the gap between "the haves and have-nots" is going to back to levels not seen in 100 years. In the book, he also propose a host of policy changes to combat the problem, including an international wealth tax. 

AHA!

In other words Piketty proposes that SOME OF THE  4-19 TRILLION DOLLARS REDISTRIBUTED FROM THE TAX PAYER TO THE BANKING ELITES SHOULD BE REDISTRIBUTED BACK TO THE TAX PAYERS!

OMIGOD!  He's a SOCIALIST!

Sunday, June 1, 2014

Jim Quinn on the unreported Retail Collapse:

The absolute collapse in retail visitor counts is the warning siren that this country is about to collide with the reality Americans have run out of time, money, jobs, and illusions. The exponential growth model, built upon a never ending flow of consumer credit and an endless supply of cheap fuel, has reached its limit of growth. The titans of Wall Street and their puppets in Washington D.C. have wrung every drop of faux wealth from the dying middle class. There are nothing left but withering carcasses and bleached bones.


Once the Wall Street created fraud collapsed and the waves of delusion subsided, retailers have been revealed to be swimming naked. Their relentless expansion, based on exponential growth, cannibalized itself, new store construction ground to a halt, sales and profits have declined, and the inevitable closing of thousands of stores has begun. 

The implications of this long and winding road to ruin are far reaching. Store closings so far have only been a ripple compared to the tsunami coming to right size the industry for a future of declining spending. Over the next five to ten years, tens of thousands of stores will be shuttered. Companies like JC Penney, Sears and Radio Shack will go bankrupt and become historical footnotes. Considering retail employment is lower today than it was in 2002 before the massive retail expansion, the future will see in excess of 1 million retail workers lose their jobs. Bernanke and the Feds have allowed real estate mall owners to roll over non-performing loans and pretend they are generating enough rental income to cover their loan obligations. As more stores go dark, this little game of extend and pretend will come to an end.

Retail store results for the 1st quarter of 2014 have been rolling in over the last week. It seems the hideous government reported retail sales results over the last six months are being confirmed by the dying bricks and mortar mega-chains. In case you missed the corporate mainstream media not reporting the facts and doing their usual positive spin, here are the absolutely dreadful headlines:
  • Wal-Mart Profit Plunges By $220 Million as US Store Traffic Declines by 1.4%
  • Target Profit Plunges by $80 Million…as Store Traffic Declines by 2.3%
  • Sears Loses $358 Million in Q1 as Comparable Store Sales Plunge by 7.8%
  • Sales at Kmart Plunge by 5.1%
  • JC Penney Thrilled With Loss of Only $358 Million For the Quarter
  • Kohl’s Operating Income Plunges by 17% as Comparable Sales Decline by 3.4%
  • Costco Profit Declines by $84 Million as Comp Store Sales Only Increase by 2%
  • Staples Profit Plunges by 44% as Sales Collapse and Closing Hundreds of Stores
  • Gap Income Drops 22% as Same Store Sales Fall
  • American Eagle Profits Tumble 86%, Will Close 150 Stores
  • Aeropostale Losses $77 Million as Sales Collapse by 12%
  • Best Buy Sales Decline by $300 Million as Margins Decline and Comparable Store Sales Decline by 1.3%
  • Macy’s Profit Flat as Comparable Store Sales decline by 1.4%
  • Dollar General Profit Plummets by 40% as Comp Store Sales Decline by 3.8%
  • Urban Outfitters Earnings Collapse by 20% as Sales Stagnate
  • McDonald’s Earnings Fall by $66 Million as US Comp Sales Fall by 1.7%
  • Darden Profit Collapses by 30% as Same Restaurant Sales Plunge by 5.6% and Company Selling Red Lobster
  • TJX Misses Earnings Expectations as Sales & Earnings Flat
  • Dick’s Misses Earnings Expectations as Golf Store Sales Plummet
  • Home Depot Misses Earnings Expectations as Customer Traffic Only Rises by 2.2%
  • Lowes Misses Earnings Expectations as Customer Traffic was Flat
  •  
  •  
  • There is 47 square feet of retail space per person in America. This is 8 times as much as any other country on earth. This is up from 38 square feet in 2005; 30 square feet in 2000; 19 square feet in 1990; and 4 square feet in 1960. If we just revert to 2005 levels, 3 billion square feet would need to go dark. Does that sound outrageous?
  • Annual consumer expenditures by those over 65 years old drop by 40% from their highest spending years from 45 to 54 years old. The number of Americans turning 65 will increase by 10,000 per day for the next 16 years. There were 35 million Americans over 65 in 2000, accounting for 12% of the total population. By 2030 there will be 70 million Americans over 65, accounting for 20% of the total population. Do you think that bodes well for retailers?
  • Half of Americans between the ages of 50 and 64 have no retirement savings. The other half has accumulated $52,000 or less. It seems the debt financed consumer product orgy of the last two decades has left most people nearly penniless. More than 50% of workers aged 25 to 44 report they have less than $10,000 of total savings.
  • The lack of retirement and general savings is reflected in the historically low personal savings rate of a miniscule 3.8%. Before the materialistic frenzy of the last couple decades, rational Americans used to save 10% or more of their personal income. With virtually no savings as they approach their retirement years and an already extremely low savings rate, do retail CEOs really see a spending revival on the horizon?
  • If you thought the savings rate was so low because consumers are flush with cash and so optimistic about their job prospects they are unconcerned about the need to save for a rainy day, you would be wrong. It has been raining for the last 14 years. Real median household income is 7.5% lower today than it was in 2001. Retailers added 2.7 billion square feet of retail space as real household income fell. Sounds rational.
  • This decline in household income may have something to do with the labor participation rate plummeting to the lowest level since 1978. There are 247.4 million working age Americans and only 145.7 million of them employed (19 million part-time; 9 million self-employed; 20 million employed by the government). There are 92 million Americans, who according to the government have willingly left the workforce, up by 13.3 million since 2007 when over 146 million Americans were employed. You’d have to be a brainless twit to believe the unemployment rate is really 6.3% today. Retail sales would be booming if the unemployment rate was really that low.
  • With a 16.5% increase in working age Americans since 2000 and only a 6.5% increase in employed Americans, along with declining real household income, an inquisitive person might wonder how retail sales were able to grow from $3.3 trillion in 2000 to $5.1 trillion in 2013 – a 55% increase. You need to look no further than your friendly Too Big To Trust Wall Street banks for the answer. In the olden days of the 1970s and early 1980s Americans put 10% to 20% down to buy a house and then systematically built up equity by making their monthly payments. The Ivy League financial engineers created “exotic” (toxic) mortgage products requiring no money down, no principal payments, and no proof you could make a payment, in their control fraud scheme to fleece the American sheeple. Their propaganda machine convinced millions more to use their homes as an ATM, because home prices never drop. Just ask Ben Bernanke. Even after the Bernanke/Blackrock fake housing recovery (actual mortgage originations now at 1978 levels) household real estate percent equity is barely above 50%, well below the 70% levels before the Wall Street induced debt debacle. With the housing market about to head south again, the home equity ATM will have an Out of Order sign on it.
  • We hear the endless drivel from disingenuous Keynesian nitwits about government and consumer austerity being the cause of our stagnating economy. My definition of austerity would be an actual reduction in spending and debt accumulation. It seems during this time of austerity total credit market debt has RISEN from $53.5 trillion in 2009 to $59 trillion today. Not exactly austere, as the Federal government adds $2.2 billion PER DAY to the national debt, saddling future generations with the bill for our inability to confront reality. The American consumer has not retrenched, as the CNBC bimbos and bozos would have you believe. Consumer credit reached an all-time high of $3.14 trillion in March, up from $2.52 trillion in 2010. That doesn’t sound too austere to me. Of course, this increase is solely due to Obamanomics and Bernanke’s $3 trillion gift to his Wall Street owners. The doling out of $645 billion to subprime college “students” and subprime auto “buyers” since 2010 accounts for more than 100% of the increase. The losses on these asinine loans will be epic. Credit card debt has actually fallen as people realize it is their last lifeline. They are using credit cards to pay income taxes, real estate taxes, higher energy costs, higher food costs, and the other necessities of life.

The master plan has failed miserably in reviving the economy. Savings, capital investment, and debt reduction are the necessary ingredients for a sustained healthy economic system. Debt based personal consumption of cheap foreign produced baubles & gadgets, $1 trillion government deficits to sustain the warfare/welfare state, along with a corrupt political and rigged financial system are the explosive concoction which will blow our economic system sky high. Facts can be ignored. Media propaganda can convince the willfully ignorant to remain so. The Federal Reserve can buy every Treasury bond issued to fund an out of control government. But eventually reality will shatter the delusions of millions as the debt based Ponzi scheme will run out of dupes and collapse in a flaming heap.
The inevitable shuttering of at least 3 billion square feet of retail space is a certainty. The aging demographics of the U.S. population, dire economic situation of both young and old, and sheer lunacy of the retail expansion since 2000, guarantee a future of ghost malls, decaying weed infested empty parking lots, retailer bankruptcies, real estate developer bankruptcies, massive loan losses for the banking industry, and the loss of millions of retail jobs. Since I always look for a silver lining in a black cloud, I predict a bright future for the SPACE AVAILABLE and GOING OUT OF BUSINESS sign making companies.