Consumer Spending – Page 5 – The Wrongologist

Monday Wake Up – December 1, 2014

Today’s Wake Up is for entrenched power in America.

Inequality and political polarization has progressed to the point that the “The Hunger Games” trilogy is being taken seriously as literature with an important message for our time.

Its symbols are appearing in protests around the world and have made it into opinion columns:

Some protesters in Ferguson, Missouri, have adopted Katniss’s revolutionary slogan, “If we burn, you burn with us.” In Thailand, students flashing District 12’s three-fingered salute — a symbol of protest in the film — have recently been arrested. (The salute has apparently been outlawed since spring.) In a few short years, “The Hunger Games” and its symbology have become a part of the cultural commons.

America’s upper middle class thinks that inequality is an issue because it means low GDP growth, solely because people can’t buy enough consumer products to create good jobs. However, there could be an inflection point ahead when having more consumer goods ceases to be the goal of the middle class, or the people in poverty.

Look back at the French and Russian monarchies for a lesson about what that transition might look like, and how fast it can come about.

Today’s wake up music isn’t designed to get you dancing. It is the political anthem, “We Can’t Make It Here” by James McMurtry. McMurtry is the son of the novelist Larry McMurtry. The song won the 2005 Americana Music Award for song of the year. Music critic Robert Christgau has ranked “We Can’t Make It Here” as the best song of the 2000s. Bob Lefsetz said that “We Can’t Make It Here” has stood the test of time because of its unmitigated truth. Listen, while thinking that this was written in 2005, not this year:

Sample lyrics:
Will I work for food, will I die for oil,
Will kill for power and to us the spoils,
The billionaires get to pay less tax,
The working poor get to fall through the cracks

Monday’s Links:

Millennials are having to choose between affordable housing and jobs. It has always been true that there are fewer jobs where housing is affordable, but today, those two halves of the American Dream are living farther apart. Jobs with high wages are in unaffordable cities. The affordable homes cluster in the cities with lower wages and less upwardly mobile families.

Governor Christie (R-NJ) gives early sign that he is running for President. Christie vetoed a bill that would have banned crating pigs. New Jersey has few pig farms, but they are widespread in Iowa.

You can unknowingly lease a dog in San Diego CA. People who thought they purchased a dog using time payments actually leased the pet. After 27 months of payments, they could pay a $93.52 fee to end the lease, or $187.04 to purchase the pet. Why not just get a rescue animal? Read the paperwork, people! This is probably the next Wall Street securitization scheme.

Pope raises eyebrows by saying:

When we read about Creation in Genesis, we run the risk of imagining God was a magician, with a magic wand able to do everything — but that is not so…

His point was that Catholics should believe in evolution and the big bang theory. Next, Kansas and Texas will probably try to excommunicate him. Clearly, he’s been confused by those science-y people.

News from Russia:

Are the sanctions working? Russian firms that are under sanctions by the West must refinance $20 billion by April-sanctions are making that difficult.

There is a serious nuclear waste problem in the Arctic, brought to you by Russia. According to a joint Russian-Norwegian report issued in 2012, there are 17,000 containers of nuclear waste, 19 rusting Soviet nuclear ships and 14 nuclear reactors cut out of atomic vessels sitting on the bottom of the Kara Sea. The worst case scenario is described as “an Arctic underwater Chernobyl, played out in slow motion.” Oh, great, and I was worried about Crimea.

Water thievery is growing in California along with the drought. Thieves are cutting pipes and taking water from fire hydrants, storage tanks, creeks and rivers to get their hands on the precious commodity.

Thought for the week:

I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong. –Katharine Graham (Owner of the Washington Post)

Sunday Cartoon Blogging – November 30, 2014

Thought for today: “We are what we repeatedly do.” Aristotle

And some things, we repeatedly do over and over. Take Ferguson, possibly becoming a new Selma. Or take our bad economy, or take Afghanistan.

This month, Americans got some news the media spun as good: The US unemployment rate fell to the lowest level since late 2007. The 5.8% unemployment rate has been seen as proof of economic recovery. But, the jobs created were mostly part-time work, often at low pay. Yes, these jobs provided employment, but did little to improve the overall economy.

As a result, an increasing number of Americans – 800,000 more than last year – have taken a second or third job, according to the BLS. This is Americans taking jobs they don’t really want, unable to pay their bills despite work, and relying on food banks and welfare to make up the difference.

And the problem is growing. In October, about 7 million Americans had part-time jobs but wanted to work full-time. Over 2.1 million Americans rely on two part-time jobs to see them through. Another 4 million have one full-time job and one part-time job, a number that increased by 444,000 since last year.

These workers earn minimum or near-minimum wage, bringing home less than $1,000 a month. In 2013, 468,000 retail workers earned minimum wage or lower. According to Pew Research Center, 1.4 million cashiers – the most common part-time job – earn less than $10.10 an hour. Part-time Walmart workers often bring home between $200 to $400 every two weeks. This is a weak contribution to our economy. These workers, despite being employed, end up relying on government assistance in the form of food stamps and housing subsidies. And when the food stamps run out, they turn to their communities and the local food banks. So, there were Black Friday demonstrations atWalmart stores all across America, and some cities had this response:

Part of your taxpayer dollars are paying Wal-Mart employees the money that the Walton’s refuse to pay them. This isn’t complicated. If you have a job at Wal-Mart and you still need Medicaid, food stamps and subsidized housing, then you aren’t just getting shafted by the Walton’s. You’re also being paid your missing wages by the federal government. Another piece of your tax dollars supported military-style protection at Walmart as a partial response to the Black Friday demonstrations.

As Aristotle said, we are what we repeatedly do. Americans aren’t deadbeats. The Walton’s are the deadbeats.

Black Friday means something radically different to the homeless:

New normal on Thanksgiving:

Life in the Billionaire’s bubble:

Who gets the benefit of the doubt?

No need to attack America:

Reasons to be Thankful, Part II

The Wrongologist Blog passed 150,000 page views in the past year, up from 58k views a year ago. Many thanks to all of you who read, and especially to those of you who comment, or suggest that others check out the Wrongologist. The Wrongologist doesn’t publish this blog to make money, but because he wants people to make better decisions as part of our political process. We have an often stated antipathy for dissembling, mendacious politicians. We all know what is wrong in America, but we are paralyzed by ideology, and can’t (or won’t) do anything to solve our problems.

This blog hopes education and data will support arguments that help end our paralysis.

Hopefully more readers will leave comments. They help other readers understand the issues at hand. Anyway, 150,000 reads is a good time to take a moment and post thanks to those who follow the Wrongologist. If you enjoy the Wrongologist, please tell a friend about it.

I’d like to recognize Terry, Jimmy, Kevin, Monty, Fred and David for their continuing support of the blog, and thanks also to Ms. Oh So Right, its editor.

Here are some Thanksgiving cartoons to go along with the turkey.

Mr. Obama needs inspiration:

Some shop. Apparently, Black Friday was part of our early experience:

Some give thanks:

The love of thanksgiving dinner dies quickly:

The turkey wants to know about the future:

Kerry’s Hair Seems Unconvinced

From the “One picture worth a thousand words” Department:

[State Department photo/ Public Domain]
A shopkeeper sells an oil lamp to Secretary of State John Kerry during Mr. Kerry’s visit to the Muttrah Souk in Muscat, Oman on November 10th, during a break in the stalled nuclear negotiations with Iran.

Kerry said:

Sometimes one has to resort to unusual measures to solve all these difficult problems.

The guy in the souk, apparently named Ali Baba (of course!) told Kerry:

This genie lamp will magically enlighten the world about your wisdom.

Really? Enlightenment about John F. Kerry’s wisdom? It is difficult to resist commenting. Is Kerry purchasing tchotchke to put in one of his many homes? Is he onboarding a new foreign policy tool for his team? Possibly, Kerry is asking, “what can you tell me about its provenance”? Maybe he’s thinking that it would be cool to bring an exotic, three wish device to his next Skull and Bones drink up, and that he could summon a young woman from the lamp.

Is Kerry hoping that genie power is stronger than nuclear power?

Another way to view it is that the merchant is trying to close the deal by reassuring Kerry that the magic genie lamp will definitely grant the US Secretary of State three wishes. After all, it was made in China.

Maybe Kerry thinks he can use the lamp to:

1. Make Assad disappear
2. Make Putin disappear
3. Make Xi Jinping disappear

All Departments of State want a secret diplomatic weapon. Sadly, ours is not John Kerry.

And it probably isn’t a Genie Lamp purchased at the Souk

October 30, 2014

What’s Wrong Today:

This year, Republicans did not put up a challenger in 37 House races, while Democrats did not field candidates in 32 districts, according to the Cook Political Report. Another 8 House districts will see no contest between the main parties, because of the “top two” primary system used in California and Washington state. These 77 single-party House races are a high number by recent standards. In 2012, there were 45 of them.

In today’s Democratic Party, challengers seldom see a primary attack from their left, while Republican incumbents often fear attacks from the right. The Economist quotes Rep. Mike Capuano (D-MA) who is running unopposed: (brackets by the Wrongologist)

In politics, Republicans are like dogs, working as a pack [while] Democrats are the cats.

Few races for the House are closely fought. Roughly 80% of the 435 members have little or fear on election day. Given the very high costs of getting elected, there are fewer opposition candidates in historically safe House districts.

Turning to the Senate, in July 2014, 42 Senators (41 GOP and 1 Dem) succeeded in killing Bill S2569, which would have repealed the corporate tax break for shipping American jobs overseas (you need 60 votes to overturn a Filibuster). And on Nov 4th, Kentucky Sen. Mitch McConnell (R) and all the other Senators (running in this cycle) who voted against the Bill will be re-elected.

DC insiders think that this is a feature, not a bug. Would voters tolerate a Congress with hundreds of uncontested seats?

Thursday linkage:

If they show you a chart, apparently, you will believe whatever they are saying.

Independents favor Republicans by 20 points: Republicans have discovered that a sufficiently united party can obstruct everything and anything, but largely escape blame for the resulting gridlock.

The most politically engaged states: This study shows the most engaged states had a more highly educated population, higher per capita economic output and fairer tax systems. Massachusetts and Colorado were #1 & #2. West Virginia was #50.

The US is developing better relations with Iran: If permanent, the shift could drastically alter the balance of power in the region. If the nuclear issue is resolved, this could be Obama’s greatest legacy. But, it risks alienating key US allies, like Israel, Saudi Arabia and United Arab Emirates.

Dubai police to use Google Glass with facial recognition to ID bad guys: Well, last year Dubai announced it would supply its police with $400,000 Lamborghini’s for use at major tourist sites. Cool cars and stupid glasses.

Some of Bach’s masterpieces were composed by his wife: A documentary film, “Written by Mrs. Bach” makes a case that Anna Magdalena Bach actually composed some of works attributed to her husband, Johann Sebastian Bach. And she had to cook and clean.

Home ownership rate in the US fell to the lowest rate in more than 19 years: Entry-level buyers have been held back by stringent mortgage standards and slow wage growth. The share of first-time buyers was 29% in September for the third straight month, compared with about 40% historically.

Who is watching the World Series? Apparently, fewer of us than ever: The last time the World Series averaged more than 20 million viewers was in 2004 when the Boston Red Sox defeated the St. Louis Cardinals to take their first title since 1918.

Your Thursday Music Break:

Retail Store Closings Reflect Middle Class Income

Today, we take a business trip!

The retail sector of the US economy is not doing so well. The Census Bureau tracks retail sales in the US, and sales decreased 0.30% in September, compared to the previous month. Retail Sales month over month in the US gained an average of 0.37% from 1992 until 2014, reaching an all-time high of 6.71% in October of 2001.

This week, NCR, the maker of point-of-sale devices for the retail industry who call themselves “the global leader in consumer transaction technologies”, announced disappointing third quarter results. NCR blamed particularly the “challenging retail market” for its debacle. CEO Bill Nuti explained it this way:

Market conditions within the retail industry worsened in the third quarter, as evidenced by weak same store sales comparisons and financial results. This resulted in our retail customers spending more cautiously than anticipated and further delaying solution roll-outs…Additionally, ongoing retail consolidation continues to be a factor impacting our performance.

NCR has noticed that brick-and-mortar retailers are cutting back. “Ongoing retail consolidation,” Nuti called it. And some, like Radio Shack, are likely to use bankruptcy courts to do it. The structural problems in the brick-and-mortar retail industry include Sears, which is closing 300 Sears stores and 80 Kmart stores.

Some of us wonder why anyone still buys there. Retail chains, large and small, have announced an epidemic of store closings in 2014. Here are the “Top 20? announcements of store closings. For these 20 chains, the total number of stores to be closed exceeds 4,200. The number of closed stores is the first column:

Store closings add up: Jobs are lost, consumer spending weakens, and fewer tax revenues are paid to states and the federal government. This process has been going on for years. As a side note: when all this washes out, who is going to fill the vacant retail space in our malls? That’s one of the many secondary effects of the troubles in the American retail industry.

Hopefully, you haven’t invested in those Shopping Center Trusts.

Source: Wolf Richter

Yet, some box store retail continues to grow. Starbucks is opening another 1400 stores in the US by 2017, a 13% growth rate. They prove there is a market for things that can’t be ordered and delivered hot over the Internet. But, the openings of new retail locations for 2014 will not offset the closures. Much of domestic retail expansion in 2014 is about discount stores. Between Dollar General, Family Dollar and Dollar Tree, more than 1400 new discount stores will be opening, using the original Walmart expansion strategy. At the same time, Walmart is abandoning its own strategy. The New York Times reports that: (brackets by the Wrongologist)

Walmart’s woes [are causing] a change in corporate strategy. Walmart will slow store openings in the United States next year, opening 60 to 70 supercenters, compared with 120 this year…The Company is shifting its focus toward smaller Neighborhood Market grocery stores, and it said it would open 180 to 200 of them next year. It is also accelerating its online offerings…

Auto sales (mostly at retail box stores) have been booming, Reuters reports that: (brackets by the Wrongologist)

The annualized sales rate slowed to 16.4 million [units]…above last year’s 15.4 million, but well below the 17.5 million [annualized] pace in August.

This performance was partly due to cheap money, long financing terms, and a focus on subprime customers. Jim Lentz, US chief executive at Toyota Motor Corp:

We are seeing more ‘subprime,’ which is good.

In one report, a 71 year old Queens NY woman on food stamps got a $16,000 loan on a used car:

After two test drives and about two hours, the dealership found her a loan: $16,000 financing for a used 2014 Ford Fiesta. There would be a bank fee of about $4,000, and she would have an interest rate of 20.23%

Subprime, indeed. As for the role of consumer spending in our economy, American consumers are stressed. Many have had to curtail their spending, or make up the difference with borrowed money. Closing retail stores may be the canary in a coal mine for our consumer economy. For some business owners, considering some retail store analytics might provide insight into how to keep their stores open.

The best measure of economic security is ownership of wealth. Yet, using Median Wealth as a yardstick, the middle class in the US ranks only 27th in the world. Here is how we rank against two of our allies:

#27 USA: $44,911 ? hardly enough to pay for an operation in a US hospital
#1 Australia: $219205
#6 United Kingdom: $111,524

Global wealth has reached a new all-time high of $241 trillion, up 4.9% since last year and 68% since 2003, with the USA accounting for 72% of the latest increase.

Perhaps the solution in the US is to not to tax based only on income, but to tax based on income and assets. If you own or control 80 to 90% of the assets of this country, and the country’s resources are securing, maintaining, and protecting your assets, it stands to reason that you should also be bearing the majority of the tax burden of the country.

The Wrongologist

Geopolitics, Power and Political Economy

Category: Consumer Spending