December 11, 2009
By Douglas McIntosh
Over one year ago, November 4th, 2008, I wrote an essay about last year's non holiday season. After the screaming stopped, the retail corpses were autopsied and the final numbers came in, my essay was shown to be dead on target. The holiday retail season for 2008, the period from Halloween to New Years, came in the worst in forty years. Forty years being 1968, the year of the Chicago Riots, the TET offensive and the murders of Robert F. Kennedy and Martin Luther King. The holiday season came in the same as when I was 14 years old. The results of that, as I predicted, were mass retail chain bankruptcies, retail store closings, imploding property taxes, mall bankruptcies and a collapse in commercial real estate values. I was on target and on budget as the construction phrase goes.
As to the charge the US economy didn't collapse in the spring of 2009, I am openly bemused by that one. Except for the rigged US stock markets, virtually every single sector and measurement of US economic activity imploded in the spring. Every single one. I find it similar to the famous question, "If a tree falls in the forest and no one hears the sound, did it fall?" The answer is yes. I would say the economic version of this question would be, "If an economy implodes, and the lying media shills, court jester economists, hack politicians and corrupt central bankers don't admit it, did it fall?" I would again say the answer is yes. A quick look at year to year tax withholdings, food stamp usage and the like gives a more accurate reflection of the real economic situation out there. You can only fake the employment numbers, the growth numbers and other economic statistics so much. Eventually, the objective economic reality will overwhelm the spin.
For instance, any discussion of the health of the US economy must include the recently revealed fact total real estate value in the USA went down at a $2 TRILLION rate per year in 2007, 2008 and 2009. $2 TRILLION is roughly 20% of our total Gross Domestic Product per year. I find it openly crazy to say you had a 20% loss in American net worth, all the while the shills, hacks and frauds running things are talking about green shoots etc. etc. etc. My view is the only way you are going to see these green shoots is if you have been smoking some green buds, as in Thai Stick or some other form of pot. In fact, based upon the delusions, rantings and fantasies regularly sprouted by the mass media, economists and central bankers, I would say LSD is involved. There are no green shoots. There is only the ongoing, real time implosion of the real American economy. Since I am now unemployed, my call center job went to Arkansas, our domestic version of China, I find it strange to be having a conversation on the health of the American economy. The American economy is in the terminal stages of fiscal collapse. Period.
As we enter the fabled holiday retail season for 2009, the usual list of suspects, media shills, political hacks and evil central bankers are spewing the usual lies, half truths, distortions and fraudulent statistics that is their modus operandi. This year it doesn't matter. If you get hit on the head with a two by four, the bump and blood will supersede someone saying you haven't been hit, but are only imagining it. So far this holiday retail season we have seen the even more fabled "Black Friday" turn out to be a dud. Despite the claim there was a one half of one percent sales increase, which I personally doubt, I think a few facts leap out at you. If, as the experts say, there were more people shopping this year, then there should have been a bigger sales increase simply due to more people actually shopping. What happened instead was more people shopped and actually spent less than they did last year. Given that fact this "sales increase" was coming off a 40 year low in holiday sales, a reasonable person would conclude that roughly equaling those kinds of low sales is not an improvement. As usual, the experts feigned surprise, even though polls have shown most people plan on spending significantly less than they did last year. Me thinks the experts express their surprise too much. I realize they are bought and paid for, still they should at least not openly act like idiots.
After this dismal start to the 2009 Christmas shopping season, the experts tell us to expect the retail version of the Virgin Birth; namely, a retail spending surge from the Thanksgiving Weekend's Black Friday to Christmas itself. I use the word Christmas, politically incorrect domestic terrorist that I am, and not the more PC word of holidays. Considering where America is right now, as a culture, a society and a people, I don't have time for any politically correct idiocy. At any rate, the latest retail sales figures show a stunning 21% decline in retail spending from the same week in 2008, roughly November 30th to December 5th or so. Hence the fervent prayers from the powers that be for a retail spending surge. The article I read quaintly put that it would take a retail spending surge in the two weeks left to Christmas to make up the deficit. As things stand right now out in retail land, we are currently doing worse than we did in 2008, which was the worst holiday season in forty years. Cutting to the chase, we are going to end up with a 2009 Christmas spending season that goes back to 1955 or so, when Bing Crosby released his "White Christmas" album.
The "official" sales figures for November were expected to be up 3 to 4%. Instead, they were down 3/10ths of a percent. The reason the court jester economists expected a 3% increase from November 2008 was the figures were so bad last November. Again, we are spending less than we did then, when we spent at 1968 levels. The court jester economists missed their projections by at least 3%. And then came the numbers for Black Friday itself and the week which followed, also lower than the "experts" forecast them to be. At this point, the expert opinion on the economy resembles a game of pinning the tail on the donkey. Or whacking at a Pinnata while blindfolded. Or maybe even throwing darts after drinking a pitcher of beer. The court economists have been consistently wrong now for quite a while. They are shown time after time to be engaged in the kind of wishful thinking common among our economic, political and media elite.
Here we are midway through the Christmas spending season, a season where retailers usually make their money. If they aren't making sales, then they aren't making money. And if they aren't making money, they will, just as they did in early 2009, start to crash and burn. Wal Mart is already starting to lay off the temp employees they hired at Thanksgiving. Wal Mart is laying these people off after less than two weeks of work, as well as cutting the hours of their full time employees. When Wal Mart is in trouble, the rest of retail must be in even worse shape. Just as I wrote last November for 2009, we will again repeat the retail bankruptcy cycle in early 2010. Instead of Circuit City and Mervyns, this time around we are talking the big boys. Potentially Sears/Kmart are among the stores listed as in trouble. Another thing to be factored in is the lack of short term credit for retailers to buy inventory and pay overhead. In addition, credit card companies have increased interest rates they charge and also cut the credit limits for cardholders. Banks, despite the so called TARP funds which were going to increase bank loans, have virtually eliminated Home Equity loans and also raised their credit card interest rates. In other words, the endless supply of credit normally used to finance Christmas spending isn't there for the second year in a row. And finally, we have the job situation, the foreclosures, the 401K losses et al. The consumer, even if they wanted to spend, which they don't, does not have the economic capacity to do so.
Go back and reread my original "The Christmas Retail Death March" from November of 2008 here at the Q files. If I seem to be merely repeating myself now, it is because we are merely repeating the exact same economic scenario as 2008. Since the causes are the same, the effects and results will be the same. Doing the same thing as you did last year, will result in the same result as last year. And since that result was retail bankruptcies en mass in early 2009, we may safely assume that with the same input as last Christmas retail season we will get the same results in 2010 we got in 2009. All this talk of economic recovery and the end of the recession is garbage. We are not in a recession, we are in a debt based depression. If 70% of the USA's economy is based upon consumer spending, and the consumer isn't spending, what does that tell you? It tells me we haven't begun to deal with the systemic corruption at the root of our economic troubles. Until we deal with the "bezzle" as Karl Denninger puts it, then there will be no recovery. The decline in consumer retail spending is merely reflecting the underlying confidence issues we are facing. On a whole range of economic issues the true issue is what people think about the situation. Mass media lies to the contrary, the dismal retail sales figures show what people truly think about their own personal economic situation.
Round two of the retail death march has now begun. Retail has arrived at the prison camp where they will be starved, beaten and eventually weakened to death. Some of them may survive long enough to be rescued. Others will not. We are entering King Rat time in retail. At least this is how I read the retail spending results. Then again, I'm quite happy on the economic fringe.