Tuesday, May 3, 2011

The Economy: “Brother, Can You Spare a Dime?”

“Brother, Can You Spare a Dime?”
by Larry Doyle

“And thus we stand at the precipice...” -Loki

"As we inch our way along the economic landscape we witness more comparisons to the economic malaise of The Great Depression. I take no pleasure in writing on these topics and of these comparisons but they are a simple and regrettably a largely unspoken reality. You do not need to read Sense on Cents to be aware that our wages and incomes are not keeping pace with the cost of living. You do need to read economic blogs, though, because the reality of our income situation and the impact on real consumer spending habits is often left untouched by major media outlets.

Although Ben Bernanke would define the current inflationary and economic trends as transitory, perhaps he should try to explain that to the couple that is struggling to keep their head above water. Where do we see growing evidence of these struggles. Let’s dive inside "The 9 Places Where Inflation Is Crushing Us" to learn the following startling statistic…
    
Wages: Perhaps the most insidious factor of our current inflationary spiral is the fact that while all these other items are costing more, household purchasing power is shrinking because wages and salaries aren’t keeping up. While the consumer price index rose 2.7% in March to clock the fastest 12-month pace since December 2009, a staggering 18.3% of personal income is now made up of food stamps while wages account for just 50.5%. That’s the lowest since the government started keeping records in 1929. Not a lot of purchasing power in those numbers.

In light of this fact, it should come as no surprise that officials from Wal-Mart are witnessing that by month end many of their customers are ‘running on empty’. CNN Money recently highlighted this fact in reporting, Wal-Mart: “Our Shoppers Are ‘Running Out of Money’, Wal-Mart’s core shoppers are running out of money much faster than a year ago due to rising gasoline prices, and the retail giant is worried, CEO Mike Duke said Wednesday. “We’re seeing core consumers under a lot of pressure,” Duke said at an event in New York. “There’s no doubt that rising fuel prices are having an impact.”
 
Wal-Mart shoppers, many of whom live paycheck to paycheck, typically shop in bulk at the beginning of the month when their paychecks come in. Lately, they’re “running out of money” at a faster clip, he said. “Purchases are really dropping off by the end of the month even more than last year,” Duke said. “This end-of-month [purchases] cycle is growing to be a concern. Wal-Mart (WMT, Fortune 500), which averages 140 million shoppers weekly to its stores in the United States, is considered a barometer of the health of the consumer and the economy. To that end, Duke said he’s not seeing signs of a recovery yet. With food prices rising, Duke said Wal-Mart is charging customers more for some fresh groceries while reducing prices on other merchandise such as electronics. Wal-Mart has struggled with seven straight quarters of sales declines in its stores.

While Wall Street revels in the easy money provided by Ben and the economic engine of overseas markets, the reality of middle America is declining incomes and more people getting squeezed. These issues are not cyclical but structural in nature. These structural issues and structural failures run across many segments of our social fabric (political, economic, social). Let us not forget this reality nor these people who are truly hurting. What will we do about this situation? The very future of our nation and our society lies in question. How will we write this chapter in our history?”
Author's website: http://www.senseoncents.com/

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