Layoffs

Fires Rage, Words Fail

fire rage gc2smOff the keyboard of Thomas Lewis

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fire rage

Published on The Daily Impact on February 5, 2016


The Daily Impact has been a quiet place lately, and I will tell you why: words fail me. The scale of the global crash now enveloping us, and the fecklessness of the leaders pretending to protect and defend us, exceed the vocabulary of this wretched scribe. If one manages, however briefly, to comprehend the enormity of the multiple disasters bearing down on us, then one accidentally sees part of a presidential-candidate debate and has to pick up  pieces of one’s skull all over the room again.

How bad it is in the United States:

  • One verse that has been sung for years now by the “Don’t Worry, Be Happy” Chorus is that we are converting to a service economy, in which half of us will serve meals, keep house and otherwise cater to the other half, and that will work fine. But now — just now — the malaise that has been eating at all the other economic enterprises of the country has attacked the restaurant industry. “If services stumble too,” observes a writer on David Stockman’s website, “there truly is nothing left.”
  • Another verse from the aforementioned Chorus: We may not make much anymore, but we sure move stuff around, and that employs a lot of people and keeps the economy chugging along. Not so much anymore. “The Transportation Recession Spreads,” says Wolf Richter of WolfStreet, with the subhead “Hope came unglued all over again.” Orders for new 18-wheeler trucks have been falling since September of 2015, because of declining freight volumes, and after a slight recovery in December (hence the hope), plummeted nearly 50% (year-to-year) in January. Rail freight is experiencing a similar, vertigo-inducing slump.
  • American jobs of all kinds are being vaporized at a rate not seen since the Great Recession got traction in 2009. Just in January, layoffs quadrupled.  See this partial list of job cuts so far this yearand an assessment of the mass layoffs just ahead. Every month the government issues, and the “Happy” Chorus extols, monthly reports lauding robust job-creation and the continued low (seasonally adjusted, statistically weighted, seasoned-to-taste) unemployment rate, while ignoring the gut-wrenching disappearance of hundreds of thousands of people from the job market. These people, six million or so of them now, are not unemployed. They are vanished.
  • The U.S. oil industry, which was promoting itself just a few months ago as the progenitor of a new American Revolution, of a return to American energy independence, and on, and on — is a smoking ruin. Shale drillers are in the process of reporting losses of about $15 billion for 2015; reductions of 25 per cent and more in their balance sheets because of devalued oil; and levels of debt that  forced 42 oil companies into bankruptcy last year and will drive under many more than that this year. Nor is the carnage limited to the shale patch; from Exxon down, Big Oil is experiencing shrinking profits, tumbling stock prices and credit ratings.   

As glum as the situation and the prospects are nationally, they are even worse abroad — for China, Russia, Brazil, Venezuela, Canada and much of Europe and Asia. (Please, valued commenters, find me a country that is doing well, with rising employment and wages, a stable currency, manageable debt, decent health care and security for its citizens. Let’s write about it and then move there. Assuming it’s on this planet.)

Failing that, as I survey the tides of misery rising everywhere, the Horsemen of the Apocalypse riding everywhere, the hopes and dreams and people dying everywhere — words fail me.

All of this confirms me once again as an Age Optimist — a person who, despite everything, maintains a sunny unshaken faith that before these events play themselves out, he will be dead.

 


Thomas Lewis is a nationally recognized and reviewed author of six books, a broadcaster, public speaker and advocate of sustainable living. He also is Editor of The Daily Impact website, and former artist-in-residence at Frostburg State University. He has written several books about collapse issues, including Brace for Impact and Tribulation. Learn more about them here.

The Crash of 2015: Vultures vs. Jackals

From the keyboard of Thomas Lewis
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First published at The Daily Impact  April 25, 2015
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So. How have you frackers been feeling, lately? Just checking. (Photo by docentjoyce/Flickr)

So. How have you frackers been feeling, lately? Just checking. (Photo by docentjoyce/Flickr)

 


The crash of 2015 has been paused temporarily by a curious circumstance: a brawl among the financial scavengers who by now should have carted away the body parts of the great American fracking boom. Against all logic, financial vultures are fighting with financial jackals for possession of the corpse, and while doing so are pumping transfusions into it even though decomposition is already well under way. Here’s what’s happening:

The Vultures believe the decline of American oil fracking is only temporary, a product of the sudden decline in oil prices that struck last fall, and that with the inevitable return to $100-a-barrel oil, the frackers will return to profitability. Now, this is a curious thing to believe when it is easily determined that the companies involved have had negative cash flows since the very beginning of their revolution,even at $100 a barrel. Nevertheless, the Vultures believe in their scenario so fervently that they have been amassing cash with which to buy up prostrate frackers at the bottom of the market and thus make billions as the market rises, phoenix-like, back to the skies. Private equity firms such as Blackstone, Carlyle Group, Apollo, and KKR, for example, have raised about $30 billion and are just waiting to see the floor to begin their coup.  But where’s the floor?

Funny story about that. The Hyenas have a similar strategy but are using different tactics. They are the ones transfusing the corpse with fresh money, buying up junk bonds and penny stocks by the dump truck load so they will be in position for the resurrection — not because they have bought the company but because they have bought into it. Their injections are keeping the corpses alive enough that they are still twitching: the death certificate cannot be signed, and the Vultures cannot land. It’s a scavenger standoff.

This is yet another unforeseen consequence of two serious infections afflicting our financial system (leaving aside, for the moment, the ailments of the fracking boom). One sickness is the enormous amount of cash, the largely unearned wealth of the two per cent, sloshing around in the frantic hands of managers under orders to do something with it, make the clients some decent return on investment, you know, like 20%. The other is the cold dead hand of the Federal Reserve, holding interest rates for all safe investments to around one per cent, forcing the frantic to take their money to a casino somewhere and risk it all in search of the legendary 20%.

The stock-market casino is on fire and it looks like the roof is going to come down any day now, so they’re not going there. They’ve already blown up the housing market, and pretty well saturated the subprime auto-loan bonanza, and have bought up a gazillion foreclosure houses to rent out (and in the process have found out just how much it sucks being a landlord). “Over here!” someone yelled a few months ago, “I found 12%!” And the stampede was on, leading to the current contretemps between buzzards and hyenas.

But the zombie companies that have lured them in to the feast are, in fact, still dead. Bloomberg reports that half of the 41 fracking companies now doing business in the United States will be gone by year’s end. And that Schlumberger Ltd., the world’s largest oilfield services provider, will lay off 11,000 people, the second largest downsizing since the oil-price crisis began (the largest? Schlumberger’s elimination of 9,000 jobs in January). Rig counts are dropping and so is production.

The dispute between the vultures and the hyenas does not make the corpse they are contesting more valuable. It simply delays the disposition of the remains and the resumption of the Crash of 2015. For maybe a week.

 


Thomas Lewis is a nationally recognized and reviewed author of six books, a broadcaster, public speaker and advocate of sustainable living. He also is Editor of The Daily Impact website, and former artist-in-residence at Frostburg State University. He has written several books about collapse issues, including Brace for Impact and Tribulation. Learn more about them here.

 

 

The Crash of 2015: Day 29-30

From the keyboard of Thomas Lewis
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Maybe we could still live in the top floor? If we could just slow it down a little?

Maybe we could still live in the top floor? If we could just slow it down a little?

First published at The Daily Impact  January 29, 2014

A couple of things to keep firmly in mind as we watch the Crash of 2015 unfold, pretty much on the schedule I’ve been writing about here for six months. First, the drop in oil prices is not the cause of this disaster, merely an accelerant. The fracking industry is succumbing to its inherent high expense, toxicity, rapid depletion rates and over-reliance on junk financing. Similarly, the stock market crash we expect to follow the fracking collapse would have come anyway because of its inherent instability, and indeed may yet occur before the chain reaction in the fracking fields has run its course. And finally, what is happening to fracking is also happening to the legacy oil business, only slower.

Ignore the noise about how this is all a plot by Saudi Arabia, or by all of OPEC, to destroy the gallant frackers of America. The Saudis control the world oil business the way the legendary horse trainer said he controlled his horse: “I look real close and see what he’s going to do,” he’s supposed to have said, “and then I tell him to do that.” The Saudis look real close and see where the market just went, and then say yeah, we did that.

To remind ourselves of the sequence we’re expecting to see in this crash, beginning in the fracking patch: layoffs, contractions, capital starvation, production declines, defaults, junk-bond market collapse, widening financial damage, stock market crash, recession. So, how are we doing so far?

Layoffs and contraction, check: The number of oil rigs operating in the United States has dropped to its lowest since 2013, and most of that decline came in the Bakken play in North Dakota. The total dropped by 49 in the week ending Jan. 23, bringing the total down to 1,317, according to Baker Hughes. In seven weeks, The number of US rigs has dropped by a record 258. If the trend continues a few more weeks, there will not be enough rigs operating to maintain production, and analysts such as John Kemp of Reuters foresee a sharp decline in fracking production beginning at midyear.

The numbers are even worse than they look at first glance when you take into account that current procedure in the fracking patch is to use rigs to drill up to four wells from a single pad, rather than moving the rig each time. Thus a stacked rig doesn’t just mean the loss of one well, then another and another, but four wells, then eight, 16 and so on in the same time frame.

In slower motion, the same disaster is spreading through the legacy oil business. More than 30,000 layoffs have been announced across the industry as companies slash budgets, according to Bloomberg News. Exploration and production spending is expected to drop by more than $116 billion, a 17 percent decline, because of falling crude revenues, according to an estimate from Cowen & Co.  BP has frozen wages, Chevron has delayed its 2015 drilling budget and Shell has canceled a $6.5 billion Persian Gulf investment; New York-based Hess Corp. on Wednesday reported a fourth-quarter net loss of $8 million

Capital starvation, check: The fracking boom got this far with stock offerings, junk bonds, and “leveraged” loans. The stock prices of the operators have tanked, and the markets for more junk bonds and loans are essentially closed to frackers. (The reason we will continue to see production continue, even increase, in the short term is that the operators, in debt to their eyeballs, have to pump oil or die.)

The damage is already metastasizing to the general junk-bond market. The total value of such bonds issued is down one-third from last year; just this week, two offerings by companies not in the oil business — Presidio Holdings ($400 million) and Koppers Holdings ($400 million) — failed for complete lack of interest, even though they were offering as much as 11% return; investors in high yield mutual funds withdrew nearly a quarter of a billion dollars last week, a week that saw leveraged-loan funds bleed out nearly three-quarters of a billion.

Next, production declines and defaults. Stay tuned.

[UPDATE: Red flags up at Bloomberg Business News, which counts $390 billion vaporized by the oil implosion so far, with losses now “starting to show up in investment funds, retirement accounts and bank balance sheets.” Read it and run.}

 

***

 

Thomas Lewis is a nationally recognized and reviewed author of six books, a broadcaster, public speaker and advocate of sustainable living. He also is Editor of The Daily Impact website, and former artist-in-residence at Frostburg State University. He has written several books about collapse issues, including Brace for Impact and Tribulation. Learn more about them here.

 

 

WHAT THE FED HAS WROUGHT

Off the keyboard of Jim Quinn

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Published on The Burning Platform on November 16, 2014

shirt_FederalReserve_2

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The chart below might be the most powerful indictment of the Federal Reserve and our corporate fascist empire of debt ever created. Some people don’t get charts. Charts tell a story. This chart tells the story of elitist bankers supporting the agenda of a corporate fascist state, resulting in the gutting of the middle class. Anyone who views this chart in a positive manner is either a Federal Reserve banker or their paycheck is dependent upon the continuation of the pillaging of the working class. Corporate profits are at all-time highs. Profit margins have always reverted to the mean throughout modern history. If they remain at all-time highs then something is terribly wrong.

“Profit margins are probably the most mean-reverting series in finance, and if profit margins do not mean-revert, then something has gone badly wrong with capitalism. If high profits do not attract competition, there is something wrong with the system and it is not functioning properly.” – Jeremy Grantham, Barron’s

Here is the story I see in that chart. Corporate profits as a percentage of GNP have averaged 6.5% over the last 67 years. As you can see, it is a volatile figure. Corporate profits rise during expansions and fall during recessions. That has been a given over time. The reason corporate profits have always reverted to the mean was due to the basic tenets of free market capitalism. When a company is generating outsized profits, that industry will then attract new competitors, resulting in price competition and lower profits. From 1950 through 1971, corporate profits as a percentage of GNP fluctuated in a narrow range between 5% and 7%. This was a reflection of a market driven by competition, a non-interventionist Federal Reserve, and a government not captured by corporate interests.

It is no coincidence since Nixon closed the gold window in 1971 and unleashed greedy bankers, feckless politicians, and self serving corporate executives to utilize easy money and prodigious amounts of debt to financialize our economic system and deform capitalism. The Fed created booms and busts are clearly evident on the chart. Nixon toady Arthur Burns created an inflationary boom in corporate profits to 8% of GNP in the late 70’s followed by the collapse to 3% caused by Volcker having to raise rates to extreme levels to crush the Burns created runaway inflation.

You can see exactly when the Maestro assumed command at the Fed and proceeded to introduce the Greenspan Put, encouraging speculation, borrowing and mal-investment. His easy money boom led to the dot com bubble that doubled corporate profits from their 1987 low. Of course the profits vaporized in an instant and plunged to 4% of GNP in 2001. Greenspan and then Bernanke  proceeded to drive interest rates to record lows creating a prodigious housing bubble resulting in the greatest level of mal-investment and financial fraud in world history. Corporate profits as a percentage of GNP skyrocketed from 4% to 10% in the space of six years. The banking cabal had captured the system.

The Fed orchestra kept the music playing and Wall Street kept dancing the rumba with their corporate CEO dates. The Keynesian acolytes were ecstatic. The Austrians warned of the impending bust. No one listened. The collapse of the worldwide financial system was portrayed by the corporate mainstream media, bankers like Dimon, corporate CEOs like Immelt, billionaires like Buffet, captured government bureaucrats like Paulson, and politicians like McCain and Obama, as a systematic risk that required a taxpayer rescue of criminals.

The $800 billion gift to bankers and mega-corporations by the Washington DC Party of captured politicians was chicken feed compared to the $3.5 trillion of newly printed fiat handed to Wall Street and corporate America by Bernanke and Yellen. Five years of 0% interest rates have impoverished senior citizens and savers, but they have done wonders for Wall Street and mega-corporation profits, along with executive bonuses. Corporate profits soared from 4.5% of GNP to an all-time high of 10.5% in the space of three years and have remained at this elevated level.

Who Needs Wage Earners Anyway?

Is it a coincidence that corporate profits as a percentage of GNP are at record highs while employee compensation as a percentage of GNP is at record lows? Is it a coincidence that employee compensation as a percentage of GNP peaked at 51% in 1971? That year certainly seems to be a turning point in U.S. economic history. Gold’s purpose as a check on statists, Keynesians, politicians, bankers, and the military industrial complex couldn’t be any clearer. The decline has multiple causes, but the storyline about technology being the major cause is patently false. My observations are as follows:

  • From the end of World War II until the mid-1970s employee compensation as a percentage of GNP was consistently between 49% and 51%. The middle class saw their standard of living rise as wages outpaced inflation, savings rates were high and led to capital investment, debt was used for long term purchases like a home or automobile, and bankers accepted deposits and made safe loans. Technological progress over the thirty years was constant, but did not result in declining wages.
  • From the moment Nixon closed the gold window, employee compensation as percentage of GNP relentlessly declined for the next quarter of a century from 51% to 44%. Over this time frame our economy deformed from a goods producing system driven by savings and capital investment into a service/financial economy built upon consumer debt, conspicuous consumption and market gambling. Our iconic mega-corporations fired Americans and hired Chinese slave laborers, lobbied for tax breaks, invested in their own stock, kept wage increases below the level of true inflation, and paid extravagant compensation packages to their Harvard MBA executives.
  • The brief upturn created by Greenspan’s irrational exuberance 90’s boom was short lived. The relentless decline resumed after the dot com collapse, even as Greenspan and Bernanke blew their epic bubble. Their financial engineering machinations on behalf of Wall Street did nothing for the average worker on Main Street. Employee compensation as a percentage of GNP declined from 47% to 44% BEFORE the financial collapse.
  • Unequivocal proof that Bernanke’s sole purpose of QE and ZIRP was to benefit his Wall Street owners can be seen in the continued decline from 44% to 42% since 2008. There has been no recovery for the average American. Wall Street is rolling in dough. Corporate America is rolling in dough. Politicians are rolling in dough. The average American worker is rolling in dog shit.

The mouthpieces for the Deep State insist corporate profits have reached a permanently high plateau. It’s another new paradigm. Just like 1929, 1999, and 2007. Jeremy Grantham is right. The system is broken. The inmates are running the asylum. But financial engineering will not work permanently.  Baijnath Ramraika and Prashant Trivedi in their outstanding article Why Jeremy Grantham is Right about Corporate Profit Margins prove that corporate gross margins have not grown, technological advancement has not been a major factor, innovation and capital investment are non-existent, and corporate CEOs have utilized one time schemes to boost profits.

There are a few major reasons for record corporate profits. The Fed’s gift to banks and mega-corporations of zero interest rates have allowed S&P 500 corporations to refinance their existing debt and take on new debt at below market interest rates. The average interest rate paid by S&P 500 companies is now at all-time lows. Any normalization of interest rates would crush corporate profits.

Even though you hear constant propaganda from the corporate MSM, corporate CEOs, and captured politicians about the dreadful level of corporate taxes, the truth is that mega-corporations are paying record low levels of actual taxes. When profits are at record highs and tax payments at record lows you know they have captured the system. “Creative” tax avoidance and the FASB allowing banks to mark their assets to fantasy have played an enormous role in record profits.

The short term oriented casino mentality of corporate CEOs can be plainly seen in the fact depreciation expense as a percentage of revenue is at 25 year lows, resulting in short term profits but long-term decline. Instead of investing in capital to increase efficiency or expand their business, greedy myopic CEOs have chosen to buy back their own stock at all-time high prices. They did the same thing in 2005 – 2007. Driving up quarterly earnings per share to boost their own stock option compensation is how it rolls in corporate America today. Investing in their workers through higher wages isn’t even a consideration. They don’t teach that in Ivy League MBA programs. SG&A expenses as a percentage of revenue have been driven to all time lows, as outsourcing, downsizing, and working people to death have done wonders for corporate profits.

Ramraika and Trivedi reach damning conclusions of corporate America, based on their detailed unbiased research:

As the world moved increasingly towards the idea of shareholder-value maximization, time horizons for management and the shareholders have shortened. As Montier shows, the average lifespan of a company in the S&P 500 in the 1970s was about 27 years and is down to about 15 years now. In tandem, the average tenure of CEOs is down from about 10 years in the 1970s to about 6 years now. Combine this with the incentive systems prevalent today (think stock options), and it is only logical that a CEO who is going to be around for as few as six years and is going to get a large chunk of her rewards in stock options will want to see higher stock prices.

Cutting SGA expenses and postponing capital investments — actions that carry positive short-term earnings impact at the expense of a business’ competitiveness in the long-term — look promising to managers whose payoffs depend on stock prices in the short-term. Not surprisingly, the renters (there are hardly any owners any more) clamor for just such actions. The problem with this thinking is that the long-term eventually shows up. And when it does, profit margins will have no choice but to remember their long forgotten tendency to revert to mean.

Are interest rates going to be driven lower for corporations? Are taxes going to be driven lower? How many more people can corporations fire? Have economic downturns been eliminated by the Federal Reserve? Will record profits not result in increased competition and price wars? Can wages be driven even lower?

The financial, economic and political system has been captured by corporate fascist psychopaths. The Federal Reserve has aided and abetted this takeover. Their monetary manipulations have resulted in this deformity. Psychopaths always go too far. The American middle class has been murdered. Decades of declining real wages have left them virtually penniless, in debt up to their eyeballs, angry, frustrated, and unable to jump start our moribund economy by buying more Chinese produced crap. Yellen, her Wall Street puppeteers, and the corporate titans should enjoy those record profits and record stock market highs. It won’t last. Short-term profits will be wiped out, as long-term consequences always arrive when you least expect it. The artificial boom will lead to a real depression. Luckily for the oligarchs, most middle class Americans are already experiencing a depression and won’t notice the difference.

“True, governments can reduce the rate of interest in the short run. They can issue additional paper money. They can open the way to credit expansion by the banks. They can thus create an artificial boom and the appearance of prosperity. But such a boom is bound to collapse soon or late and to bring about a depression.” – Ludwig von Mises

The Retail Death Rattle

Off the keyboard of Jim Quinn

Published on The Burning Platform on January 20, 2012

Death-Rattle

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“I was part of that strange race of people aptly described as spending their lives doing things they detest, to make money they don’t want, to buy things they don’t need, to impress people they don’t like.”Emile Gauvreau

If ever a chart provided unequivocal proof the economic recovery storyline is a fraud, the one below is the smoking gun. November and December retail sales account for 20% to 40% of annual retail sales for most retailers. The number of visits to retail stores has plummeted by 50% since 2010. Please note this was during a supposed economic recovery. Also note consumer spending accounts for 70% of GDP. Also note credit card debt outstanding is 7% lower than its level in 2010 and 16% below its peak in 2008. Retailers like J.C. Penney, Best Buy, Sears, Radio Shack and Barnes & Noble continue to report appalling sales and profit results, along with listings of store closings. Even the heavyweights like Wal-Mart and Target continue to report negative comp store sales. How can the government and mainstream media be reporting an economic recovery when the industry that accounts for 70% of GDP is in free fall? The answer is that 99% of America has not had an economic recovery. Only Bernanke’s 1% owner class have benefited from his QE/ZIRP induced stock market levitation.

The entire economic recovery storyline is a sham built upon easy money funneled by the Fed to the Too Big To Trust Wall Street banks so they can use their HFT supercomputers to drive the stock market higher, buy up the millions of homes they foreclosed upon to artificially drive up home prices, and generate profits through rigging commodity, currency, and bond markets, while reducing loan loss reserves because they are free to value their toxic assets at anything they please – compliments of the spineless nerds at the FASB. GDP has been artificially propped up by the Federal government through the magic of EBT cards, SSDI for the depressed and downtrodden, never ending extensions of unemployment benefits, billions in student loans to University of Phoenix prodigies, and subprime auto loans to deadbeats from the Government Motors financing arm – Ally Financial (85% owned by you the taxpayer). The country is being kept afloat on an ocean of debt and delusional belief in the power of central bankers to steer this ship through a sea of icebergs just below the surface.

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 most amazingly delusional aspect to the chart above is retailers continued to add 44 million square feet in 2013 to the almost 15 billion existing square feet of retail space in the U.S. That is approximately 47 square feet of retail space for every person in America. Retail CEOs are not the brightest bulbs in the sale bin, as exhibited by the CEO of Target and his gross malfeasance in protecting his customers’ personal financial information. Of course, the 44 million square feet added in 2013 is down 85% from the annual increases from 2000 through 2008. 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.

The impact of this retail death spiral will be vast and far reaching. A few factoids will help you understand the coming calamity:

  • There are approximately 109,500 shopping centers in the United States ranging in size from the small convenience centers to the large super-regional malls.
  • There are in excess of 1 million retail establishments in the United States occupying 15 billion square feet of space and generating over $4.4 trillion of annual sales. This includes 8,700 department stores, 160,000 clothing & accessory stores, and 8,600 game stores.
  • U.S. shopping-center retail sales total more than $2.26 trillion, accounting for over half of all retail sales.
  • The U.S. shopping-center industry directly employed over 12 million people in 2010 and indirectly generated another 5.6 million jobs in support industries. Collectively, the industry accounted for 12.7% of total U.S. employment.
  • Total retail employment in 2012 totaled 14.9 million, lower than the 15.1 million employed in 2002.
  • For every 100 individuals directly employed at a U.S. regional shopping center, an additional 20 to 30 jobs are supported in the community due to multiplier effects.

The collapse in foot traffic to the 109,500 shopping centers that crisscross our suburban sprawl paradise of plenty is irreversible. No amount of marketing propaganda, 50% off sales, or hot new iGadgets is going to spur a dramatic turnaround. Quarter after quarter there will be more announcements of store closings. Macys just announced the closing of 5 stores and firing of 2,500 retail workers. JC Penney just announced the closing of 33 stores and firing of 2,000 retail workers. Announcements are imminent from Sears, Radio Shack and a slew of other retailers who are beginning to see the writing on the wall. The vacancy rate will be rising in strip malls, power malls and regional malls, with the largest growing sector being ghost malls. Before long it will appear that SPACE AVAILABLE is the fastest growing retailer in America.

The reason this death spiral cannot be reversed is simply a matter of arithmetic and demographics. While arrogant hubristic retail CEOs of public big box mega-retailers added 2.7 billion retail square feet to our already over saturated market, real median household income flat lined. The advancement in retail spending was attributable solely to the $1.1 trillion increase (68%) in consumer debt and the trillion dollars of home equity extracted from castles in the sky, that later crashed down to earth. 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. With real median household income 8% lower than it was in 2008, the collapse in retail traffic is a rational reaction by the impoverished 99%. Americans are using their credit cards to pay their real estate taxes, income taxes, and monthly utilities, since their income is lower, and their living expenses rise relentlessly, thanks to Bernanke and his Fed created inflation.

The media mouthpieces for the establishment gloss over the fact average gasoline prices in 2013 were the second highest in history. The highest average price was in 2012 and the 3rd highest average price was in 2011. These prices are 150% higher than prices in the early 2000′s. This might not matter to the likes of Jamie Dimon and Jon Corzine, but for a middle class family with two parents working and making 7.5% less than they made in 2000, it has a dramatic impact on discretionary income. The fact oil prices have risen from $25 per barrel in 2003 to $100 per barrel today has not only impacted gas prices, but utility costs, food costs, and the price of any product that needs to be transported to your local Wally World. The outrageous rise in tuition prices has been aided and abetted by the Federal government and their doling out of loans so diploma mills like the University of Phoenix can bilk clueless dupes into thinking they are on their way to an exciting new career, while leaving them jobless in their parents’ basement with a loan payment for life.

The laughable jobs recovery touted by Obama, his sycophantic minions, paid off economist shills, and the discredited corporate legacy media can be viewed appropriately in the following two charts, that reveal the false storyline being peddled to the techno-narcissistic iGadget distracted masses. There are 247 million working age Americans between the ages of 18 and 64. Only 145 million of these people are employed. Of these employed, 19 million are working part-time and 9 million are self- employed. Another 20 million are employed by the government, producing nothing and being sustained by the few remaining producers with their tax dollars. The labor participation rate is the lowest it has been since women entered the workforce in large numbers during the 1980′s. We are back to levels seen during the booming Carter years. Those peddling the drivel about retiring Baby Boomers causing the decline in the labor participation rate are either math challenged or willfully ignorant because they are being paid to be so. Once you turn 65 you are no longer counted in the work force. The percentage of those over 55 in the workforce has risen dramatically to an all-time high, as the Me Generation never saved for retirement or saw their retirement savings obliterated in the Wall Street created 2008 financial implosion.

To understand the absolute idiocy of retail CEOs across the land one must parse the employment data back to 2000. In the year 2000 the working age population of the U.S. was 213 million and 136.9 million of them were working, a record level of 64.4% of the population. There were 70 million working age Americans not in the labor force. Fourteen years later the number of working age Americans is 247 million and only 144.6 million are working. The working age population has risen by 16% and the number of employed has risen by only 5.6%. That’s quite a success story. Of course, even though median household income is 7.5% lower than it was in 2000, the government expects you to believe that 22 million Americans voluntarily left the labor force because they no longer needed a job. While the number of employed grew by 5.6% over fourteen years, the number of people who left the workforce grew by 31.1%. Over this same time frame the mega-retailers that dominate the landscape added almost 3 billion square feet of selling space, a 25% increase. A critical thinking individual might wonder how this could possibly end well for the retail genius CEOs in glistening corporate office towers from coast to coast.

This entire materialistic orgy of consumerism has been sustained solely with debt peddled by the Wall Street banking syndicate. The average American consumer met their Waterloo in 2008. Bernanke’s mission was to save bankers, billionaires and politicians. It was not to save the working middle class. You’ve been sacrificed at the altar of the .1%. The 0% interest rates were for Jamie Dimon and Lloyd Blankfein. Your credit card interest rate remained between 13% and 21%. So, while you struggle to pay bills with your declining real income, the Wall Street bankers are again generating record profits and paying themselves record bonuses. Profits are so good, they can afford to pay tens of billions in fines for their criminal acts, and still be left with billions to divvy up among their non-prosecuted criminal executives.

Bernanke and his financial elite owners have been able to rig the markets to give the appearance of normalcy, but they cannot rig the demographic time bomb that will cause the death and destruction of our illusory retail paradigm. Demographics cannot be manipulated or altered by the government or mass media. The best they can do is ignore or lie about the facts. The life cycle of a human being is utterly predictable, along with their habits across time. Those under 25 years old have very little income, therefore they have very little spending. Once a job is attained and income levels rise, spending rises along with the increased income. As the person enters old age their income declines and spending on stuff declines rapidly. The media may be ignoring the fact that annual expenditures drop by 40% for those over 65 years old from the peak spending years of 45 to 54, but it doesn’t change the fact. They also cannot change the fact that 10,000 Americans will turn 65 every day for the next sixteen years. They also can’t change the fact the average Baby Boomer has less than $50,000 saved for retirement and is up to their grey eye brows in debt.

With over 15% of all 25 to 34 year olds living in their parents’ basement and those under 25 saddled with billions in student loan debt, the traditional increase in income and spending is DOA for the millennial generation. The hardest hit demographic on the job front during the 2008 through 2014 ongoing recession has been the 45 to 54 year olds in their peak earning and spending years. Combine these demographic developments and you’ve got a perfect storm for over-built retailers and their egotistical CEOs.

The media continues to peddle the storyline of on-line sales saving the ancient bricks and mortar retailers. Again, the talking head pundits are willfully ignoring basic math. On-line sales account for 6% of total retail sales. If a dying behemoth like JC Penney announces a 20% decline in same store sales and a 20% increase in on-line sales, their total change is still negative 17.6%. And they are still left with 1,100 decaying stores, 100,000 employees, lease payments, debt payments, maintenance costs, utility costs, inventory costs, and pension costs. Their future is so bright they gotta wear a toe tag.

The decades of mal-investment in retail stores was enabled by Greenspan, Bernanke, and their Federal Reserve brethren. Their easy money policies enabled Americans to live far beyond their true means through credit card debt, auto debt, mortgage debt, and home equity debt. This false illusion of wealth and foolish spending led mega-retailers to ignore facts and spread like locusts across the suburban countryside. The debt fueled orgy has run out of steam. All that is left is the largest mountain of debt in human history, a gutted and debt laden former middle class, and thousands of empty stores in future decaying ghost malls haunting the highways and byways of suburbia.

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. Real estate developers will be going belly-up and the banking sector will be taking huge losses again. I’m sure the remaining taxpayers will gladly bailout Wall Street again. The facts are not debatable. They can be ignored by the politicians, Ivy League economists, media talking heads, and the willfully ignorant masses, but they do not cease to exist.

“Facts do not cease to exist because they are ignored.”Aldous Huxley

 

Scapegoating Da Goobermint Unions

Posted originally on TBP on 18th February 2011 by Reverse Engineer  in Economy

Discuss this article at the Kitchen Sink in the Diner

Round 9: Pummel Da Goobermint Unions

 

We now have entered the stage Greece hit about a year ago. The Illuminati have their backs against the wall and they need a new Scapegoat. Blazing across the MSM at the Speed of Light on the Internet the word went out from Goobermint to the Propaganda Machine, and the word was WAR on the Goobermint Unions.

Far and wide, from WI to IL to NY the Goobernators slashed Jobs and slashed collective bargaining rights. Except for the Cops and Firemen of course. They’re going to NEED them. Lots of them.

20,000 or so irate Goobermint Employees surrounded the State House in WI, and a dozen or so Demopublican legislators fled the state to prevent the bill coming to a vote. Billionaire Pigman Mayor/POTUS wannabee Michael Bloomber announced he is going to lay off-get this-some 4400 Teachers. NYC schools ALREADY have absurd teaching ratios over 30:1, which means you would have to redistribute out around 13K students into other classrooms. Hello, besides the obvious issues of controlling said classrooms, when the buildings were constructed the size of the classrooms maxed out at 30 kids, and that was crowded. Really, you cannot even physically put 40 kids in such a classroom unless you make it Standing Room Only.

As I have mentioned, I run a sort of One Room Schoolhouse paradigm here on the Last Great Frontier. I have set it up so each of our classrooms max out at 16:1, with 12:1 being the expected number and 10:1 is about Break Even at the current tuition. Besides myself, I have 2 Kindergarten Teachers (1 Half day, 1 Full day), a Grade 1-2 Teacher, and yours truly, Grades 3 to AP College Courses in ALL subjects an AP Test is available for taking. I am a generalist, I learned a lot about everything. I don’t specialize, I look for relationships in information. At the moment though maxing out at 6th Grade since we are only 4 years into the paradigm. Reason we need fewer teachers as we go up in grade level is because after Kindergarten, mostly the parents go into the Public Schools, because they are of course FREE. However, as the education there deteriorates due to high teaching ratios, those who can afford it will keep their kids in this paradigm. I only need 10 to teach to Break Even. As we are economically structured at the moment, if you want this for your kid, a median income will suffice if you direct it toward the child’s education. However, I will not keep any child in the classroom who will not Listen & Obey. You can’t buy into it with lots of money. Eventually as we move to subsistence level, I expect this to be done by Barter. Unless there are not enough Fishermen and Farmers with kids they want educated, I should do fine with this. I can give a child the equivalent of an Ivy League education such as I had, just with a little better ideological underpinning and some focus change on what is actually worthwhile to learn for the FUTURE we are presented with. Nobody stays in my classroom who will not Listen & Obey though, I have ZERO tolerance for disobedience. I am as intolerant of that as I am of Capitalist Pigmen here on TBP. LOL. I am a TEACHER, not a fucking Babysitter or Prison Guard. To the best of my ability also I will SCHOLARSHIP kids out of my own pocket if they are good kids who like to learn. I can’t do that past the point of break even though. I am also limited in how many I can actually Save myself, it maxes out at 16 kids. I CANNOT save them all.

I am drifting off topic here a bit though, the issues here in this post are not about teaching paradigms, its about what will happen as a result of Austerity being dropped down on Public Education, as well as the other sectors of Goobermint.

In reality, these kids will no longer BE in these classrooms, like the Unemployed who fall off the roles at 88 weeks, they will no longer be counted. Where WILL they be then? They will be out on the street, making Trouble and getting IN Trouble. Ever been around a bunch of wasto teens in a Mall? Its SCARY. Lord of the Flies time.

Now, here in the FSofA, we aren’t in quite the situation that Greece is in, since at least the Financial Economy at the TBTF Bank level is still functioning and at least theoretically paying Taxes on the money they are making FROM the Taxpayers. Its not spinning down quite as fast YET, but the Shot Heard Round the World was FIRED at the Unions and Goobermint Workers in the MSM over the last couple of days. THESE are the folks we should REVILE, because they make so much money and have such good bennies we can no longer afford!

Obviously it is true we cannot afford this, but these folks are NOT the ones who soaked up most of the wealth here. They are just apparatchiks who made it possible for the Illuminati to soak up most of the wealth. Cutting these people off from their source of income so Bonds can be paid off on to the Illuminati is NOT going to help our economic situation at ALL. In NYC, you just took 4400 Tax Paying Teachers and put them on the UE roles. You took 13.000 kids and put them out on the street where they will do mayhem. You INSTANTLY made more criminals and potential “terrorists”. Laying off these teachers is a SOLUTION to our socioeconomic woes? Hardly. It will only exacerbate them.

Meanwhile, folks like Mish are having their Wet Dream come true of the Goobermint Unions being destroyed. Sadly Mish, this isn’t going to solve the economic problems, it will just make them WORSE. Laying off Goobermint workers and cutting pensions just means that you will have fewer people with disposable income to keep the consumer based economy running. This will drive more private biznesses which exist as a result of their disposable income to go belly up also. Austerity doesn’t work to make you more solvent in such a system, it just drives a deflationary spiral. It is irrelevant here how much money Helicopter Ben prints, it just is not getting distributed out into the consumer economy. The fake money eventually will go up in smoke. Prices in commodities will rise past the ability of the people to buy them, there will be excess product causing more companies to fail, prices will fall and speculators who did not exit fast enough will get hammered.

Food prices aren’t JUST affected by the speculation though, they are also affected by actual production, and if that ALSO is falling off a cliff here, even in a deflationary spiral those prices could increase. That just means more people are pushed over the edge, and economic destruction translates to real starvation. Happening already in the poorest countries, Coming Soon to a Theatre Near You if the spiral is not interdicted.

Somewhere along this timeline there WILL be Interdiction. The more Goobermint Workers that get laid off and SHAFTED of what was promised to them, the more will begin to act like Greeks. It can get ugly quite fast in such a situation. Only time will tell if this latest attempt to salvage the system doesn’t quickly BLOWBACK. I suspect it will.

RE

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