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Off the keyboard of Jim Quinn

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Published on The Burning Platform on August 13, 2014

Discuss this article at the Economics Table inside the Diner

Consumer spending accounts for 70% of GDP. The government apparatchiks, corporate media propagandists, and the Wall Street shysters assured the masses that the negative GDP in the 1st quarter and dreadful retail sales were solely the result of harsh winter weather, as if the weather in the winter is ever good. They were absolutely unequivocally sure that retail sales would soar once Spring arrived.

The thing about retail sales is they aren’t lost. If you are snowed in for a few days and can’t buy that new pair of shoes, they’ll be there next week. The reality is if poor retail sales are really the result of weather, there is pent up demand that will be satisfied when the weather improves. In addition, harsh winter weather should increase the sales of items used to deal with harsh winter weather, shovels, salt, winter coats, long johns, etc.

So here we are in July. Retail sales have been essential flat for the last three months. There has been no rebound. There has been no surge. When inflation is taken into consideration, real retail sales are falling. But still the stock market rises. It rises because it has nothing to do with reality. The average American is far poorer today than they were at the depths of the recession in 2009. Real wages continue to fall, despite the bullshit about a jobs recovery.

The shit dumped by the media and the government is so deep, you need hip boots to wade through it. The reality is the .1% have been enriched by the Federal Reserve at the expense of the 99.9%. Retail sales will continue to stagnate, as the prices for energy, food, healthcare, tuition, clothing, and services rise relentlessly, along with taxes from local, state, and federal governments.

The oligarchs are using the exact same game plan that blew up in 2008 – dole out gobs of consumer debt (auto, student) and try to convince the ignorant masses they are wealthier because they are driving a new GMC Yukon with a 0% down, o% interest, 7 year loan. The megacorps use the free money from the Fed to buy back their stock, pumping their EPS and the stock bonuses of the executives, while laying off thousands, and distributing 2% raises to the plebs. The Too Big To Trust Wall Street titans take the free candy from the Fed, use their HFT supercomputers, and rig the markets with trillions in derivatives of mass destruction. The raping and pillaging of the middle class will continue until there is nothing left but bleached bones.

This Wall Street fantasy world is interrupted every day with anecdotes from the real world, but the willfully ignorant public enjoys believing the lies as their normalcy bias overcomes their own eyes.

Macy’s is supposed to be one of the successful retailers in the country and their earnings report was nothing but PR maggot spin and misinformation. The huge headline was their earnings per share rose by 11%. That sounds really impressive. You have to go deep into their propaganda press release to find out their profit actually went up a pitiful 3.9%. They spent millions buying back their stock. Brilliant move considering the stock cratered by $4 per share today. They announced same store sales growth of 3.4%, but in a little footnote say this includes on-line sales. Their on-line sales are growing strongly and their bricks and mortar is dying. They are closing stores and firing people.

Retail stocks are down 4% this year, while the S&P 500 is up 5%.As you can see in the chart Department stores (Macys, Sears, Kohls, JC Penney) and general merchandise stores (Wal-Mart, Target) are sucking wind with sales collapsing in July. So much for that back to school surge.

JC Penney will report another huge loss later this week. Wal-Mart will report shitty results as their customers are the ignorant masses. Retail is dying a long arduous slow death. It will not reverse itself. Americans are using their credit cards to pay for utilities, gas, taxes, and everyday bills. This Federal Reserve created Bubble 2.0 is going to cause havoc when it bursts because it has engulfed stocks, bonds, and housing simultaneously.

Does anyone with two brain cells actually believe we are having a housing recovery with mortgage applications at 14 year lows? Mortgage rates have fallen for the last year, as mortgage applications have plummeted. That is a sure sign of a strong health housing recovery and really bodes well for home furnishing, building materials, appliance, and electronics retailers.

Retail sales have missed expectations to the downside in 8 of the last 12 months. But, Jim Cramer assures us this is about to change. All is well. The future is bright. Jobs are plentiful. Consumers are confident. The stock market is at all-time highs. There is cash on the sidelines. Subprime loans are going to invigorate consumer spending. The deadbeats won’t default this time. They promise.

So the recession ended in 2009 according to TPTB. Shouldn’t year over year changes in retail sales be accelerating rather than declining since 2010? The unemployment rate, according to the geniuses at the BLS, has fallen from 9.6% in 2010 to 6.2% today. This should have spurred a huge spending spree by all the joyous employed people. What happened? The 9 million people who “willingly” left the workforce surely have plenty of leisure time to shop. The same government drones at the BLS also tell us that prices have only risen by 8.5% over the last four years, so paying more for food, energy and healthcare surely hasn’t deterred discretionary spending. Right?