Monday, February 3, 2014

Slip-Sliding Awayeee...

Last month there was a report about a surge in factory orders ahead of what was assumed to be rapid growth in the economy. Reuters reported an increase in 4th quarter growth and apparently retailers, anticipating further growth loaded up their inventory. A misleading Bloomberg headline (12/05/2013) read "Economy in U.S. Grows at 3.6% Rate on Bigger Inventories" but the meat of the story was about a possible slowdown by years end because "unsold merchandise piled up at the fastest rate since 1998."

The economy was being measured by factory orders. It seems the traders were paying attention to the wholesale transactions and ignoring retail numbers. For whatever reason, Wall Street was avoiding the looming shadow of consumer sentiment.

Now it seems Bloomberg's prediction has come to fruition. The LA Times reports the Dow, S&P, and Nasdaq are dropping because factory orders are down significantly. Inventories are full. Where are the customers? Many more customers are going to the food banks because their unemployment benefits and food stamps were cut.

Russia Today (RT), A Russian news agency with an odd obsession for America, is a news source with no apparent "skin in the game" here in the U.S. RT seems to focus on what the American main-stream corporate media avoids in order to curry favor to its financiers.

RT posted two stories explaining the aggravating factors obvious to us working class folks down on the "line level." Most food stamp payments issued to working Americans for first time - report and Silent misery: Actual US unemployment 37.2%, record number of households on food stamps in 2013.

It seems plainly obvious that customers aren't magical visitors from another universe with lots of money to spend, but supply-side economists appear to have detached from the ideal image of the consumer, the bare naked facts that the majority of consumers are working class, and they are not paid well enough to spend money to stimulate the economy. Consequently, inventory fills up and factory orders go down.

Since McDonald's and Walmart are notorious for having their payroll subsidized by the very food stamps that are getting cut, they face employees with the obvious question: Is it more profitable to simply be unemployed?

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