Consumer Impulses or Economic Reality?
Which comes first, America's consumer impulses or stark economic reality? With the holiday shopping season upon us the aforementioned question may be one that we are forced to finally answer.
Where the nation's economy stands today may not be where it's headed. The October job growth reports a surprisingly strong gain of 166,000 new jobs. The Commerce Department also reported that the economy expanded in the third quarter at an annual rate of 3.9 percent, much faster than economists expected.
This bodes well for those ready to prime the consumer-spending pump. But just over the horizon are ominous dark clouds, signaling the winds of change for our current consumer practices.
It's fair to say that what we have is at best a mixed economic picture. The strong job growth cannot be denied. Wages are outpacing inflation.
But we also have more indicators, as Merrill Lynch and Citicorp can attest, that we've not seen the last of subprime loan problems. Many of those who would like to buy homes are now shut out; and those who've purchased homes, some have foreclosure staring them in the face.
Home prices are dropping, which will negatively impact equity withdrawal that has supported much of the consumer spending.
And none of this factors oil prices that, at the time of this writing, closed at nearly $97 per barrel. The combined increase in gas prices along with home heating cost this winter translate to a tightening of consumer budgets--canceling out the good economic news regarding jobs and wages.
Federal Reserve Chairman Ben Bernanke underscored this point with a somber report that U.S. economic growth will "slow noticeably" in the fourth quarter of 2007 and the first half of 2008.
Long term, the dollar dropped to its lowest level since 1981 on the news that Chinese officials hinted of plans to diversify the nation's $1.43 trillion of foreign exchange reserves. In other words, the Chinese are signaling for the first time it may no longer be in their interest to bankroll the consumer lifestyle to which we've grown accustomed.
In fairness, the good economic news is at least tangible, while the bad news is a looming possibility. But it appears to be looming larger now than ever before.
It is not good to be the world's largest debtor nation--which presently stands at $9 trillion--as well as the largest consumer of oil, especially when one of the countries that have been financing that debt has its own ravenous oil needs. America's potentially weakened economic condition and escalating oil prices further complicates its relationship with China.
Africa owns about eight percent of the world's known oil reserves, with Nigeria, Libya and Equatorial Guinea as the region's leading oil producers. The region is also vulnerable to instabilities such as terrorism, tribal conflict, AIDS and political uncertainties.
Currently, the U.S. derives 15 percent of its oil supplies from Africa. According to the U.S. National Intelligence Council, within the next ten years, that percentage could increase to 25 percent--equal to the amount China now receives from Africa.
When the U.S. cut ties with Sudan because of its human rights abuses China was there to fill the gap. And China is better positioned going forward to benefit from Africa's growing significance in the oil market.
Moreover, there remain differences between U.S. and China on exchange rate policies, intellectual property rights infringements, and human rights abuses. In addition to Sudan, the two countries are on opposite sides in its relations with Iran, Burma, Taiwan, and Venezuela. Our current economic direction potentially places us at a disadvantage in addressing these critical issues.
Most concerning is the deafening harmony of silence emanating from the White House, Capitol Hill, and the presidential campaign trail. None of the so-called top tier presidential candidates has made energy independence a significant part of their campaign. It is the long-term answer to our current economic and national security concerns.
The silence, however, would lead me to conclude that we should continue on our present course. Anything left on that credit card for the holiday season is upon us?
Byron Williams is an Oakland pastor and syndicated columnist. E-mail byron@byronspeaks.com or leave a message at 510-208-6417
Follow Byron Williams on Twitter: www.twitter.com/byronspeaks
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I am so tired of hearing about all those jobs that are being created. Mainly waitresses, salesclerks, stockers, insurance salesmen, low level clerical AND a few CEO's, computer nerdz, and doctor/lawyer etc., jobs. I am partially disabled and stopped looking for a job a few years ago even though I have a college degree. The idea that there are massive numbers of "good" jobs out there is simply wrong. "Service sector" jobs don't pay. And they pay even less as the economy goes down. The Republicans call this economy the "greatest story never told," but for most middle class Americans, it's just not true.
October job-growth ... right before Christmas ... hmm.
"Good evening, happy holidays (we can't say 'Christmas') and 'Welcome to Wal-Mart!'" 166,000 new "jobs" like THAT? Woo-hoo.
If you've been raking in the "slods" (sh*tloads o' dimes) on Wall Street all these years, then no, maybe you don't know what's actually happening out there in the far-away land (such as the other end of the island you live on) where "let them eat cake" is simply not an option.
"Money" is not "value." It is not even a measure of value. It is a trading-token, nothing more. No matter how many copies of those pretty-printed pieces of paper you have, the time may come -- and has come, in the past -- when the best way to use those pieces of paper is as stove-fuel.
There is absolutely NO reason why this nation, which not too long ago was the mightiest industrial producer on the planet, should be wringing its hands at the front door of the church. It does so now only because its erstwhile leaders have stolen so much.
A national economy cannot be based on "war and oil." That's what we tried, and as Eisenhower told us would happen, it ruined us.
The actual solution is simple: get those factories restarted. Impose tariffs upon all imported goods and use those tariffs to pay for restarting the nation's own economy. Fire all the economists who howl the word "protectio
Spend 200 bucks on double-insulated windows
and check the rafters and foundations for leaks
and spend 50 bucks LESS per month on heating
oil etc...but, when you buy less oil, they'll
just run the price up some more, kind of
drawing that slipknot a little tighter...
Sell everythying is what I am doing and what I advise. Things is going to get bad. Really, really bad. It feels like the end of the Star Trek movie "First Contact" where the alien borg said" watch as your world dies."
"October job growth reports a surprisingly strong gain of 166,000"
This number comes one month after they "found" 93,000 jobs they had overlooked in August. The September report revised the August report by 2350% from minus 4,000 to plus 89,000 because of a "seasonal adjustment".
"the economy expanded in the third quarter at an annual rate of 3.9 percent,"
They also released the implicit price deflator for the quarter at 0.8%. That's down about 80% from the first two quarters. The deflator is used to factor out inflation. If it had been the same as the first two quarters the GDP would have recorded an increase of only 1.7%. If you believe the 3.9% number then you must believe that the rate of inflation fell by 80% at the same time oil was rising to almost $100 per barrel.
"Home prices are dropping, which will negatively impact equity withdrawal that has supported much of the consumer spending."
Equity withdrawal, sounds so pleasant like borrow and spend or mortgage the future or commit economic suicide. Yes, about 0.5% of GDP has come from using your home as an ATM with no thoughts of repaying the debt. Kind of like George Bush and the National Debt.
So let's sum up:
The rosy numbers being tossed about would appear to have no basis in reality. They're using the Enron method for their economic bookkeeping.
The primary source of middle America's wealth, their homes, has been mortgaged to the hilt to pay for past spending and economic growth. This wealth is disappearing faster than you can say upside down in your mortgage.
Prices for essentials are rising faster than wages and consumer cutbacks mean it will get worse before it gets better.
Enjoy!
The American Consumer is trained to spend until s/he can't spend anymore and let someone else pick up the pieces. Don't be surprised if s/he follows the training and doesn't understand that bankruptcy laws won't save him/her.
It's like the bankers say, if you loan a client enough money, it's not the client that's in trouble when he can't pay.
So, if the American Consumer has a fine holiday season and can't pay the fuel bills when they come due, don't say I didn't tell you to expect it.
"Wages are outpacing inflation. "
Only if you don't count food and fuel in the numbers to calculate inflation.
My health insurance premiums went up 14%.
Food is up 7.9 -8.7% depending upon the area.
Fuel is up 28% this past week alone.
My income will go up about 2.3%.
TO be accurate, the term "core inflation" should mean the cost of 'core goods and services' - food, fuel, housing, healthcare
Instead it is given the perverted definition of all goods and services EXCEPT two of the most important four items (food and fuel.)
I don't know anyone, whose wages are "outpacing" inflation, except CEOs!
Once again!
The "Middle Class" lives in the real world, not the world of charts, grafts and annual reports.
From their economic standpoint, higher oil prices increasing the cost of gas, home heating, food and many other day to day expenses tell them the real story of the economy.
Add to that, multiple houses for sale on every street and road they travel on, the increasing cost or lack of affordible health insurance, along with stagnant wages and they see a bleak picture of the current economy.
No amount spin can change this.
Richard Russell reports that a recent Economist magazine puts the year-over-year dollar index of ‘all item’s’ up 16.7%. The price of food is up 31.6% year-over-year. But the government tells us ‘core inflation’ is running between 1 - 2%.
'It continues to boggle the mind, however, that many continue to view government data including the "core" rate of inflation as anything other than meaningless statistics. Reported ex food and energy, this would be akin to a job seeker proclaiming to be an 'A' student ex all the F's in his major courses. As the majority of employers might care just a little bit more about those particular grades, it is puzzling that economists who continue to place any weight on the "core" number aren't similarly laughed out of the room.' - Christopher G. Galakoutis
http://www
/editorial
"By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." - John Maynard Keynes
Henry C. K. Liu estimates that the real unemployment rate is around 10.6% and there are at least four applicants for every single available job opening.
'Using government stats to size up the economy is like trying to gauge the results of your diet by standing on a rigged scale in front of a funhouse mirror.' - Eric Janszen
"The economic statistics put out by the US Government are propaganda, pure and simple...I
- Peter D. Schiff
http://www
/0,23636,2
Well said. The Chinese are not our friends. We are merely their customer. This will end badly.
Assumptions in the article:
1) Inflation data provided by this government is correct
2) Jobs data provided by this government reflects reality
These are not necessarily good assumptions. See:
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Yeah.
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