An Economic Twofer

I think we have to call this a two-fer because while the topics of the two posts I'm linking to are different, they are related, at least when it comes to their effects on our economy.

First, it 's the downturn in retail sales, particularly for some of the large retail chains like Wal-Mart, Target, Sears, JC Penney, Kohl's, Costco, Staples, Lowes, Home Depot, and Macy's, just to name a few. Some are calling it the “death rattle” of retail as we have come to know it over the past 14 years or so.

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 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 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.

It's not that retail sales will end by any means, but the big chains are in trouble and a lot of them are going to either shrink to a fraction of their former size or they will disappear altogether. (Does anyone remember Bradlee's, King's, or Ames, just to name a few?) The “build it and they will come” days of retail expansion is dormant, if not dead. There will be few, if any new malls built. Existing malls will either have to shift their focus to become something other than what they have been or they will wither away and die, to become nothing more than yet another empty or abandoned monument to conspicuous consumption paid for with money that wasn't really there.

Retail at the mom-and-pop level will survive, perhaps better than their chain store competitors. Online sales will also survive as they don't have the infrastructure costs the chain operations do. (It's here that the mom-and-pop stores may also thrive, offering local products not readily available elsewhere in the nation to those wanting them.)

Second, it appears our self-anointed betters have failed to learn the lessons of history, particularly when it comes to the subject of centrally planned economies, that lesson being “They Don't Frickin' Work!”

There are so many past and present examples showing the failure of the planned economy concept, with the Soviet Union being one of the biggest and Cuba and its socialist relative Venezuela filling the roles of present day planned economy disasters. But like most of our 'betters' they have somehow come to believe that they'll do it better this time because they won't make the same mistakes. However the problem is that they'll make exactly the same mistakes as their predecessors but they'll be blind to them because, quite frankly, they really aren't as smart and as wise as they think they are. They're trying to rein in a self-sustaining self-organizing semi-chaotic system and make it fit into their version of reality. However it won't react in ways they think it will and they'll find that all they can do is damage or destroy the economy, causing it to stagnate, or worse, to collapse.

F.A. Hayek won the Nobel prize in economics in part because of his prescient warning about what he called "the fatal conceit," of intellectuals, who tend to believe that they are capable of centrally planning life for everyone.

This fatal conceit is at or near the epicenter of nearly every crisis of recent times in America. Start with the housing bubble. A vast over allocation of resources by the federal government seduced Americans into buying a home, whether they could afford it or not.

On the eve of the financial meltdown in 2008, nearly the entire mortgage industry was subsidized By Uncle Sam. This over allocation of resources into homes caused housing prices to explode and it also rewarded massive speculation and fraud.

It all went downhill from there when the housing market collapsed, making hundreds of billions of dollars just disappear from the economy, taking banks, people's homes, and their credit ratings with them. That started a cascade that rippled through the rest of the economy here in the US and then across the globe. Rather than letting the market (and the banks) decide who could and could not afford to buy a home, the 'planners' stuck their hairy little pinkies into the economic bowl and short-circuited the normal feedback mechanisms that would have stopped the housing market bubble cold.

These same 'planners' also created the “Too Big To Fail” fallacy that justified hundreds of billions of dollars in bailouts to the financial institutions who bought into the BS sold by these elite planners.

Here it is, 7 years later, we're still feeling the effects of that fiasco, and our 'betters' want to double down on stupid, digging an even deeper financial hole that we may not survive. What the hell is wrong with these idiots? Oh, yeah. I forgot. They know better than everyone else how things should run.

Not from what I've seen, they can't.

It's likely these are the same geniuses who also helped bring about the first issue I wrote about above.

And the hits just keep on coming....