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Guest Post: Cause, Effects & The Fallacy Of A Return To Normalcy
Submitted by Jim Quinn of The Burning Platform
Cause, Effects & The Fallacy Of A Return To Normalcy
“Thousands upon thousands are yearly brought into a state of real poverty by their great anxiety not to be thought of as poor.” – Robert Mallett

I hear the term de-leveraging relentlessly from the mainstream media. The storyline that the American consumer has been denying themselves and paying down debt is completely 100% false. The proliferation of this Big Lie has been spread by Wall Street and their mouthpieces in the corporate media. The purpose is to convince the ignorant masses they have deprived themselves long enough and deserve to start spending again. The propaganda being spouted by those who depend on Americans to go further into debt is relentless. The “fantastic” automaker recovery is being driven by 0% financing for seven years peddled to subprime (aka deadbeats) borrowers for mammoth SUVs and pickup trucks that get 15 mpg as gas prices surge past $4.00 a gallon. What could possibly go wrong in that scenario? Furniture merchants are offering no interest, no payment deals for four years on their product lines. Of course, the interest rate from your friends at GE Capital reverts retroactively to 29.99% at the end of four years after the average dolt forgot to save enough to pay off the balance. I’m again receiving two to three credit card offers per day in the mail. According to the Wall Street vampire squids that continue to suck the life blood from what’s left of the American economy, this is a return to normalcy.
The definition of normal is: “The usual, average, or typical state or condition”. The fallacy is calling what we’ve had for the last three decades of illusion – Normal. Nothing could be further from the truth. We’ve experienced abnormal psychotic behavior by the citizens of this country, aided and abetted by Wall Street and their sugar daddies at the Federal Reserve. You would have to be mad to believe the debt financed spending frenzy of the last few decades was not abnormal.

The Age of Illusion
“Illusions commend themselves to us because they save us pain and allow us to enjoy pleasure instead. We must therefore accept it without complaint when they sometimes collide with a bit of reality against which they are dashed to pieces.” - Sigmund Freud
In my last article Extend & Pretend Coming to an End, I addressed the commercial real estate debacle coming down the pike. I briefly touched upon the idiocy of retailers who have based their business and expansion plans upon the unsustainable dynamic of an ever expanding level of consumer debt doled out by Wall Street banks. One only has to examine the facts to understand the fallacy of a return to normalcy. We haven’t come close to experiencing normalcy. When retail sales, consumer spending and consumer debt return to a sustainable level of normalcy, the carcasses of thousands of retailers will litter the highways and malls of America. It will be a sight to see. The chart below details the two decade surge in retail sales, with the first ever decline in 2008. Retail sales grew from $2 trillion in 1992 to $4.5 trillion in 2007. The Wall Street created crisis in 2008/2009 resulted in a decline to $4.1 trillion in 2009, but the resilient and still delusional American consumer, with the support of their credit card drug pushers on Wall Street, set a new record in 2011 of $4.7 trillion.

A two decade increase in retail sales of 135% might seem reasonable and normal if wages and household income had grown at an equal or greater rate. But total wages only grew by 125% over this same time frame. Interestingly, the median household income only grew from $30,600 to $49,500, a 62% increase over twenty years. It seems the majority of the benefits accrued to the top 20%, with their aggregate share of the national income exceeding 50% today, versus 47% in 1992 and 43% in the early 1970s. The top 5% are taking home in excess of 21% of the national income versus less than 19% in 1992 and 16% in the early 1970s. It appears the financialization of America, after Nixon closed the gold window and allowed unlimited money printing by the Federal Reserve, has benefitted the few, at the expense of the many. The bottom 80% of households has seen their share of the national income steadily decrease since the early 1970s. There are 119 million households in the United States and 95 million of these households have seen their wages and income stagnate. One might wonder how the 80% were able to fuel a two decade surge in retail sales with such pathetic wage growth.
Your friendly Wall Street banker stepped into the breach and did their part to aid a vast swath of Americans to enslave themselves in debt. As the chart above reveals, the slave owners on Wall Street have been the chief beneficiary of the decades long debt deluge. It seems that charging 18% interest on hundreds of billions in credit card debt can be extremely profitable for the shyster charging the interest. Decades of mailing millions of credit card offers, inundating financially ignorant Americans with propaganda media messages convincing them they needed a bigger house, fancier car, or latest technological gadget and creating complex derivatives that permitted banks to market debt to people guaranteed not to pay them back but not care since they sold the packages of these toxic AAA rated loans to pension funds and little old ladies, has done wonders for earnings per share, stock option awards, executive salaries and bonus pools. It hasn’t done wonders for the net worth of the average American who has been entrapped in the chains of debt, forged link by link over decades of purposeful deception and willful delusion.
The 135% increase in retail sales over two decades may have been slightly enhanced by the 213% increase in consumer credit outstanding. Consumer revolving credit rose from $800 billion to the current level of $2.5 trillion over the last two decades. Those 15 credit cards in our possession were so easy to use that we financed our trips to Dollywood, Sandals, and Euro-Disney, in addition to financing our 72 inch 3D HDTVs, granite countertops, stainless steel appliances, decks, pools, recliners with a built in fridges, home theatre rooms, Coach pocketbooks, Jimmy Cho shoes, Rolex watches, yachts, bigger and better boobs, and of course our smokes and beer. Much has been made about the great de-leveraging by the American consumer. There’s just one inconvenient fact – it hasn’t happened – yet.

Total consumer credit outstanding peaked at $2.58 trillion in July 2008. Today it stands at $2.50 trillion. Revolving credit card debt peaked at $972 billion in September 2008 and subsequently declined to $790 billion by April 2011. It now stands at $801 billion, as living well beyond our means has resumed its appeal. Meanwhile, non-revolving credit for automobiles, boats, student loans, and mobile homes peaked at $1.61 trillion in July 2008 and “crashed” all the way down to $1.58 trillion in May 2010. Once Bennie fired up the printing presses, the government car companies decided to make subprime auto loans again and the Federal government started doling out student loans like a pez dispenser, all was well in the non-revolving consumer loan world. The debt outstanding has soared to $1.7 trillion, a full $90 billion above the pre-crash peak. So, after three and a half years of “austerity” and supposed deleveraging, consumer debt outstanding has fallen by 3%.
The Big Lie of austerity and consumer deleveraging is unquestioned by the talking heads in the mainstream media. They are incapable or unwilling to examine the actual data which substantiates the fact that Americans have NOT deleveraged and have NOT taken austerity to heart. The most basic facts fly in the face of consumers even having the wherewithal to pay down their debt. Median household income has declined from $50,300 in 2008 to $49,400 today. There are 5 million less people employed today than employed in 2008. Total wages in the country have only grown from $6.6 trillion in 2008 to $6.8 trillion today. This increase was concentrated among the .01%, who do not carry credit card debt. They profit from credit card debt. Real disposable personal income has fallen by 5% since the peak in 2008 as Bernanke’s Wall Street bailout zero interest rate policy has caused prices for everything except our houses to surge. The people carrying most of the credit card debt are the least able to pay it off. These are the same people who have swelled the food stamp rolls from 28 million in 2008 to 46.5 million today.

A CNBC bubble headed arrogant bimbo might sarcastically ask, “If the American consumer isn’t deleveraging, than how did revolving credit card debt drop by $182 billion over three years?” Rather than do the minimal research needed to find the answer, they would rather parrot the company/government line. The chart below, compiled from Federal Reserve data, provides the answer. The Wall Street banks have written off $193.3 billion of bad debt since 2008. Now for some basic math, that will probably be over the head of most Wall Street analysts and CNBC parrots. If you start with $972 billion of credit card debt and you write-off $200 billion (assuming another $7 billion in the 4th Quarter of 2011) and your ending balance is $801 billion, how much debt did the American consumer pay down? It’s a trick question. The American consumer ADDED $29 billion of credit card debt since 2008 to go along with the $90 billion of auto and student loan debt ADDED onto their aching backs. So much for the deleveraging storyline. It’s comforting to convince ourselves we’ve changed, but we haven’t. And the powers that be need you to keep believing, so they can continue to keep you enslaved and under their thumbs.
Consumer Credit Card Debt and Charge-off Data (in Billions):
| Outstanding Revolving Consumer Debt | Outstanding Credit Card Debt | Quarterly Credit Card Charge-Off Rate | Quarterly Credit Card Charge-Off in Dollars | |
| Q3 2011 | $793.4 | $777.5 | 5.63% | $10.9 |
| Q2 2011 | $787.4 | $771.7 | 5.58% | $10.8 |
| Q1 2011 | $779.6 | $764.0 | 6.96% | $13.3 |
| 2010 | $826.7 | $810.2 | $75.1 | |
| Q4 2010 | $825.7 | $810.2 | 7.70% | $15.6 |
| Q3 2010 | $806.9 | $790.8 | 8.55% | $16.9 |
| Q2 2010 | $817.4 | $801.1 | 10.97% | $22.0 |
| Q1 2010 | $828.5 | $811.9 | 10.16% | $20.6 |
| 2009 | $894.0 | $876.1 | $83.2 | |
| Q4 2009 | $894.0 | $876.1 | 10.12% | $22.2 |
| Q3 2009 | $893.5 | $875.6 | 10.1% | $22.1 |
| Q2 2009 | $905.2 | $887.1 | 9.77% | $21.6 |
| Q1 2009 | $923.3 | $904.8 | 7.62% | $17.2 |
| Q4 2008 | $989.1 | $969.3 |
(Source: CardHub.com, Federal Reserve)
Loving Our Servitude
“There will be, in the next generation or so, a pharmacological method of making people love their servitude, and producing dictatorship without tears, so to speak, producing a kind of painless concentration camp for entire societies, so that people will in fact have their liberties taken away from them, but will rather enjoy it, because they will be distracted from any desire to rebel by propaganda or brainwashing, or brainwashing enhanced by pharmacological methods. And this seems to be the final revolution.” Aldous Huxley
The American people have come to love their servitude through a combination of self- delusion, corporate mass media propaganda, and an irrational desire to appear successful without making the necessary sacrifices required to become successful. The drug of choice used to corral the masses into their painless concentration camp of debt has been Wall Street peddled financing. Can you think of a better business model than being a Wall Street bank? You hand out 500 million credit cards to 118 million households, even though 60 million of the households make less than $50,000. You then create derivatives where you package billions of subprime credit card debt and convince clueless dupes to buy this toxic debt as if it was AAA credit. When the entire Ponzi scheme implodes, you write-off $200 billion of bad debt and have the American taxpayer pick up the tab by having your Ben puppet at the Federal Reserve seize $450 billion of interest income from senior citizens and re-gift it to you through his zero interest rate policy. You then borrow from the Federal Reserve at 0% and charge an average interest rate of 15% on the $800 billion of credit card debt outstanding, generating $120 billion of interest and charging an additional $22 billion of late fees. Much was made of the closing of credit card accounts after the 2008 financial implosion, but most of the accounts closed were old unused credit lines. Now that the American taxpayer has picked up the tab for the 2008 debacle, the Wall Street banks are again adding new credit card accounts.

With 40% of all credit card users carrying a revolving balance averaging $16,000, they are incurring interest charges of $2,400 per year. Some of the best financial analysts in the blogosphere have been misled by the propaganda spewed by the Wall Street media shills at Bloomberg and CNBC. The following chart, which includes mortgage and home equity debt, gives the false impression households are sensibly deleveraging, as household debt as a percentage of disposable personal income has fallen from 115% in June 2009 to 101% today. As I’ve detailed ad nauseam, $200 billion of the $1.2 trillion of “household deleveraging” was credit card write-offs. The vast majority of the remaining $1 trillion of “deleveraging” could possibly be related to the 5 million completed foreclosures since 2009. Of course, this pales in comparison to the unbelievably foolhardy mortgage equity withdrawal of $3 trillion between 2003 and 2008 by the 1% wannabes. Bloomberg might be a tad disingenuous by excluding the $1 trillion of student loan from their little chart. If student loan debt is included, household debt outstanding surges to $11.5 trillion.

Based on the Bloomberg chart you would assume wrongly that American consumers are using their rising incomes to pay down debt. Besides not actually reducing their debts, the disposable personal income figure provided by the government drones at the BEA includes government transfer payments for Social Security, Medicare, Medicaid, unemployment compensation, food stamps, veterans benefits, and the all- encompassing “other”. Disposable personal income in the 2nd quarter of 2008 reached $11.2 trillion. It has risen by $500 billion, to $11.7 trillion by the end of 2011. Coincidentally, government social transfers have risen by $400 billion over this same time frame, a 20% increase. Excluding government transfers, disposable personal income has risen by a dreadful 1.1%. For the benefit of the slow witted in the mainstream media, every penny of the social welfare transfers has been borrowed. Only a government bureaucrat could believe that borrowing money from the Chinese, handing it out to unemployed Americans and calling it personal income is proof of deleveraging and austerity.
Household debt as a percentage of wages in 2008 was 185%. Today, after the banks have written off $1.2 trillion of debt, this figure stands at 169%. Meanwhile, total credit market debt in our entire system now stands at an all-time high of $54 trillion, up $3 trillion from 2007. It stands at 360% of GDP. In 1992, total credit market debt of $15.2 trillion equaled 240% of GDP ($6.3 trillion). Was it a sign of a rational balanced economic system that total credit market debt grew by 355% in the last two decades while GDP grew by only 238%? I think it is pretty clear the last two decades have not been normal or built upon a sustainable foundation. In the three decades prior to 1990 household debt as a percentage of disposable personal income stayed in a steady range between 60% and 80%. The current level of 101% is abnormal. In order to achieve a sustainable normal level of 80% will require an additional $2 trillion of debt destruction. No one is prepared for this inevitable end result. The impact of this “real” deleveraging will devastate our consumer dependent society.

The colossal accumulation of debt in the last two decades was the cause and abnormally large retail sales were the effect. The return to normalcy will not be pleasant for consumers, retailers, mall owners, local governments or bankers.
Demographics are a Bitch
In addition to an unsustainable level of debt, the pig in the python (also known as the Baby Boomer generation) will relentlessly impact the future of consumer spending and the approaching mass retail closures. Baby Boomers range in age from 51 to 68 today. The chart below details the retail spending by age bracket. Almost 50% of all retail spending is done by those between 35 years old and 54 years old. This makes total sense as these are the peak earnings years for most people and the period in their lives when they are forming households, raising kids and accumulating stuff. As you enter your twilight years, income declines, medical expenses rise, the kids are gone, and you’ve bought all the stuff you’ll ever need. Spending drops precipitously as you enter your 60’s. The spending wave that began in 1990 and reached its apex in the mid-2000s has crested and is going to crash down on the heads of hubristic retail CEOs that extrapolated unsustainable debt financed spending to infinity into their store expansion plans. The added kicker for retailers is the fact Boomers haven’t saved enough for their retirements, have experienced a twelve year secular bear market with another five or ten years to go, are in debt up to their eyeballs, and have seen the equity in their homes evaporate into thin air in the last seven years. This is not a recipe for a spending up swell.

Demographics cannot be spun by the corporate media or manipulated by BLS government drones. They are factual and unable to be altered. They are also predictable. The four population by age charts below paint a four decade picture of reality that does not bode well for retailers over the coming decade. The population by age data correlates perfectly with the spending spree over the last two decades.

- 26% of the population in the prime spending years between 35 and 54 years old.
- Only 14% of the population over 65 years old indicating reduced spending.

- 31% of the population in the prime spending years between 35 and 54 years old.
- Only 13% of the population over 65 years old indicating reduced spending.

- 28% of the population in the prime spending years between 35 and 54 years old.
- A rising 14% of the population over 65 years old indicating reduced spending.

- 24% of the population in the prime spending years between 35 and 54 years old.
- A rising 17% of the population over 65 years old indicating reduced spending.
The irreversible descent in the percentage of our population in the 35 to 54 year old prime spending age bracket will have and is already having a devastating impact on retail sales. In addition, the young people moving into the 25 to 34 year old bracket are now saddled with $1 trillion of student loan debt and worthless degrees from the University of Phoenix and the other for-profit diploma mills, luring millions with their Federal government easy loan programs. The fact that 40% of all 20 to 24 year olds in the country are not employed and 26% of all 25 to 34 year olds in the country are not working may also play a role in holding back spending, as jobs are somewhat helpful in generating money to buy stuff. Even with Obama as President they will have a tough time getting onto the unemployment rolls without ever having a job. The 55 and over crowd, who have lived above their means for three decades, will be lucky if they have the resources to put Alpo on the table in the coming years. The unholy alliance of debt, demographics and delusion will result in a retail debacle of epic proportions, unseen by retail head honchoes and the linear thinkers in the media and government.
We’re Not in Kansas Anymore Toto
“We tell ourselves we’re in an economic recovery, meaning we expect to return to a prior economic state, namely, a turbo-charged “consumer” economy fueled by easy credit and cheap energy. Fuggeddabowdit. That part of our history is over. We’ve entered a contraction that will seem permanent until we reach an economic re-set point that comports with what the planet can actually provide for us. That re-set point is lower than we would like to imagine. Our reality-based assignment is the intelligent management of contraction. We don’t want this assignment. We’d prefer to think that things are still going in the other direction, the direction of more, more, more. But they’re not. Whether we like it or not, they’re going in the direction of less, less, less. Granted, this is not an easy thing to contend with, but it is the hand that circumstance has dealt us. Nobody else is to blame for it.” – Jim Kunstler

The brilliant retail CEOs who doubled and tripled their store counts in the last twenty years and assumed they were geniuses as sales soared are getting a cold hard dose of reality today. What they don’t see is an abrupt end to their dreams of ever expanding profits and the million dollar bonuses they have gotten used to. I’m pretty sure their little financial models are not telling them they will need to close 20% of their stores over the next five years. They will be clubbed over the head like a baby seal by reality as consumers are compelled to stop consuming. As we’ve seen, just a moderation in spending has resulted in a collapse in store profitability. Retail CEOs have failed to grasp that it wasn’t their brilliance that led to the sales growth, but it was the men behind the curtain at the Federal Reserve. The historic spending spree of the last two decades was simply the result of easy to access debt peddled by Wall Street and propagated by the easy money policies of Alan Greenspan and Ben Bernanke. The chickens came home to roost in 2008, but the Wizard of Debt – Bernanke – has attempted to keep the flying monkeys at bay with his QE1, QE2, Operation Twist, and ZIRP. As the economy goes down for the count again in 2012, he will be revealed as a doddering old fool behind the curtain.
There are 1.1 million retail establishments in the United States, but the top 25 mega-store national chains account for 25% of all the retail sales in the country. The top 100 retailers operate 243,000 stores and account for approximately $1.6 trillion in sales, or 36% of all the retail sales in the country. They are led by the retail behemoth Wal-Mart and they dot the suburban landscape from Maine to Florida and New York to California. These super stores anchor every major mall in America. There are power centers with only these household names jammed in one place (example near my home: Best Buy, Target, Petsmart, Dicks, Barnes & Noble, Staples). These national chains had already wiped out the small town local retailers by the early 2000s as they sourced their goods from China and dramatically underpriced the small guys. The remaining local retailers have been closing up shop in record numbers in the last few years as the ability to obtain financing evaporated and customers disappeared. The national chains have more staying power, but their blind hubris and inability to comprehend the future landscape will be their downfall.
Having worked for one of the top 100 retailers for 14 years, I understand every aspect of how these mega-chains operate. They all approach retailing from a very scientific manner. They have regression models to project sales based upon demographics, drive times, education, average income, and the size of the market. They will build any store that achieves a certain ROI, based on their models. The scientific method works well when you don’t make ridiculous growth assumptions and properly take into account what your competitors are doing and how the economy will realistically perform in the future years. This is where it goes wrong as these retail chains get bigger, start believing their press clippings and begin ignoring the warnings of sober realists within their organizations. When the models show that cannibalization of sales from putting stores too close together will result in a decline in profits, the CEO will tweak the model to show greater same store growth and a larger increase in the available market due to higher economic growth. They assume margins will increase based upon nothing. At the same time, they will ignore the fact their competitor is building a store 2 miles away. Eventually, using foolhardy assumptions and ignoring facts leads to declining sales and profitability.
There is no better example of this than Best Buy. They increased their U.S. store count from 500 in 2002 to 1,300 today. That is a 160% increase in store count. For some perspective, national retail sales grew by 42% over this same time frame. Their strategy wiped out thousands of mom and pop stores and drove their chief competitor – Circuit City – into liquidation. But their hubris caught up to them. There sales per store has plummeted from $36 million per store in 2007 to less than $28 million per store today, a 24% decline in just five years. They have cannibalized themselves and have seen a $6 billion increase in revenue lead to $100 million LESS in profits. It appears the 444 stores they have built since 2007 have a net negative ROI. Top management is now in full scramble mode as they refuse to admit their strategic errors. Instead they cut staff and use upselling gimmicks like service plans, technical support and deferred financing to try and regain profitability. They will not admit they have far too many stores until it is too late. They will follow the advice of an earnings per share driven Wall Street crowd and waste their cash buying back stock. We’ve seen this story before and it ends in tears. I was in a Best Buy last week at 6:00 pm and there were at least 50 employees servicing about 10 customers. Tick Tock.

You would have to be blind to not have noticed the decade long battles between the two biggest drug store chains and the two biggest office supply chains. Walgreens and CVS have been in a death struggle as they have each increased their store counts by 80% to 90% in the last 10 years. Both chains have been able to mask poor existing store growth by opening new stores. They are about to hit the wall. I now have six drug stores within five miles of my house all selling the exact same products. Every Wal-Mart and Target has their own pharmacy. At 2:00 pm on a Sunday afternoon I walked into the Walgreens near my house and there were six employees, a pharmacist and myself in the store. This is a common occurrence in this one year old store. It will not reach its 3rd birthday.

Further along on the downward death spiral are Staples and Office Depot. They both increased their store counts by 50% to 60% in the last decade. Despite adding almost 200 stores since 2007, Staples has managed to reduce their profits. Sales per store have declined by 20% since 2006. Office Depot has succeeded in losing almost $2 billion in the last five years. These fools are actually opening new stores again despite overseeing a 36% decrease in sales per store over the last decade. These stores sell paper clips, paper, pens, and generic crap you can purchase at 100,000 other stores across the land or with a click of you mouse. Their business concept is dying and they don’t know it or refuse to acknowledge it.

Even well run retailers such as Kohl’s and Bed Bath & Beyond have hit the proverbial wall. Remember that total retail sales have only grown by 42% in the last ten years while Kohl’s has increased their store count by 180% and Bed Bath & Beyond has increased their store count by 175%. Despite opening 200 new stores since 2007, Kohl’s profits are virtually flat. Sales per store have deflated by 26% over the last decade as over-cannibalization has worked its magic. Bed Bath & Beyond has managed to keep profits growing as they drove Linens & Things into bankruptcy, but they risk falling into the Best Buy trap as they continue to open new stores. Their sales per store are well below the levels of 2002. Again, there is very little differentiation between these retailers as they all sell cheap crap from Asia, sold at thousands of other stores across the country. With home formation stagnant, where will the growth come from? Answer: It won’t come at all.

The stories above can be repeated over and over when analyzing the other mega-retailers that dominate our consumer crazed society. Same store sales growth is stagnant. The major chains have over cannibalized themselves. Their growth plans were based upon a foundation of ever increasing consumer debt and ever more delusional Americans spending money they don’t have. None of these retailers has factored a contraction in consumer spending into their little models. But that is what is headed their way. They saw the tide go out in 2009 but they’ve ventured back out into the surf looking for some trinkets, not realizing a tsunami is on the way. The great contraction began in 2008 and has been proceeding in fits and starts for the last four years. The increase in retail sales over the last two years has been driven by inflation, not increased demand. The efforts of the Federal Reserve and Wall Street to reignite our consumer society by pushing subprime debt once more will ultimately fail – again. The mega-retailers will be forced to come to the realization they have far too many stores to meet a diminishing demand.
The top 100 mega-retailers operate 243,000 stores. Will our contracting civilization really need or be able to sustain 14,000 McDonalds, 17,000 Taco Bells & KFCs, 24,000 Subways, 9,000 Wendys, 7,000 7-11s, 8,000 Walgreens, 7,000 CVS’, 4,000 Sears & Kmarts, 11,000 Starbucks, 4,000 Wal-Marts, 1,700 Lowes and 1,800 Targets in five years? As our economy contracts and more of our dwindling disposable income is directed towards rising energy and food costs, retailers across the land will shut their doors. Try to picture the impact on this country as these retailers are forced to close 50,000 stores. Where will recent college graduates and broke Baby Boomers work? The most profitable business of the future will be producing Space Available and For Lease signs. Betting on the intelligence of the American consumer has been a losing bet for decades. They will continue to swipe that credit card at the local 7-11 to buy those Funions, jalapeno cheese stuffed pretzels with a side of cheese dipping sauce, cartons of smokes, and 32 ounce Big Gulps of Mountain Dew until the message on the credit card machine comes back DENIED.
There will be crescendo of consequences as these stores are closed down. The rotting hulks of thousands of Sears and Kmarts will slowly decay; blighting the suburban landscape and beckoning criminals and the homeless. Retailers will be forced to lay-off hundreds of thousands of workers. Property taxes paid to local governments will dry up, resulting in worsening budget deficits. Sales taxes paid to state governments will plummet, forcing more government cutbacks and higher taxes. Mall owners and real estate developers will see their rental income dissipate. They will then proceed to default on their loans. Bankers will be stuck with billions in loan losses, at least until they are able to shift them to the American taxpayer – again. No politician, media pundit, Federal Reserve banker, retail CEO, or willfully ignorant mindless consumer wants to admit the truth that the last three decades of debt delusion are coming to a tragic bitter end. The smarmy acolytes of Edward Bernays on Wall Street and in corporate America have successfully used propaganda and misinformation to lure generations of weak minded people into debt servitude. But, at the end of the day, you need cash to service the debt. Mind control doesn’t pay the bills. We will eventually return to normal, just not the normal many had in mind.

“If we understand the mechanism and motives of the group mind, it is now possible to control and regiment the masses according to our will without them knowing it.” – Edward Bernays
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No worries at all. Ritters et al have set the precedent. The new normal is not to pay for your mortgage (renters are losers), car loans and whatever else. Instead they spend, spend, spend. Purple couch and bible sales are up.
The banks write off the loans or keep the balance sheets marked to myth until eternity. The End.
Speaking of eternity. How's that saying? Hope springs eternal.
I see lots of iTulips everywhere this Spring. iTulips!
I used to be a commercial retail real estate agent for a big international company......I went thru the recession of the 80´s oil boom growth in Denver....developers got 130% loan to values and for just a blueprint..no preleasing..nada...and if one story made you a million...why not build two or three....call it garden level....and make it pretty..win an architectual award or something...its not your money anyway...they were never occupied...and took 10 years to sell.......but during that time we used to have Leasing meetings....lol....circle jerks mainly as we were not doing much....but we came up with a great concept for those bad times.....Vice Centers.....the anchor tenant was a big strip club....and the outliers would be tatoo parlors..liquor store of course...with a drive thru no less.....a gun shop....a massage parlor...pawn shop...payday loans...unemployment office...free medical clinic...a soup kitchen....and you could sleep overnight in the parking lot just like Walmart allows with big motor homes....except my clientel have shopping carts and cardboard...It will still work...to da moon boys...to da moon
The empty box stores will make excellent FEMA rendition centers.
That is an actual scenario, by the way.
I'm writing a new "Camp FEMA" songbook for campouts around the crematorium.
Since most of my local businesses have shut down due to big box stores, I have no reason to actually go anywhere to buy anything other than food and gas.
Why bother when Amazon is cutthroat cheap and I just click my mouse and the nice UPS man brings it a couple days later?
Sorry folks. But this time is different. Normalcy is no more. The world as it was pre-08 is now a matter for historians and nostalgia shows to pick over. We'll always remember the old Britney Spears, the way that she looked and acted back then before she, in perfect sync with the economy, crashed and burned.
I've been calling it 'the downsizing of America" to distinguish this from the cyclical downturns that were called 'post-war recessions'. This is all about change. Big change. The entire developed world is in the same boat since it always hitched it's wagon to the US pony. And it will take a long time to sort out. Before there's any semblance of a new normalcy we'll have wave after wave of change.
Considering the import of symbolism with TPTB - see this year's Superbowl show, the Grammy's and the Whitney Houston sacrifice for great examples - that's an interesting take on Britney Spears and the economy. Makes one wonder just how big of a cartoon this 'culture' really is.
Re: CVS
In my 'hood, I have 2 within 1 block of each other, and a 3rd about 8 blocks away (Walgreens->CVS aquisitions). Oh yeah, there's a Walgreens in the same vicinity as well.
Call me when the shots start ringing.Better yet,ill here em myself no doubt.Wawa has really good jalapeno soft pretzels too.They rock.
And have a nice day.
Seriously, this is an excellent recap of where we have been and where we are going. And it is right on. As an older baby boomer we have literally stopped spending. We do not have to but we do not need a new car, truck or another house. We have 0 debt except our mortgage and that is getting paid down. Many of us older shits have learned what is not needed.
The sheeples will not be able to spend as in the past. Way too many malls. In my town, the largest, fanciest and newest mall is missing its next bond payment. Too many box stores, car dealerships, furniture stores and giant malls.
Downsizing is beginning and it will end very badly. One area that was not expounded upon was on line retailers. I cannot remember the last time I bought something at BBY. What little crap we buy is online. Who needs all these stores?
And the older baby boomers, well, we just stop buying fancy clothes. Have not worn a tie in 4 years. We have what we want and we do not want anymore "stuff". There will be millions of us "old farts" that will stop spending. Either we cannot afford it or we don't need or want it. That will take a lot of the spending out of the equation.
Really enjoyed reading this post. Wish I was smart enough to be able to convey the above.
The credit card companies, the banks, every bank/cc/financial corporation... they are farming you.
They are bundling up debtors like cattle , waiting for them to default due to the economic hard ships and short fall of credit that these corporations and banks create.
Then when people can't pay, they sue them.... and pretty much enlist them into their army of zombie debtors to be locked in debt forever and ever pushing the wheels of slavery for their "MASTER"'s Card.
I detest credit cards, they are nothing but a tool of enslavement, I have one card and I refuse to use it.
Soon the bank won't let me get away with having free checking/check card though, thats when ill have to pull it all out and use cash only, it sucks though because online purchases save you money (no tax/shipping/retail is over priced).
I find myself opening accounts, making purchases and closing accounts.
Fuck the banks.
When you receive the "Denning Letter", have them prove that they suffered a loss. The credit card companies are ALWAYS commiting FRAUD! They never disclose the way they do business.
Ironic, that if you attempt to use “cash” to pay off your mortgage, there are some banks that won’t accept it and you’ll be refused the payment transaction. THAT was told to me by a mortgage loan officer in a Top-Five Bank. (I know, I know, they’re afraid you’re a drug dealer, a pimp, whatever; in short, they accuse you of what they do, but in actuality, they want to force you to use their banks.)
They can not refuse to accept cash, and if they do , the debt (amount you went to pay) is cancled.
i get sick of the fricking blame game. Take a look in the mirror for once and therein lies the blame. I am sure your perfect and have no blame. Hell it all depends on the site you hit these days or the commentators even on this site we always blame someone else for our problems. No one signing their name on the dotted line accepting a credit card with 29% interest is too blame. No one spending more then they can pay is too blame after all they are now brainwashed. Give me a break most people want to keep up with the Joneses and they go out and buy, buy, buy. I am sure you never voted for the fucked up baby boomers. I happen to be one and owe no one.
Just another writer spreading around more blame and no solutions. Doom and Gloom just like the rest of the doom and gloom writers. Sounds like the nazi's blaming the Jews for all of their troubles. I could write about blame as well because people do not want to fess up to their obligations these days. They want to blame everyone else for their problems. Give me a break. I do agree people are speanding like there is no tomorrow. The next article will be rounding them up and sending them to gas chambers or FEMA camps.
"winners write history"
You sound like a winner... from history. If the idea of fractional reserve banking was infinitely sustainable then you would be correct, however it isn't and you are not.
The Banksters did not disclose the terms of the contract. Therefore the contract is null & void from the beginning.Use the UCC against them! You choose to be defrauded! I say let the motherfuckers burn!
Its mathematically impossible for everyone to honor these "obligations", theres just not enough money circulating to doit.
They lend 1000 , demand 2000.
98% of the fucking money is credit created out of nothing from people using credit cards , taking out mortgages, car loans etc... etc... You always create less than you need and creating more only has the net effect of making EVERYTHING more expensive for EVERYONE.
The system is just flawed.
I don't blame someone for not being able to pay a credit card, because the ability of one person being able to pay THEIR card off is almost contingent on someone else NOT being able to pay theirs! (not enough money in circulation for both individuals to pay off the interest they owe).
The banks play us all off against eachother and in the end they are the only winners.
I don't care that the system is like this (that much) because so far I have managed to get enough from the rest of society to honor most of my obligations (sucks for you rest of society).
This monetary system is like a game of musical chairs, theres always a loser.
Everyone runs around. Everyone dances to the same music, Everyone puts forth the same effort (more or less) but even if you were the "good guy who did everything right" you can lose everything and the lazy bum can get your seat.
Bankruptcy is built into this system (just to keep it going) because without it, this system would of self-destructed 40 years ago.
I mean.... believe what you want.
But when the odds are always against you before you even came out of the womb.... just because we have these assholes in power making the "rules". . . . theres something wrong here that needs to be fixed.
The system needs to be equitable.... for all parites involved.
Our monetary system is too one- sided.
"i get sick of the fricking blame game. Take a look in the mirror for once and therein lies the blame."
you get sick of the blame game, yet you do the same...
"Just another writer spreading around more blame and no solutions."
are you talking about yourself?
Policy has a lot to do how people choose to spend, save, or invest their money. Since savings account yields ultra negative loss of purchasing power adjusted for inflation, or rising prices, on top of that taxed, it's a real loser to save money. It gives the incentive to spend money for the consumer, and not save. For the investor, it gives them a strong incentive to invest in investment vehicles that protect them from inflation, or at least keep up with inflation. Cheap credit distorts the economy in general.
What pisses me off the most is if I don't want to spend $80 on a pair of Jo Bank trousers, I will go to Kohls to find a cheap pair to get by on, and they are such garbage IF I can find something decent enough to buy. That reminds me, Jo Bank cannot be turning anything close to a profit with their 'BUY ONE GET TEN FREE' sales. How the hell are they still in business?
end the fed ! i really hope they are listening.
.
here some very well written and thought
provoking words.
.
London Banker
Saturday, 24 September 2011
Testimony of Marriner Eccles to the Committee on the Investigation of Economic Problems in 1933
http://londonbanker.blogspot.com/2011/09/testimony-of-marriner-eccles-to...
.
.."Before effective action can be taken to stop the devastating effects of the depression, it must be recognised that the breakdown of our present economic system is due to the failure of our political and financial leadership to intelligently deal with the money problem. In the real world there is no cause nor reason for the unemployment with its resultant destitution and suffering of fully one-third of our entire population. We have all and more of the material wealth which we had at the peak of our prosperity in the year 1929. Our people need and want everything which our abundant facilities and resources are able to provide for them. The problem of production has been solved, and we need no further capital accumulation for the present, which could only be utilized in further increasing our productive facilities or extending further foreign credits. We have a complete economic plant able to supply a superabundance of not only all the necessities of our people, but the comforts and luxuries as well. Our problem, then, becomes one purely of distribution. This can only be brought about by providing purchasing power sufficiently adequate to enable the people to obtain the consumption goods which we, as a nation, are able to produce. The economic system can serve no other purpose and expect to survive." ......
I actually did deleverage. Went from 30k in credit cards and a $150k mortage to zero. It still sucks as I lost my good paying job and don't qualify for anything that pays much. "However".......I haven't worked a day in almost 5 years and tommorow im going to the liquor store as soon as it opens. No kidding. Fuck this system raw. I would even go farther outside the sytem(sell the property) but my better half doesn't like the idea of being mobile. So im like that's fine......let's just get sick and go to the hospital and lose it all.
new, I do not understand the "have not worked a day in 5 years". Is that by choice. I mean, there are jobs out there. I understand many of them suck and pay little, but why 5 years? Sorry, just trying to get your post.
I wrote a naughty handbook for runaway debt slaves. http://www.amazon.com/gp/aw/d/1907498524
'Haha it's funny because he's fat" - Leslie Chow
I'm glad things are finally returning to normal. Time to upgrade my lousy 65" Plasma for a 142" 3D. My 2010 Escalade is getting a little rough around the edges. And since property values always go up, I might as well buy 6 houses with no money down. Hey, I wonder if it's too late to invest in Greek debt...
Errg, re deleveraging, OK, the banks wrote off 193 Billion in bad debts. Just how much of that do you think was credit card debt? Consumers are pikers in this game but they be definitely be deleveraging. It is the financial debt pyramid that is coming down. The consume to you drop economy keeps going with the Federal deficit and transfer payments picking up the slack.
What I don't get is why haven't large numbers of these stores - Sears, BestBuy - been closed already? What are they hanging on for?
Tax "refunds" and Christmas?
I suppose maybe they are on the hook for the lease, and the least-loss option is to keep the lights on until the lease expires. ?!
I like to make things personal, so I can provide both a real example and explain why my perspective is valid even if the reality of your area is different. For example, start at the southern border of broward county, on university, and drive north. There is a home depot every town, a best buy every other town. It's insane, I always thought this was un-sustainable. Broward is still busy, but the stores on the other coast are empty all the time. The only lot that's always packed is Walmart.
I think that the typical consumer wants to deleverage, but can't, and the debt you are seeing is people charging basics on the card. At least around here that is.
TARP and all the bailouts since then were sold to the public on the premise the economy would soon recover, all that money would be paid back with interest, and taxpayers would make a profit.
It was a big lie. They knew the economy wouldn't recover. They knew it was the end of the road for the American economy.
It was a big lie to hide the real reason for all those bailouts, one last huge looting spree before the US dollar collapses and America collapses.
But now is the BEST time to buy a new home!
(brought to you by the NAR)
The people carrying most of the credit card debt are the least able to pay it off. These are the same people who have swelled the food stamp rolls from 28 million in 2008 to 46.5 million today... --Jim Quinn
This is a Quinn blockbuster!
“Look in the book of Revelation,” ministers are inclined to say, “and you’ll find, in the end, we win.”
But in this piece, where Quinn strings enough facts together to fill an entire library shelf, he paints his revelation more darkly. He describes a debt-financed serfdom economy that arrives at its end in a dramatic failure.
“The rotting hulks of thousands of Sears and K-Marts will slowly decay; blighting the suburban landscape and beckoning criminals and the homeless.”
In short, giving power to bureaucracy and its central bank controllers creates poverty.
If you want to destroy growth you support weakness; and the better one does and the more one saves, the more you punish them.
The government advertises for the failures so they can give them more money. They import the Third World and flatter the willful indigent on promises of government life support paid for by the demonized American taxpayer. IOW, they stimulate recession; they actually support recession!
The liberals always tout the phrase:” Everybody should pay his fair share.” I agree. And that includes the so-called ”weak,” the able-bodied, low-producing liberal constituency who pay no taxes but live off child support/housing support/food support/medical support/utilities support/education support/school lunch support/legal support/day care support/mortgage insurance support... They also should pay their fair share. But No! “Fair share” in the language of the progressives means that the rich ($100,000 a year plus) need to pay higher taxes.
And, now, another housing crisis, shades of ninja, is about to crash down once again on an unsuspecting, struggling economy.
Joseph Gyourko predicts that the “leveraged bets as high as 30 to 1 on risky investments with little equity cushion against potential losses [that] helped bring down the likes of Lehman Brothers, Bear Stearns, Fannie Mae and Freddie Mac” is about to happen again — with the Federal Housing Administration.
Why? Because FHA is rapidly multiplying its home loans at 3.5% down on credit scores of 640. With this difference: “In 2007, FHA insured the mortgages of just 6 percent of new home purchases. By 2010, it insured 30 percent. Its insurance guarantees tripled from $305 billion in 2007 to more than $1 trillion today.”
Says Gyourko, the Martin Bucksbaum professor of real estate, finance and business & public policy at the University of Pennsylvania’s Wharton School: “When the mortgage market imploded in 2008, FHA shifted from being a backstop for relatively poorer borrowers to the lender of last resort… Meanwhile, its capital reserve has fallen perilously low — to less than one-third its required level…
“It is no surprise that more than half of FHA’s insurance is on mortgages backed by homes with negative equity… To make matters worse, it encouraged people to buy homes with little or no personal equity investment. Essentially, taxpayers provided down-payment assistance. Existing research indicates that defaults will be high among those who did not make the down payment out of their own resources.”
This economic collapse was set up, it came, and we’re in it. And this is where reaction sets in – big time; when the taxpayers who are footing the bill for the bankers and politicians’ schemes, while enduring increasing impoverishment themselves, start saying: It’s too much!
And the worm turns.
He didn't mention the already empty real estate that is only used for halloween for about 6 weeks out of the year. All those pathmarks, circuit cities, 6th ave electronics etc.etc
The Circuit City Near by was replaced by Li Mings's Global...true story.
http://t2.gstatic.com/images?q=tbn:ANd9GcRDcAL16WL-n9U_TgQwRtfSNffPe0n0y...
I picture five years from now seeing hundreds of thousands of 30 year old rusting beater RVs clogging up the roads everywhere that the weather is nice, with broke boomer "retirees" with attitudes.
Gypsy hippies, whether they want to be or not.
Don't trust any RV over 30, man!
Wildly bullish! Lmao! These are my ten reasons why I am rooting for the Mayan Apocalypse and you should be too..http://thecivillibertarian.blogspot.com/
Very thorough piece Jim. Nice work.
Its pieces like this that inpire me to work my garden. It helps keep me in shape, gives me some peace and tranquility, and allows me to think about what is important, like surviving, then I check my firearm.
Brilliant piece of work!
Thanks Tyler and Jim Quinn.
P.S. - BTW - this explains all the late model cars in the lot at the local weekly free food hand out center - - -
@Mr. Quinn
Mr. Quinn,
Thank you so much for a well written article that articulates the 'intuitive' sense I have had of the end of the collapse begun in 2001 with the attack on Afganistan.
The population charts shown are quite indicative, to me, of the flattening of population growth in the US as the charts do not show very much of a 'pyramid' form after the boomers and their shadow. As we know from the other details you give that I have been 'intuiting', without growing income the machine will starve itself eventually. Your use of 'cannibalization is confirmation of the above, and well serves your position.
It seems to me that the present predicts that the future will be interesting as we attempt to build the new 'machine'. The old model could only succeeded if population growth was maintained and/or the goods and services produced by the society been more equitably shared; this, of course, with the rampant greed and fear of said society has been doomed to fail for years with debt the only possibility for its survival.
Thanks, again, for this piece om
Nice post.
(Deleted)
Great article. Shared on my facebook for the sheep. If they decide to open it, they will read the first paragraph and then decide to turn on American Idol.
Superbly structured piece of work Mr. Quinn. Thanks to you for the extensive work it obviously took to write it, and also to Tyler, for giving it a platform that will ensure it receives the widest possible notice and maximise its influence. We need more Jim Quinn's.
I can see things becoming much like South Africa, with the haves living in walled compounds and the have nots grabbing what they can. It will be interesting to see to what extent the elite will be able to manipulate the political, judicial and law enforcement process so as to preserve their position.
Absolutely amazing article! +1
Please! More of these! Truly a delight reading it.
Dr. Frederick Frankenstein: Igor, help me with the bags.
Igor: Soitenly. You take the blonde, I'll take the one in the turban.
Dr. Frederick Frankenstein: I was talking about the luggage.
For those of you who track the spin machine, you should know that JQ believes the 9-11 official conspiracy story ... BLDG#7 and hook, line and sinker. Some wranglers got to range far to turn back the strays who get too far from the herd.
World War III - The First Private War in History
Those who won all battles shall lose the war.
Bilderberg Group and the crimes against humanity.
This is how things work in all countries. Whatever used to belong to their people, today it belongs to the multinational companies of the Club. People were betrayed by their given leaderships and they lost everything. Capitals and markets were handed to the Club bosses. If you understand what is going on in Greece, you can understand what is going on in Britain, France, and Germany etc..
http://eamb-ydrohoos.blogspot.com/2012/02/world-war-iii.html
Authored by PANAGIOTIS TRAIANOU
Really sharp article. I understand the whole, "We know this shit already" response on here....the problem is, the American consumer is too stupid to notice (until gas/energy/food costs force them too) and the American CEO is too ignorant to notice while answering emails on his yacht.
There's this persistent thought amongst CEOs, including mine, that things have to eventually turn around. The problem is, the corporations who EXPECT this aren't exactly doing anything about it. It's almost as if they don't think that "Risk of Ruin" or "Prisoner's Dilemma" are just fairy tales that don't apply to the mathematics of the average's person wallet.
I am one of those consumers deleveraging. I think the main reason why the proletariat, especially in the middle class hasn';t spoken up is because of A) ignorance/misinformation about how much the (corporate) policies Federal Reserve affects their earning power and B) they are good people, who honor their debts, for the most part. People DO NOT want to default. But they also know if they do, they are fucked in getting a job, house, and pretty much are blacklisted in society. The next thing to come up next are more robo calls and debtor's prisons. People in general, want to avoid this. And if you have a kid or few, you REALL Ywant to avoid it as you want to keep up a decent standard of living for them.
Bascially, the corporate-led government rent seeking system has the majority of us by the balls. If people were out of debt, they'd be more inclined to "lock out" their employers, and go Galt until their wages icreased and their workplaces less toxic. being in debt creates the opposite effect; it applied more pressure on humans to be productive, which is why productivity is up. It also gives corporate elites the wrench to tighten the screws on the serf.
When I am out of debt by the end of this year, I'll finally have the negoiating power to say, "You know what, corporate job, I really don't NEED you."
My wage hasn't gone up. I don't get a bonus. My bills are going up.
How the fuck am I supposed to buy your shit?
It is funny that Santorum and Romney said that they are runnign because "Beginning of the end of freedom in America?" started with Obama. This is untrue.
The Beginning of the End of Freedom in America has happened every day for the last 30 years, the minute Americans walk into the workplace