On May 19, 2010, at 5:01 PM, Chuck Grimes wrote:
> Okay. But a couple of points. It would help to know how much of the
> consumer spending is coming from the richer and much smaller percent.
Hard to say. There are no good figures available on this. But here are a couple of proxies. The International Council of Shopping Centers (yes, there is such a thing) tallies monthly chain-store sales figures into various composites and subindexes. Their overall sales index is up 4.5% over the last year. The luxury-stores index is up 9.7%. The discounters', up 3.7%. Wal-Mart, which only reports sales quarterly and so isn't in the ICSC reports, was off 1.4% in the year ending in the first quarter. All this suggests that the middle ranks, who patronized Wal-Mart more than usual during the recession, have gone back to more pleasant retail destinations, leaving the company on the mercies of its traditional poorer clientele, who are still hurting. And the better off, who really cut back during the recession (luxury sales fell by about 20%, about twice as much as overall retail spending) are now letting it rip again. Not like during the bubble days, but still pretty strong.
> See I suspect the inequality has gotten so large that it can skew an
> average enough to make it look like the bigger `we' are doing okay.
> My other worry is that the austerity packages for the states and
> cities hasn't taken effect yet, but when they do, it won't just
> cause `pain', they will force the economy into a real depression.
Dunno about that. The job and service cuts will hurt, and pretty bad, and be a drag on growth, but I'm not sure about a depression.
> So, anyway, what about the rest of the Whitney articles? When you
> get a chance, read through and see.
He's always seemed over-excitable to me.
> I'd like to hear Doug and other evaluation on the predictive claims
> that we are headed into another big crash, the current stock market
> levels represent a bubble and not a recovery, that the Greeks are
> dead meat if they don't get out of the EU, that the EU bailout won't
> work for very long, that Club Med (Portugal, Spain, Italy) are
> headed in the same downward spiral.
Could just be their turn to go through what the U.S. did in 2008 & 2009. Our stock market is behaving pretty much in line with the way stock markets have usually behaved after financial crises - down hard, then recovering pretty well. Employment, though, typically recovers slowly from a financial crisis. My guess is that while a second leg down is possible, we're more likely to see a grindingly sick economy than a real collapse. But who knows?
Doug