Tuesday, April 20, 2010

An Unexpected Spending Spree

Certain people are spending money and they shouldn't be. The statistics reported to the the federal Government indicate consumer spending is increasing and the hope is that these statistics show increasing confidence among we the people. in fact it appears that many among we the people are behaving rather strangely in the face of economic uncertainty.
breaking down the statistical anomaly I was intrigued by some information I discovered on the reporting of "same store sales." Part of the improvement in the economy was attributed to stronger sales in box stores around the country. It sure seemed plausible, if a little odd...people spending money when everything seems to be wrecked? Could things really be improving? It turns out the "same store sales" figures were being skewed by the closure of several neighboring chains which tend to share space in the same malls... Thus the closure of Circuit City would push more shoppers to a rival, say Best Buy, creating a surge in shopping in stores that survived the blood bath. So much for a surge in total numbers of shoppers shopping.
If we take that part of the equation with a pinch of salt we need to start scratching our heads at the news of a new round of consumer spending. This one seems to be real, that is to say people are actually spending money. The weird part is the assumption that these are people who are no longer spending money to pay their hopelessly underwater mortgages.I wish I could find it unbelievable but i find myself wondering if in fact this story may not be true. It seems that when mortgage holders finally give up they simply stop paying and turn their new found momentary wealth onto luxury spending instead, just like the good old days when homes were ATMs. Yes indeed, stop paying your mortgage and take a vacation instead seems to be the theme.
On it's face it sounds incredible that people would go on a spending spree when they decide to default on their mortgages, and the fact that the banks aren't yet interested in throwing them out of their homes won't mean much in the long run. But there it is, save yourself the hassle of paying for the roof over your head and go to Hawaii instead. The new bankruptcy paradigm for the homeowners under water on their mortgage. I wait to see what happens next.
We are currently seeing almost 4.5 million foreclosures on annual basis with one million repossessions expected this year. if trends continue there will be millions waiting to get kicked out yet spending, dare i say wasting, money in the meantime. My brain hurts.

7 comments:

Danette said...

I don't find that surprising actually. My X would have had exactly that attitude-- thus, he's an X.

And if consumers are exhaling, they are doing it way too soon. News from the city of Denver- the word to the schools is that there will be large budget cuts the year after this. Reason? Stimulus money is gone- nothing, nada, zip, zilch- and tax revenues are projected to be down. Get rid of those policemen and firemen I say! What need have we of such lazy ineffectual strains on our city's budgets!! :)

Milton's Freeman said...

In order to protect itself and flourish, central gov't (state or national level) will ALWAYS fire teachers, firemen, close parks, etc. to "demonstrate" their need for a bigger share of GDP. Like a Plover feigning a broken wing...

...instead of taking real steps to improve efficiency and effectiveness - and cut their drag on the economy.

Yet the sheeple cover their hearts, and moan "Randolf Scott!" every time a "Hopey Changey" or "Read My Lips" phoney steps to the podium...

Conchscooter said...

Back in the days of Ronald Reagan the term sheeple hadn't yet been coined, but the description is apt. His followers still believe to this day that government should be shrunk, though it is always a theoretical equation as no one actually wants to lose their beenfits in real life.
Budget reduction? End foreign wars. Empire building is expensive and not productive, then all the tea baggers can keep their socialized medicine and the grumpy old gits can keep their social security checks. Otherwise not.
Then we'll some wailing and gnashing of teeth.

Anonymous said...

I wonder how the demonstrators at a Tea Party rally would react to a participant carrying a sign that says:

END OBAMACARE
END MEDICARE
END SOCIAL SECURITY

I'm tempted for the comedy value alone.

Conchscooter said...

Do it with an AK47 strapped to your back...
It's easy to talk cuts until the cuts hit home...Has anyone else noticed that Republicans promise to privatize medicare and social security if they win a majority?

Orin said...

Portland is full of shuttered big-box retail stores (even a local one called Joe's went tango-uniform a couple years ago, but the buildings remain). Likewise, on Canyon Road, which used to be Beaverton's Auto Row, most of the car dealerships are shuttered.

So it's actually plausible that the likes of Walmart, Target and Fred Meyer are moving more merch than last year. All these places crow about how they've lowered their prices, on everything, and they are not purveyors of luxury goods.

Yes, I got a car recently. A 15-year-old one with 175K miles on the clock, for which I paid $2,300. Because in the USofA, economic survival requires owning a car. The cheapest way to travel between Seattle and Portland is to drive your own vehicle, and ironically, it's also the fastest.

In a couple months, I will be setting up a household again, as the place where I've been figuratively couch-surfing is going to be sold. Craigslist and Freecycle will figure prominently in my search for household stuff, but it's not possible to get everything from these sources. I'll have to do the retail thing...

__Orin
Scootin' Old Skool

Conchscooter said...

I wish you luck Orin. We have discarded the idea of buying a new/used car and I expect my wife will yield to reality and agree to put a new/old engine in the Maxima.Or we could stop paying the mortgage for six months and change cars!
I keep hearing how we are on the path to recovery. But there again I understand marijuana is on the path to legalization so perhaps soon we'll all think we're on the road to recovery.