Pie in the Sky and Lowered Expectations
Today's Financial News - Posted December 30, 2008
What consumer confidence numbers tell about America’s trust in liberal totalitarianism.
by J. Christoph Amberger
Baltimore — (TFN): “I hope you have a healthy New Year,” my friend wrote in her Christmas card. “I would wish you a prosperous and happy New Year, but unfortunately I don’t think that’s in the cards for anyone this year. Although maybe I’m being too pessimistic. Hopefully you’ll have some of each!”
In the twenty years that I have lived in the States, I have never encountered the same degree of pessimism among “normal” people—that’s people who do work that doesn’t constist of blaming the government. The mass media may still ooohhh and aaahh about the new Spirit of Hope and Change tread loose by the election of Barack Obama. But that optimism seems to be restricted to people conditioned to expect something for nothing.
Even the Baltimore-Washington MARC train still has tickets left for Inauguration Day.
Those who have money to spend, cash to convert into capital, and optimism to transform into entrepreneurial energy are rightfully holding back. With good reason: If even the last bastion of practical free market policy, the Bush Administration, is allowing government bailouts and nationalization of industries—what can be expected from a newcomer whose only known quantities are a penchant for redistributive social engineering and a dislike of private initiative and financial independence?
Accordingly, confidence among U.S. consumers fell by a record margin in December—to the lowest level since records began in 1967. It’s blamed on rising unemployment, lowered home values, and decimated retirement accounts. But confidence is forward-looking. Despite all the campaign promises of a liberal Cloud Cuckoo Land, with free this and free that and green jobs for all, consumer confidence indicates that the actual expectations for the Obama Administration are very low indeed.
And while Keynes would be proud of American households saving rather than spending, diminished expectations on our future are wreaking havoc on the consumer economy. Over the holiday week, U.S. retailers’ sales declined the most in almost six years for the worst holiday shopping season in four decades.
Because an economy that doesn’t consume might as well be an economy that doesn’t produce.
“It’s dismal,” Patrick Byrne, CEO of Overstock.com said in an interview on Bloomberg Television. “It seems the entire retail nation is running a going-out-of-business sale. It means the pricing is very competitive.”
Unsold merchandize means one thing: Firesale discounts! Which translate in to strong deflationary pressure over the next six months as inventories get unraveled. That provides the Fed with just enough of a window to throw on the printing presses without fear of inflation.
The only question is how to best get the new money into stores’ cash registers: Lowered borrowing cost and a few hundred bucks in tax rebate checks are not going to cut through low expectations.
Then again, given the prospects, I don’t know what will.
Recommended Reading
“Don’t get all emotional on me”
“The Best Ocean View in South America”
Cordially yours,
J. Christoph Amberger
Executive Publisher, TodaysFinancialNews.com
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