Monday, August 17, 2015

How to View Bad Economic News

So much bad news about the economy!  And there is the error, referring to the economy we have as THE economy.  It is A economy, the mainstream one, the result of policies that wittingly lead to misallocation and malinvestment, picked winners and losers, the false economy reported upon 24/7 by cable and other media.

At the same time there are other economies, real economies of productive enterprise, upon which todays depredations have no effect.  In fact, the destruction of THE economy is a boon to the real economy.  Come the crack-up, prices will fall on real estate, people will be able to rent cheap, and begin making things again.    The big, subsidized, centrally produced everything will break up back to local, which in fact has already been going on.

Imports will fall, but imports of things we should be making ourselves anyway, like clothes and sporting goods.  Those imports of what we cannot effectively make will continue to do well.  And we will export what we do best when unsubsidized.

Stockman keeps a good survey of what is going on... retail:
 Jim Quinn dissected the most recent financial results of four of the largest US mall retailers——Macy’s, Kohl’s, Sears and J.C. Penney. Their combined sales in the most recent quarter of $19.1 billion were down 10% from the prior year;
All those stores have huge pension liabilities, expect them to be wiped out Hostess Twinkie style in the next downturn.  Their business is huge and dropping, small businesses need only crumbs from their table to support a family business.

Small specialty retailers ought to trade in both new and used products, because a whole lotta stuff will come out of storage when the next crash crushes...
The relatively strong year over year furniture sales is also driven by the fact that you can finance the purchase at 0% interest for seven years. All is well for the Ally Financial, GE Capital and the myriad of fly by night subprime lenders until the recession arrives, unemployment soars, and defaults skyrocket. Then their bloated debt ridden balance sheets will explode in an avalanche of defaults. That’s when they insist on another taxpayer bailout to “save the financial system”.
And M&A, the technique of growing by destroying, is at its fastest pace...
Takeover-deal announcements would reach $4.58 trillion this year if the current pace of activity continues, according to data provider Dealogic. That tally would comfortably exceed the $4.29 trillion notched in 2007, a record year for deal making.
All this bad news is very good news for small, real economy business.  You'll be able to support a family with a small business again.  But then, you'll need a small business to support a family.

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