WalMart has begun its return to Bentonville, Arkansas, an odyssey begun in 1962. The neat idea of price cutting, "stack 'em high and watch 'em fly" was one of those unforeseen right time right place things when ten years later Nixon took the world off the gold standard (lite). It was perfectly positioned to borrow asset-less credit and use it to call forth misallocation by aggregating more production to itself.
Wolf Richter dissects Walmart's big stock price drop. Wolf notes financial engineering. Read the comments too, he has smart readers.
As banks lent asset-less credit (malcredit) there was no rational limit on how much Walmart could buy at ever-lower prices as USA factory owners committed the folly of price cutting (page 221 of my book) as they accepted Walmart orders. With lower costs on product compliments of the banking fraud explicit in lending malcredit, not money, there was no limit to where a genius cost-cutter like Sam Walton could work:
1. Financial engineering.
2. Product
3. Land
4. Buildings
5. Logistics
6. Employees.
The economic policy of the USA is get big or get out. By being the biggest and baddest in this regime, Walmart was the winner. The irony is collectivism's biggest beneficiary are right wing ideologues. Or perhaps the lesson is not lost on right wing ideologues.
The losers were the countless smaller factories in USA that, as mentioned above, cut prices to gain Walmart volume business. Family businesses (as well as family farms.) I watched these companies increase sales and go out of business in the 1970s and 1980s. Greed kills. I was in China watching as Walmart buyers could take the demand data from USA, wherein the USA supplier had been squeezed to death (another story from my book, how Levitz choked Kroehler to death) to China and get the Chinese management and state-enterprise subsidies to ever cut costs (labor rates has never had anything to do with international trade) and inevitably build that country's infrastructure.
Walmart is not the only one, every mass-merchandiser, big box retailer now on top played this same game, Toysrus, Lowes, Office Depot, Safeway, Best Buy, Petco, Barnes and Noble, The Gap, you name the category, the biggy played the game. And every one is in trouble now, because the malcredit game has reached its limit, something everyone knew would happen, but no one could say when.
When. Now everyone agrees it is over.
This roll-up process wherein the biggest borrower crushed the smaller retailers decimated the family businesses that were the USA economy. Those families also hired employees to help out. To be destroyed by this juggernaut was inevitable if you made the mistake of joining in and participating in the force and fraud of accepting malcredit. Countless small businesses simply moved up market and thrived, another phenomenon I outline in my book. But those who tried to play the discount game were wiped out. Critical to your survival was how you defined wealth: personal accumulation, or the range of goods and services one could afford with what they earned. Also, people who saw business as a lifestyle and not a money making opportunity always have the advantage.
And as an aside, never in the history of USA has a single American job been "exported." What happens is as a factory becomes outdated, the new factory with all the new processes and systems is built overseas, with new labor needs. The USA worker does not know how to do the new job, but his dis-employment is useful for diverting attention by claiming his wages are too high, that foreign workers are paid less, as if wages matter in overall costs. As a part of financial engineering, overseas activity is necessary to book profits overseas in order to avoid USA taxes. Our biggest importers/exporters also pay negligible taxes, for the all perfectly legal tax exemption programs. It works to blame it on USA labor for he lack of jobs. Blame the victim. The argument misses the point: the jobs are gone because our only choice, democrats and republicans agree, get big or get out, USA is a collectivist state. All of capitalism's patterns and practices are ordered to collectivism. The right and left wing obscure this by calling this fraud "the free market" and such moral crimes as NAFTA and TPP "free trade agreements."
The solution to this is to no longer protect by hegemon force the fraud of lending credit, creating malcredit, which has driven out benecredit. Now that is not going to happen, indeed, quite the opposite. McDonalds, Boeing, Microsoft, Walmart, and all the companies whose welfare depends on force and fraud are looking to the super-secret TPP program to save them, just as NAFTA was a boost in protectionism in the 1990s. Democrats and republicans alike overwhelming supported NAFTA, and after the election, will pass TPP, no matter who wins.
I do not recommend criminalizing the fraud, merely delegitimizing it by withdrawing the state violence necessary to maintain it.
Bad money crowds out good, bad credit crowds out good credit.
Feel free to forward this by email to three of your friends.
Wolf Richter dissects Walmart's big stock price drop. Wolf notes financial engineering. Read the comments too, he has smart readers.
As banks lent asset-less credit (malcredit) there was no rational limit on how much Walmart could buy at ever-lower prices as USA factory owners committed the folly of price cutting (page 221 of my book) as they accepted Walmart orders. With lower costs on product compliments of the banking fraud explicit in lending malcredit, not money, there was no limit to where a genius cost-cutter like Sam Walton could work:
1. Financial engineering.
2. Product
3. Land
4. Buildings
5. Logistics
6. Employees.
The economic policy of the USA is get big or get out. By being the biggest and baddest in this regime, Walmart was the winner. The irony is collectivism's biggest beneficiary are right wing ideologues. Or perhaps the lesson is not lost on right wing ideologues.
The losers were the countless smaller factories in USA that, as mentioned above, cut prices to gain Walmart volume business. Family businesses (as well as family farms.) I watched these companies increase sales and go out of business in the 1970s and 1980s. Greed kills. I was in China watching as Walmart buyers could take the demand data from USA, wherein the USA supplier had been squeezed to death (another story from my book, how Levitz choked Kroehler to death) to China and get the Chinese management and state-enterprise subsidies to ever cut costs (labor rates has never had anything to do with international trade) and inevitably build that country's infrastructure.
Walmart is not the only one, every mass-merchandiser, big box retailer now on top played this same game, Toysrus, Lowes, Office Depot, Safeway, Best Buy, Petco, Barnes and Noble, The Gap, you name the category, the biggy played the game. And every one is in trouble now, because the malcredit game has reached its limit, something everyone knew would happen, but no one could say when.
When. Now everyone agrees it is over.
This roll-up process wherein the biggest borrower crushed the smaller retailers decimated the family businesses that were the USA economy. Those families also hired employees to help out. To be destroyed by this juggernaut was inevitable if you made the mistake of joining in and participating in the force and fraud of accepting malcredit. Countless small businesses simply moved up market and thrived, another phenomenon I outline in my book. But those who tried to play the discount game were wiped out. Critical to your survival was how you defined wealth: personal accumulation, or the range of goods and services one could afford with what they earned. Also, people who saw business as a lifestyle and not a money making opportunity always have the advantage.
And as an aside, never in the history of USA has a single American job been "exported." What happens is as a factory becomes outdated, the new factory with all the new processes and systems is built overseas, with new labor needs. The USA worker does not know how to do the new job, but his dis-employment is useful for diverting attention by claiming his wages are too high, that foreign workers are paid less, as if wages matter in overall costs. As a part of financial engineering, overseas activity is necessary to book profits overseas in order to avoid USA taxes. Our biggest importers/exporters also pay negligible taxes, for the all perfectly legal tax exemption programs. It works to blame it on USA labor for he lack of jobs. Blame the victim. The argument misses the point: the jobs are gone because our only choice, democrats and republicans agree, get big or get out, USA is a collectivist state. All of capitalism's patterns and practices are ordered to collectivism. The right and left wing obscure this by calling this fraud "the free market" and such moral crimes as NAFTA and TPP "free trade agreements."
The solution to this is to no longer protect by hegemon force the fraud of lending credit, creating malcredit, which has driven out benecredit. Now that is not going to happen, indeed, quite the opposite. McDonalds, Boeing, Microsoft, Walmart, and all the companies whose welfare depends on force and fraud are looking to the super-secret TPP program to save them, just as NAFTA was a boost in protectionism in the 1990s. Democrats and republicans alike overwhelming supported NAFTA, and after the election, will pass TPP, no matter who wins.
I do not recommend criminalizing the fraud, merely delegitimizing it by withdrawing the state violence necessary to maintain it.
Bad money crowds out good, bad credit crowds out good credit.
Feel free to forward this by email to three of your friends.
1 comments:
Walmart is still good for bulk toilet paper.
Can I hear crickets?
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