50 Years of Gutting America's Middle Class

Happy Birthday, Wal-Mart.  We inexplicably love you despite your best efforts to kill our economy.  Other Words: 

Sam Walton opened the first Walmart store in Rogers, Arkansas, 50 years ago this month. Sprawled along a major thoroughfare outside the city's downtown, that inaugural store embodied many of the hallmarks that have since come to define the Walmart way of doing business. Walton scoured the country for the cheapest merchandise and deftly exploited a loophole in federal law to pay his mostly female workforce less than minimum wage.



That relentless focus on squeezing workers and suppliers for every advantage has paid off since July 1962. Walmart is now the second-largest corporation on the planet. It took in almost half-a-trillion dollars last year at more than 10,000 stores worldwide.


Walmart now captures one of every four dollars Americans spend on groceries. Its stores are so plentiful that it's easy to imagine that the retailer has long since reached the upper limit of its growth potential. It hasn't. Walmart has opened over 1,100 new supercenters since 2005 and expanded its U.S. sales by 35 percent. It aims to keep on growing that fast. With an eye to infiltrating urban areas, Walmart recently introduced smaller "neighborhood markets" and "express" stores.

While the big-box business model Sam Walton pioneered half a century ago has been great for Walmart, it hasn't been so great for the U.S. economy.


Walmart's explosive growth has gutted two key pillars of the American middle class: small businesses and well-paying manufacturing jobs.


Between 2001 and 2007, some 40,000 U.S. factories closed, eliminating millions of jobs. While Walmart's ceaseless search for lower costs wasn't the only factor that drove production overseas, it was a major one. During these six years, Walmart's imports from China tripled in value from $9 billion to $27 billion.


Small, family-owned retail businesses likewise closed in droves as Walmart grew. Between 1992 and 2007, the number of independent retailers fell by over 60,000, according to the U.S. Census.


Their demise triggered a cascade of losses elsewhere. As communities lost their local retailers, there was less demand for services like accounting and graphic design, less advertising revenue for local media outlets, and fewer accounts for local banks. As Walmart moved into communities, the volume of money circulating from business to business declined. More dollars flowed into Walmart's tills and out of the local economy.


In exchange for the many middle-income jobs Walmart eliminated, all we got in return were low-wage jobs for the workers who now toil in its stores. To get by, many Walmart employees have no choice but to rely on food stamps and other public assistance.


Walmart's history is the story of what has gone wrong in the American economy. Wages have stagnated. The middle class has shrunk. The ranks of the working poor have swelled. Whatever we may have saved shopping at Walmart, we've more than paid for it in diminished opportunities and declining income.
And the worse things get, the more alluring Walmart's siren call of low prices becomes. While the Ford Motor Co. once profited by creating a workforce that could afford to buy its cars, today Walmart profits by ensuring that Americans cannot afford to shop anywhere else. The average family of four now spends over $4,000 a year at Walmart.

Such market concentration is unprecedented in U.S. history, as is the concentration of wealth it has engendered. Sam Walton's heirs own about half of Walmart's stock and have a net worth equal to the combined assets of the bottom one-third of Americans — about 100 million people. This year alone, the Waltons will pocket $2.7 billion in dividends from their Walmart holdings.
They are among the few Americans who have reason to celebrate Walmart's 50th birthday. As for the rest of us, the milestone offers a good moment to reflect on the company's business model and where it might lead us if we allow Walmart's growth to continue full-steam for another 50 years.

Evidence that yeah, South Park is funny, but politically short sighted.  When no one has any money to buy their DVD's, do you think Trey Parker and Matt Stone will change their ignorant minds?  They're uber-rich, so probably not..

Guest Post: Alan Greenspan Asked For Advice, Do People Ever Learn?

BAM.  Thanks, Alan!  James Miller via Zero Hedge drops the hammer.  Excerpts:

Unbelievable.



That is the only way to express this author’s utter bewilderment that former Federal Reserve chairman Alan Greenspan is still given an outlet to speak his mind. Actually, I am surprised Mr. Greenspan has the audacity to show his face, let alone speak, in public after the economic destruction he is responsible for.
It was because of Greenspan, of course, that the world economy is still muddling its way along with painfully high unemployment. His decision to prop up the stock market with money printing under any and every threat of a downtick in growth, also known as the Greenspan Put, created an environment of easy credit, reckless spending, and along with the federal government’s initiatives to encourage home ownership, the foundation from which a housing bubble could emerge.


It was moral hazard bolstering on a massive scale. Wall Street quickly learned (and the lesson sadly continues today) that the Federal Reserve stands ready to inflate should the Dow begin to plummet by any significant amount. Following his departure from the chairmanship and bursting of the housing bubble, Greenspan quickly took to the press and denied any responsibility for financial crisis which was a result in due part to the crash in home prices. In his infamous 2009 Wall Street Journal editorial, he had the nerve to blame availability of credit which financed the run-up in home prices to a “savings glut” in Asia. He writes.

[T]he presumptive cause of the world-wide decline in long-term rates was the tectonic shift in the early 1990s by much of the developing world from heavy emphasis on central planning to increasingly dynamic, export-led market competition. The result was a surge in growth in China and a large number of other emerging market economies that led to an excess of global intended savings relative to intended capital investment. That ex ante excess of savings propelled global long-term interest rates progressively lower between early 2000 and 2005.

Sounds convincing right?

Much of the aura of greatness attributed to Greenspan throughout his term as chairman was due in part to the purposefully overly-technical language he used when talking to reporters. Here he utilized the same technique, albeit in a simpler manner, to obscure the Fed’s role in the housing bubble. His explanation falls on its face though when looking at key historical data and by asking the right questions.
..
And as economist George Reisman brilliantly shows, the “savings glut” argument doesn’t stand when taking into account the following questions and observations:

First, if saving had been responsible, rather than credit expansion and the increase in the quantity of money, there would have been a corresponding decline in consumer spending in the countries allegedly doing the saving. The fact is that there was no such decline.

Second, saving implies a growing supply of capital goods, more production, and lower prices, including lower prices of capital goods and even of land. These are results that are incompatible with the widespread increases in prices typically found in a bubble.


Third, if somehow saving had been responsible for the housing bubble, the spending it financed would not suddenly have stopped. Such stoppage is a consequence of the end of credit expansion and the revelation of a lack of capital.


Fourth, if large-scale saving rather than credit expansion had been present, banks and other firms would have possessed more capital, not less. They would not be in their present predicament of having inadequate capital to carry on their normal operations. This situation of insufficient capital is the result of malinvestment and over consumption, which are the consequences of credit expansion, not saving.


Fifth, in the absence of increases in the quantity of money and overall volume of spending in the economic system, saving also implies an immediate tendency toward a fall in the economy wide average rate of profit. This is another result that is incompatible with what is observed in a bubble or boom of any kind, which is surging profits so long as “the good times” last.

It should be perfectly clear at this point that Greenspan holds the majority of the blame for the housing bubble. And yet many financial media outlets still see the former central banker as a type of guru on global economic affairs.

That reverence seems to be fading quickly.  By this fall, people should (finally!)have a very different opinion of Alan Greenspan, all the choices he's made, and where those choices have brought all of us. Right now, it's still the economists and information junkies and people his policies destroyed.  More to arrive shortly, to be sure.. 

Greek Parliment Votes Austerity. Greek Citizens Vote Chaos..

Here we go..  Greek financial and political discourse is about to get really rocky..  With real rocks.  The Roundup begins now..  The Extinction Protocol, via Reuters..  Excerpts:

Historic cinemas, cafes, shops and banks were set ablaze in central Athens on Sunday as black-masked protesters fought Greek police outside parliament, while inside lawmakers looked set to defy the rage by endorsing a new EU/IMF austerity deal. State television reported violence spread to the islands of Corfu and Crete, the northern city of Thessaloniki and towns in central Greece. Shops were being looted in the capital in the worst breakdown of order since 2008 when violence gripped Greece for weeks after police shot a 15-year-old schoolboy. As parliament prepared to vote on a new 130 billion euro bailout to save Greece from a messy bankruptcy, a Reuters photographer saw buildings in Athens engulfed in flames and huge plumes of smoke rose in the night sky.

Yeah, it's burning..

So, what does this all mean?  Tyler Durden from ZeroHedge 'splains and sums up..

The Greek parliament just passed the latest proposed austerity plan with a majority voting Yes. Judging by the reaction of the EURUSD, which experienced a modest 40 pip short covering squeeze in the last few minutes, one would imagine that today's Greek vote outcome is surprising. It isn't: after all, all Greece has done is promise to do something it won't do in hope it can get another bailout package, this time amounting to €210 billion (of which its people will pocket a de minimis 19%). As we said earlier: "The only real questions are i) what the Greek population may do in response to this latest selling out of a population "led" by an unelected banker, which if history is any precedent, the answer is not much, and ii) how Germany will subvert this latest event, and put the bail [sic] back in Greece's court once again."
Plus, a little funny for you..
..everyone knows revolutions in heavily socialist countries only start between 9 am and 5 pm, with a 2 hour break for siesta.

Not funny, though, is how the Greek people will respond to these financial shenanigans.  Not well is the answer; Not well at all..

I fear for a social explosion: Greeks can't take any more punishment The Guardian.  Excerpts:

Despair has enveloped Greece. This weekend the bankrupt nation, for that is what it is, began negotiating the latest act of a drama that many fear will end in catastrophe – financially, socially and politically.


In an electric atmosphere, with thousands demonstrating outside parliament, MPs began debating the arduous terms of a €130bn (£110bn) rescue package that the interim prime minister, Lucas Papademos



"A disorderly default," he said, referring to the 20 March deadline that Greece faces of repaying €14.5bn in maturing debt, "would plunge our country in a disastrous adventure. It would create conditions of uncontrolled economic chaos and social explosion."
..
But in both parties MPs are far from convinced. The country has reached a crossroads, of that there can be no doubt. But almost two years since it was first "rescued" with €110bn, the nation's acceptance of this latest lifeline puts it in a perilous place. Politicians, almost without exception, believe they are "damned if they do and damned if they don't".


After more than two decades reporting from Athens, I can only concur. For the truth – as unpalatable as it may be for the IMF, EU and European Central Bank, Greece's "troika" of creditors – is that, far from plugging the country's budget black holes, the harsh austerity pursued in the name of deficit-reducing goals has pushed it towards economic and social collapse. Relentless wage and pension cuts, tax rises and cost-cutting reforms have left the country a shadow of itself. In its fifth successive year of recession, Greece is a hollowed-out version of what it once was, coming apart at the seams a little more with each day. Men and women forage through rubbish bins late at night. More sleep on the streets. Last week as Eurostat, the European statistic agency, announced that poverty had engulfed more than a third of the nation, it was revealed that unemployment had also exceeded one million people, from a record 19% to 20.9% in one month.


"Nothing functions. Nobody pays anybody any more and the state is not just crumbling but in complete stasis," said Giorgos Kyrtsos, a prominent political commentator. "These guys," he said of officials in the troika of European agencies negotiating the bailout, "should really lose their jobs. They've miscalculated everything. I understand on Friday the police trade union called for their arrests. Well, maybe they are right!"

..
A series of resignations by ministers on Friday, unwilling to support the latest measures, not only underlined the panic of the political class – in a country where MPs no longer feel safe walking in the streets – but proved how tenuous public support is for the bailout. If there is to be a social explosion, many said that it would come because Greeks had been pushed too far. The loan agreement not only will lead to job losses and more cuts in salaries and pensions but a 22% reduction in the minimum wage.



Ferment on the street is back. The clashes during last week's second general strike are generally expected to be a prelude to something much more ominous. "There is going to be a huge social eruption," said Apostalia Kiroudi, an unemployed jeweller shouting herself hoarse in front of parliament.

"Our politicians lied to us. They never told us the truth, and now they want to pass policies that they have no mandate to do. As that sign says over there," she said, pointing to a friend holding a placard, "We choose to be free. Keep your money."

Things are going to devolve rapidly.  The bankster gangsters won't take The People's shit, and vice versa.  And the Greeks have proven time and again they're always up for a fight, and a fight they shall have.  I sure hope Riot Dog has been resting up--In the coming days, he's going to be busy!

Global employment crisis will stir social unrest, warns UN agency

From The Telegraph  Excerpts:

The United Nations work agency said it was putting back by two years from 2013 its previous assessment of the time needed to create the 22 million jobs still needed to regain the pre-crisis level - 14 million in rich countries and 8 million in developing states.
And:
In 35 countries for which data exists, nearly 40 per cent of job seekers have been without work for more than one year, running risks of demoralisation and mental health problems, and young people were disproportionately hit by unemployment.

It noted that social unrest related to the crisis has been reported in at least 25 countries, including some recovering emerging economies.

This week riot police were on the streets as protesters in Spain, Belgium, Italy and Greece demonstrated against tough austerity measures.


On a metaphysical note:
Uranus re-enters Aries on March 12  Another perspective.