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Look How Well American Consumers Are Doing!

That’s right folks, US consumers are doing just great. In fact, on a real per capita basis, retail spending (ex gasoline sales)  in July was up 3.9% from last year and up 7% from the July 2009 recession low. In fact real retail spending per capita has recovered all the way back to where it was in 1997. That’s right, the average US consumer is consuming retail goods at the same rate he or she was just 16 years ago.

The mob is only concerned with how top line retail sales did this month.  They’re really looking at inflation and total spending as driven by the spending of the  top 10%, not growth in the volume of sales, and not broader growth in real demand.

The idea of the “resilient US consumer” is a myth. Only the top 10% is resilient. The other 90% is losing ground. Real Retail Sales Ex Gasoline Per Capita for July 2013 was $659.98  in 1982 constant dollars. That was 3.9% above the year ago level. That sounds great, but months with big gains tend to be followed by givebacks in succeeding months.  The 7% total gain over the past 4 years is probably a more accurate representation of the trend.  The real rate of growth is at a snail’s pace, and some of that comes from external factors, not increased spending power of the typical US consumer.

Retail sales per capita are  skewed by increased spending by the top 10% of the income spectrum, and by shopping tourism as foreigners come to the US to shop to take advantage of a weak dollar or lower prices. For example, Canadians cross the border in droves to shop in the US. With the Canadian dollar recently weak versus the US dollar, that trend increases.

Then there is the “wealth effect” that accrues to the small percentage of US Americans who actually own stocks, or a house that isn’t under water. Bernanke’s stock market bubble has disproportionately benefited the few who own stocks. No doubt they’re spending more, and some of this is trickling down to the jewelry store clerks and luxury car salesmen that serve them. But it’s clearly not helping the millions who work at WalMart and competing retailers and those who supply those chains, as their wages stay stuck near minimum wage, with fewer hours and even fewer benefits.  It’s highly likely that most of the increase in real spending has come from those at the top, not the majority, who simply struggle to pay the bills as their wages are suppressed in a system where labor consistently trends toward a lower value.

Considering this data ask yourself how the Fed’s money printing, which has clearly fomented asset bubbles in stocks and housing, would help more Americans get good paying jobs that will enable them to halt the long term slide in their standard of living.  The last bubble in housing did not do that. In fact, it made things worse for most Americans. Only the savvy speculators and crooked banksters at the heart of the easy money driven Ponzi scheme did better. Everyone else simply treaded water through the bubble. Then when it collapsed, they got crushed. Most people have not caught up during this “recovery” phase.

Why would the Fed expect the effects of the the bubbles it has blown this time to be any different? That just defines insanity. Declaring that the economy is doing better and using that as an excuse to reduce QE, as it appears they are about to do, would be  just as delusional, and dishonest to boot.  I guess we just have a bunch of crazy liars making policy.

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish LiquidityTrader.com, and was lead analyst for Sure Money Investor, of blessed memory. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both sales, analytical, and trading capacities. Prior to starting the Wall Street Examiner I was a commercial real estate appraiser in Florida for 15 years. I was considered an expert in the analysis of failed properties that ended up in the hands of bank REO divisions, the FDIC, and the RTC. Remember those guys? I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. I'm not some Ivory Tower academic, Wall Street guy. My perspective comes from having my boots on the ground and in the trenches, as a real estate broker, mortgage broker, trader, account rep, and analyst. I've watched most of the games these Wall Street wiseguys play from right up close. I know the drill from my 55 years of paying attention. And I'm happy to share that experience with you, right here. 

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