U.S. Retail Collapse Accelerates

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Recently by Jeff Nielson: Crash Warning

Less than two weeks ago I wrote "Crash Warning." It outlined the current economic parameters of the global economy and explained that we were careening toward a particular form of economic Armageddon which I believe was first described by John Williams of Shadowstats.com, when he coined the phrase "hyperinflationary depression" nearly a decade ago.

The debt-laden, fraud-saturated paper Ponzi-schemes of Western bankers are now all about to implode in a deflationary (debt-default) collapse — most notably all their fraud-bonds. Simultaneously, the rabidly excessive money-printing of these reckless gamblers is causing (and will cause) the prices for hard assets (i.e. assets which actually have value) to spiral upward, with the most likely final destination being hyperinflation.

Because that previous commentary was describing a global economic paradigm, my analysis was necessarily abbreviated with respect to the apex of all economic ills: the United States. In particular, I spent less than a paragraph discussing the collapse of the retail sector in the world's largest economy — a consumer economy.

Before we examine this train-wreck directly, let's take a moment to define the backbone of this consumer economy: the American consumer. The two charts below should be very familiar to regular readers, and describe the American consumer in stark but precise terms: poor and/or unemployed.

[chart above courtesy of http://nowandfutures.com/index.html]

We see two things in the chart above on average American wages. First we see how (in real dollars) wages for the average U.S. worker have been falling steadily for more than 40 years. Those wages have now fallen by more than 50%, all the way down to the same levels as during the Great Depression. And we see how the U.S. government's lies about inflation have almost entirely concealed this relentless collapse in wages. How convenient.

Meanwhile, we see the percentage of Americans who are actually working also plummeting downward, to a 30-year low. The collapse in wages has been accompanied by a collapse in employment levels. Combined, it translates into a collapse in consumer purchasing power of well in excess of 50%.

The great Economic Myth (naturally perpetuated by the U.S. government) is that "the world can't live without" the American Consumer. The truth is that the rest of the world has been gradually learning how to live without the American consumer for the past 40 years, as the American consumer is literally less than half what he used to be. The real-and-obvious question instead is how will the U.S.'s consumer economy be able to survive the Death of the U.S. Consumer?

The relentless campaign by the U.S. government to transform its own Middle Class into the Working Poor has been an unmitigated success. Using the numbers of the Corporate Media itself, only about 10% of the U.S. population presently qualify as "middle class", now actually a smaller segment of the total population than the wealthy Americans who tower oppressively above them.

The purpose of destroying wage-levels for U.S. workers has been to drive those wages so low that American serfs will be able to "compete" with the wages of Asian serfs…while they manufacture toys and consumables for the wealthy. This is the "prosperity" which the Corporate Oligarchs promised us when they rammed "globalization" down our throats. They had the gall to call it "free trade", when the only thing "free" about it was their ride — on our backs.

However, this transformation comes at a terrible cost. Deprived of income, the Working Poor have been forced to use ever-increasing amounts of debt in a foolish quest to sustain an unsustainable level of consumption: mimicking the policies and attitude of the U.S. government itself. The result is the ultimate retail "perfect storm": consumers with small-and-falling incomes; loaded up with so much debt that they are incapable of borrowing any more; and with much/most of those incomes permanently going to pay interest to the Debt Parasites (i.e. banks). Perpetual debt-slavery.

Of course the "collapse" to which I'm referring didn't just start last month, or even last year. It began in earnest with the Crash of '08, and has continued unabated since then. The propaganda-concocted "recovery" of government and media has been nothing but a cruel hoax, designed to placate the growing suffering of the Working Poor, and goad them into more overspending with the malicious lies that "things are getting better".

The truth is the exact opposite. During every month of this sham-recovery, the real rate of inflation (as provided by John Williams of Shadowstats.com) has exceeded the percentage increase in retail sales (which are always unadjusted for inflation). Translation: every month of this "recovery" U.S. retailers have been selling less and less goods. This leads to another extremely obvious question: how can a consumer economy claim to be experiencing a "recovery" when it sells less and less goods each month, to consumers with ever-smaller incomes (and ever-larger debts)?

This scenario become still more absurd when we note that rising costs of raw materials have put extreme pressure on retail profit margins. Selling less and less goods for less and less incremental profit is not a formula for retail success. Rather it is a prescription for annihilation, and this is precisely what we see before us.

U.S. mall-vacancy rates have soared to all-time highs, and stubbornly refused to budge from those levels. Concurrently, margin-starved retailers are closing their storefronts and opting for more and more on-line commerce. In other words, they're closing stores which generate significant numbers of jobs and tax revenues in favor of on-line operations which provide little of either. It is a self-reinforcing downward spiral which can only end in total economic disintegration. And we're told that this collapse in sales, profit margins, employment, and tax revenues can all be taking place while the U.S. economy "recovers".

This brings us (at last) to the actual numbers currently being peddled by this propaganda-machine. On Monday it was announced that U.S. retail sales had fallen by 0.5% in the month of June, and that this was the third month in a row that sales had (officially) fallen. For a consumer economy, this sounds bad enough even when we only contemplate the official propaganda. However, it's only when we translate these numbers that we can truly appreciate the approaching U.S. economic holocaust.

As noted previously, retail sales numbers are never adjusted for inflation. Living in a permanent era of high inflation, this makes absolutely no sense at all if you're attempting to distribute information with this statistic, but makes wonderful sense if you're a propaganda-machine with the sole goal of deceiving people every day of their lives.

Instead of the runaway inflation produced by the psychopathic money-printing of Western bankers being their "enemy", it is their best friend. The propagandists hide it completely with their absurd lies about "official" inflation. And eureka! High inflation is magically transformed into "high (and growing) retail sales", and "high (and growing) GDP".

I've dealt exclusively with the U.S.'s GDP sham in a previous commentary, so those readers still not familiar with this clumsy ruse can refer to that older piece. Here's how the game of pretending that inflation doesn't exist is used to lie about retail sales.

Real inflation is currently bouncing somewhere around the 10% level. John Williams will tell us that it has briefly dipped below that level, however his calculation is somewhat skewed by the effect of (temporarily) falling gasoline prices. As less and less of the Working Poor can afford to drive, the correct weighting of gasoline in an any inflation calculation must steadily fall — while (high) double-digit increases in food prices must be given more and more weight, as is the case in other poor nations.

I will steadfastly stick with a 10% figure for real inflation, with the qualification that this is an understatement for the American majority. Note also that in order to hide its deceptions involving retail sales, the U.S. government reports it as a monthly figure, with monthly rates of change. Conversely, almost every other major economic statistic is expressed as an annual rate of change, because we have been programmed to understand all statistics expressed in this manner. Thus by reporting retail sales in purely monthly terms, this dramatically shrinks the perceived size of these incremental changes in the eyes of the average reader. This serves two purposes.

When these numbers are bad (as they are presently), it dramatically understates this severity in the minds of those being fed these numbers. Conversely when the numbers were (supposedly) "good"; when U.S. retail sales were increasing (nominally) by a 20%+ annual rate while wages were increasing by only a (nominal) 3% annual rate, it stopped the dim bulbs in the media from forming the word "bubble" in their minds.

The argument for expressing these numbers in monthly terms is that they are "highly volatile", and so reporting them as annual figures would be "misleading". Obviously such an argument is nothing less than Machiavellian when coming from the most-accomplished propaganda machine which the world has ever seen.

Translated into an annual number, and adjusted for inflation; the 0.5% number reported for June is transformed into a collapse in U.S. retail sales at an annual rate of 16%. The 0.2% decline reported in May becomes a plunge of well in excess of 12% (annually). Which of these numbers "misleads" people, and which informs them?

With consumption directly or indirectly accounting for well over 80% of the U.S. economy; by the time that the "multiplier effect" is factored in (in reverse) this collapse in retail sales transforms almost point-for-point into a collapse in (real) U.S. GDP. Thus the consequences of this double-digit freefall in U.S. retail sales are plain for all to see.

The worsening economic collapse engineered by several successive U.S. regimes (at the guidance of their Bankster Overlords) is about to produce an economic cataclysm for Americans which will make the Great Depression seem like a day at Disneyland. Indeed, in the don't-worry-be-happy world of the U.S. propaganda machine and its beloved "recovery" every day is like a day in Disneyland.

Reprinted with permission from Silver Gold Bull.

Jeff Nielson is Senior Precious Metals Analyst for SilverGoldBull.com.

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