Token Economic Commentary (aka: "Bandwagon Jumping")
Posted by I.A.M. in CANADA, rant, THINKINESSThe Canadian Finance Minister has finally admitted we’re having a recession. However the PM continues to take the Harold McMillian approach to things that ‘if you don’t say you can see it, then it doesn’t exist’ about more serious economic situations being even possible. Meanwhile, one of the oldest steel manufacturers in North America is shutting one of its smelters in Hamilton, Ontario that’s never been cold since before Canada was created (for those of you in the UK, imagine half of Sheffield stopping steel making… oh wait, that’s 1988, isn’t?); General Motors is having its books examined and the report that they only have a few weeks to live, if that, is met with a response from the Board of Directors of “YES! THAT’S WHAT WE’VE BEEN SAYING TO YOU!”; Toyota, of all firms, is going to the Japanese Government cap-in-hand; the telecommunications company which was started by Alexander Graham Bell has basically chucked the entire staff out the door, no matter what their place on the ladder, and is trying to find a way to sell its bits and pieces off to other firms but getting little interest from anywhere in the world; and still we get the silly line about how ‘Canada’s economy is strong and we’ll weather this better than anyone shall’, which is probably true but it’s a matter of degrees, isn’t it, if everyone’s killed and chopped into little bits and we’re only killed and quartered, well we’re still dead aren’t we?
“C.I.B.C. Towers, Vancouver, BC (#001 — neon edges)” by I am I.A.M., on Flickr
As many say, now that the consumer supposedly has no interest in purchasing anything, no-one wants to put their firm into any product being proposed. Going to the mall up the hill, however, the place is packed! and it’s not all just Asian teen-ages looking to be free of their homes and be seen by others; hardly many at all, actually. The place is wall-to-wall with all sorts of ages and types and classes are elbowing and carrying bags of products they’ve purchased and seem to be seeking more as well. Granted, the windows have sales being declared in them, but it’s not all “BUY FOUR, GET TEN MORE FREE!”, so the notion that no-one is buying anything is a load of bollocks. Have a look in the parking lot of IKEA or some such, you’ll be hard-pressed to find a place to put many more vehicles. So… either these people are buying what they anticipate will be expensive commodities after some impending collapse (‘hey, buddy, I got a sweet line on a “Blirj” what’s never even seen the sun since it was flat-packed!’) or they’re buying things on the never-never and intending to declare personal bankruptcy when put to the wall.
I doubt the extent of the actual economic pain is being actually felt beyond the stock market and financiers, but the problem is that — rightly or wrongly — they are the ones who ensure the currency for everyone’s day-to-day things, like payrolls, supply-lines, and ready-markets for production, continue to operate and function as they have done for some time. Therefore, eventually and inevitably, we all feel the pain that they both wrought and are now experiencing. The simplistic attitude of “think happy and carry on” is almost as correct as it is naïve, however. Yes, it’s right that we don’t have anything to do with it, but the anarchy of finance is also inherently going to effect us adversely. So, “we’re fucked and can’t do nothin’ about it, so carpe diem and pass the gin”, while depressing, is probably about as accurate as one can get.
Tom Joad, we needs you now!
Ian Alexander Martin [
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Any nation’s economy is mostly a matter of belief. That was the way it used to seem to me. Nations that had claimed they were impoverished found money for armaments in 1939+. Of course, they may have made those purchases on the never-never, too. The theory here would be that you carry on, grateful that you can invest where you couldn’t afford to before because everything is going for cheap. That was what Harper meant when he talked about “bargains out there”. Just because cash dries up (and where does it go? There isn’t a villain sitting somewhere with all the nation’s cash stocks under his bed) doesn’t mean that a nation has no assets. They haven’t lost natural resources or manufacturing capacity. Their transportation networks are still functioning. They still have capable and trained workers. Tell me it’s not international bankers in Switzerland. It seems to be debt, that everyone has spent money they didn’t have or money that they might never have, so everyone owes everyone else. I tried to find out the other day how bad things have to be before the situation is called a depression but no one wants to define it. That is another example of if you don’t acknowledge it, it doesn’t exist. In the history books there are no recessions, only depressions. We don’t want to call anything a depression after the one we had in the thirties because most of the population will dive for their beds, assume the fetal position and turn the heat up to nine while a small number of the elderly will cry, “It’s not a *real* depression. Why I remember in the thirties we were so poor that.…” Neither do anyone much good. I remember older people telling me about all the bargains they could have had in the thirties if they could only put some cash together. Well, yes, and you can only get the ‘ten free’ if you’ve got the means to buy the first four. So are all those customers stimulating the economy or making things worse by putting them on credit? I’ve asked myself these questions for years and I just go around in circles.
Things do appear to be becoming a real problem in the UK in fairness. A good number of house hold names have gone under. Ones that have been around forever and you never thought would colapse, like Woolworths and MFI along with others like Zavvi (formerly Virgin Megastores) that seemed to be in a very strong and central position in the market. In fairness, Zavvi fell becuse Woolworths fell and Woolworths had a signed contract to be the sole supplier of entertainment goods to Zavvi. There is a house of cards knock on happening all over though. I keep hearing about this company or that company going under at the moment and a lot of it seems to be because firms you have never heard of are behind several names/chains and if the backing firm falls, so do all the subsiduaries. That is to say nothing of the independant retailers and family run firms who seem to be going at an alarming rate. They are shops in York city centre that have stood vacant for a good few months now and that is unheard of.
As you say, people can attempt buy four get six free deals, but those (or realistic versions) are increadably expensive for the suppliers to run and there is always a pivot point where, if they sell over a certain quantity, it will result in the supplier actually paying out money for the promotion to be run as oppose to making it (trust me, a lot of my time is taken up with this). Most of these promotions are an attempt by companies to make you try their products and like them so much that you continue to buy them after the offer has finished. However, if shoppers are just buying promotion after promotion and not really bothering with the product otherwise, then the company wont make any money. So although you have a work/manufacturing force producing and selling things, if no profit is being made from them, eventually there wont be the money to keep going. The work force will be whittled down or completely laid off. Then all you get is a load more people who haven’t got a lot of money, only buying stock from shops that is on offer. As you can see, all you need is for a few people to be laid off for that to actually generate losses in profits across the board and eventually snowball into more and more redundancies.
As Ian noted, there are a lot of shoppers still out there, but a lot of people will be attracted to a shopping area because one shop has a sale on and they will just window shop elsewhere, waiting for a sale to happen in the shops they have browsed in, now they have already assesed what they will buy once the sale happens.
I know certainly from my own compnies point of view, that we have had to change their stratergies of how we can operate this coming year because the banks can’t/wont lend us any money. This is a multinational company run by the Swiss! If we haven’t got a chance who else has? If companies can’t borrow from banks to make new products, expand, etc based on projected profits, because the profits can’t be projected with any form of accuracy any more, then no-one can move forward and companies will go under. Then we are back to another load of people who and out of work and buying those offers again.
The picture on this side of the Atlantic isn’t exactly bright at the moment I’m afraid. It was even reported a couple of weeks ago that Gordon Brown has now increased the national debt to a level that exceeds the GDP. If you scale that down to be one person, that is the equivelent of someone being in more debt (I’m not talking about good debt like mortgages here, but potentially bad debt such as credit cards) than they make in a year. If you were in that position, how would you plan to get out of it and how many years would it realisticaly take for that to happen?