Great deals, if you act now!
During my week off, I went clothes shopping (something I do only when my clothes are literally splitting at the seams) at my local mall. The last time I’d been there was in January, when I took advantage of all the post-Christmas sales and bought a couple of dress shirts. I wasn’t very surprised to see that the Macy’s I’d visited in January was still discounting everything. Every item in the men’s store was marked down at least 25%; I bought a $300 sports jacket for $99.
What that tells me, albeit based on a very limited and anecdotal sampling, is that retailers still have absolutely no pricing power (go see the deals at your local auto dealer, if he’s still in business) in the face of a consumer who is massively develeraging, in some cases voluntarily and in some cases involuntarily. And it’s hard to see how the recovery everybody’s so hopped up about is going to materialize while this is going on.
Incidentally, I have yet to see a single prediction of what the driver of this purported recovery will be. Everybody’s talking recovery, but nobody’s talking about what will drive it. Housing? Tech? Finance? What’s it going to be? China? Unless the US starts exporting toasters to China, how are they going to drive growth over here?
It seems fairly apparent, to me at least, that the only thing keeping the economy afloat right now is the massive, historic, unprecedented intervention of the federal government. What’s being perceived as a natural recovery of the economy is in fact an unnatural support of it from the government. And until consumers and the economy can stand on their own, there will be no real recovery.
If recovery were really at hand, new jobless claims should be showing more improvement than they are, James Hamilton writes at econbrowser.
The four-week average is basically where it was four weeks ago. “If we were really beginning a recovery similar to that experienced in previous episodes, we should be seeing sharper drops in this number at this point.” And other indicators aren’t showing much in the way of recovery either, he says, which could mean the consumer consumption slowdown is less an “animal spirits” letdown and more of an unavoidable deleveraging.
Yes, the abyss has been skirted (and thank God for it,) but it may be some time before a true recovery arrives.
“In an economy paralyzed by the excess of debt,” Andre Lara Resende says at Maverecon, “neither monetary policy nor fiscal policy can reactivate the economy.” While the massive government intervention was needed to avoid economic collapse, it can’t revive the economy.
“The US will most likely face a long period of stagnation,” as long as the private sector remains excessively indebted. There is no way around that, Resende says.
Ultimately, it will take something that no single government can provide to get the global economy past this. A “supra-national legal and institutional framework” is the only way to manage the challenges of a globalized world, Resende says. “Its need is obvious, but there is a long road before it.”
