Andy Sutton: Once again, the lapdog media is agog over increased consumer spending data stemming from what it calls ‘rising wages’. We’ve been down this road before a time or three and we know the major debunking points of this particular government statistic. What is curious this time around is that the reports are in direct contradiction with recently released consumer sentiment data, which took the plunge last month. Then there is all the nonsense about a government budget (or lack thereof), wars all over the Middle East and rumors of wars in Syria, Iran, and who knows where else. Be on the lookout for big companies inking deals that involve trespassing on the property of sovereign nations. Find these deals and you’ve probably found the next war. But I digress. There’s going to be a lot of that this week. There are at least five topics flying around in my head, so please bear with me.
The Wealth Effect and Its Concomitant Trends
There is a definite trend in the propaganda business and the major epicenter, at least in my opinion, is Bloomberg News. And it would appear that outfit has one particular group of ‘reporters’ that are responsible for the majority of the spin stories we see on Bloomberg. I’m not simply taking potshots at Bloomberg here either. The fact of the matter is that many other sources get their story ideas from Bloomberg, CNBC, and the other major networks. So any sources of misinformation need to be called out because you can bet that stuff is going to be repeated, which is the whole idea. Goebbels would be proud. Pick a lie, make it a London Whale of a lie (no apologies to JP and the boys), and then repeat it like crazy. Eventually it’ll become the truth. That is precisely what is going on here.
All of this revolves around the ‘wealth effect’, which I’ve been harping on recently, and with good reason. It is one of the mechanisms, along with the perception of value of an intrinsically worthless currency, that the powers that be count on to perpetuate the sham that is the global economy in 2013. The goal here is to look at what is really going on and to demonstrate how economic actions are following the perceptions rather than reality. This is an extremely bad prognosis for the future of this country (and the world in general), but extremely good news for the establishment that profits from such actions.
Consumer Spending Increases – Faux Statistics at Their Finest
Directly from the Bloomberg article linked here:
“Household purchases, which account for about 70 percent of the economy, climbed 0.3 percent after a revised 0.2 percent advance in July that was more than previously estimated, the Commerce Department reported today in Washington. The advance in August matched the median forecast of economists in a Bloomberg survey. Incomes rose 0.4 percent, the most in six months.
Rising home values, stock market gains, and an improved job market are cushioning the effects of this year’s payroll tax increase and giving households the means to sustain purchases. At the same time, spending growth has shown little momentum since the end of the second quarter.”
What we see above is the ‘wealth effect’ I have hammered so many times in the past. It is not a difficult concept. If people feel secure, they’re more likely to engage in additional spending. The redux here occurs in the fact that there is solid data that points to the fact that people aren’t feeling more secure about their overall situations. In fact, as most data points, more and more people are feeling much less secure. And another thing we have to look at is debt load. The debt load carried by the consumer, after taking a break a few years back, is on the rise again.
What is also disturbing is another trend we’ve been watching develop over the last several decades. I’m going to use car loans as an example, and that is the duration of loans in general. The number of months has increased dramatically from less than 3 years in 1971 to roughly 5 years today. So what? Well, that is a 67% increase in the length of the loan and that means 2 more years of interest payments. This data doesn’t include lease arrangements. These are just outright purchases of new vehicles through finance companies.