Junior Mogambo Ranger (JMR) Terry L sent a column by Robert Morley, who is
described as "columnist", with the headline "What Garage Sales Tell Us About
Our Economy".
Perhaps because the incident was so fresh in my mind, I thought that he was
referring to the few precious heirloom articles from the back of my closet that
I tried to sell at my neighbor's garage sale, hoping that maybe I'd, you know,
make a few lousy bucks that the wife and kids wouldn't know about.
Apparently, people are appalled that I would have been living with
such trash up to now, and they rudely laughed at the idea that anyone would
actually buy any of my treasures, and then they got mad at me because my
heirlooms were, so they said, "stinking up the joint".
So, if you ask me, "What Garage Sales Tell Us About Our Economy" is that the
people are rude and stupid to reject a genuine, collectible, original
Thigh-Master exercise device just because it had some sticky stuff on it that
smelled bad. And even though I explained that the rust and dirt were valuable
"patina", it was no dice, so I slunk home and threw the damn thing in the kid's
closet, and now I have to listen to her complain about it stinking up the
joint. It is always something around here!
Fortunately, the article was NOT about that, and the subhead was, "As people
struggle to put food on the table, a wave of second-hand goods is sweeping the
nation."
This turns out to mean that "Struggling with billowing debt and rising prices,
faced with a rapidly deteriorating economy and job market, cash-strapped
Americans are selling family heirlooms, prized possessions, scrap, and just
about anything with value".
And the way he knows this stuff is that "Internet garage sale sites are
booming. According to the Associated Press, Craigslist, one of the better-known
online flea markets, has seen the number of for-sale listings soar 70% since
last July. AuctionPal.com says its sales rose a blistering 66% from February to
March."
Furthermore, pawnshops are busy, and "People are pawning out like crazy", says
Nat Leonard, a pawnshop owner in Philadelphia. He went on, "People are cleaning
out their houses of gold, silver, whatever, to get money just to fill their
cars with gas," which he must know first-hand because "Leonard's sales volumes
are up 20% over last year, with increasing numbers of first-time customers."
Well, to be fair, this is always what happens at the beginning of a downturn,
and around here towards the end of every month, as that is when I always run
out of money to spend in trying to drown my sorrows in liquor. So I would be
surprised if all this was NOT happening!
Naturally, I concluded that there was nothing new here for me, and so I was
just about to get up and leave when he said something that stopped me in my
tracks.
He said, "I've got business owners coming in to pawn things just to make their
payrolls. I've never seen that before." Never seen it before! This really IS
interesting!
And what is the result of all of this sudden supply? Being as familiar as I am
with the whole supply/demand thing because it is the only thing I think I
actually kind of sorta understand, I think I can safely say that the demand for
people's old stuff has to be down, including a genuine collector's item like a
Thigh-Master, as the supply rises, making prices fall, as Mr Morley attests
when he writes, "Secondhand online merchandise is already selling for 25 to 35
percent below last year's prices" according to Brian Riley, senior analyst at
Tower Group.
From here the path gets ugly, as Mr Morley explains that "There is coming a
time when the consumer will be tapped out, and the debt-fueled consumption
binge will end. When it does, consumer confidence will be replaced with fear
and eventually panic. This panic will result in increased asset sales and
reduced spending as workers attempt to pay off their debts (or save their
homes). Evaporating confidence will cause consumers to rethink current and
future spending plans. The economy, hit with a lack of demand, will slow,
corporate earnings will fall, stock markets will plummet, and layoffs will
become prevalent. As more people enter the unemployment line, the deflationary
spiral will intensify."
And it gets worse, as "If that happens, the resulting economic instability will
lead to a vicious cycle of consumer spending cutbacks, a plummeting economy and
soaring unemployment. Home prices, along with many other domestic-demand-driven
assets, will be sucked into a deflationary spiral, likely stimulating a banking
crisis as thousands of bad loans must be written off. Yet simultaneously,
import prices will soar as the federal government continues to inflate and
spend money in a vain attempt to stimulate the economy and keep paying promised
Social Security and Medicare liabilities. The dollar will fall further as
boatloads of rapidly depreciating greenbacks wash up on America's shores as
America's foreign debt holders try to spend their US dollars before they become
worthless."
There is probably more, but I can see by the look of horror on your face that
you have heard enough today. We'll take it up again tomorrow, or whenever I
sober up after hearing this Awful, Awful News (AAN) myself. Brrr! The blood
runs cold!
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.
(Republished with permission from
The Daily Reckoning. Copyright 2008, The Daily Reckoning.)
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
