ECONOMY "DOING WELL": TAX REVENUE DOWN, BUT BUSINESS IS BOOMING?

Another post from the HA forum that involved a bit of research...

Mississippi IS a recession...

OK, wait a second.

Yesterday, we were informed that:
"Hattiesburg residents haven't been spending as much money as they once did..."

And today, we're informed that:
"...representatives at most Hattiesburg businesses that rely on disposable income say it is too early to see a drastic change in the habits of consumers."

Something isn't adding up.

For one thing, today's story has one caveat, which is that businesses "that rely on disposable income" supposedly aren't hurting. That could be taken as an implication that businesses that don't rely on disposable income are seeing "a drastic change in the habits of consumers." This flies in the face of generally accepted notions of economic behavior, i.e., that when people have less money (which we know is true across the country), they have to cut back spending on the types of goods and services mentioned in today's article in order to be able to cover the expenses they must pay, such as rent, mortgage, insurance, daycare, health care, etc.

I'm not sure that the statement of the headline of today's story--"Hub City economy doing well so far"--can be validated on the basis of comments from five representatives of small businesses in Hattiesburg. After all, it is in the best interests of those representatives to put a positive spin on their supposed success and resilience even if in reality, they are not especially successful or resilient. In fact, the comment from McLelland along with the copy in the story regarding his business comes off like an advertisement rather than as an actual inquest regarding the strength of his sales.

In other words, to accurately say "Hub City economy doing well so far," one would not ask for an assessment of the how good or bad sales are from a representative of any given business (who will almost invariably feel obligated to paint as rosy a picture of the situation as possible), one would have to view current sales numbers versus sales numbers from a comparable period of time. And that data is surely not going to made available to a reporter for analysis.

On the other hand, it may be true that "businesses that rely on disposable income" might not be experiencing hard times despite the negative savings rate and decline in wages that plagues the entire country--we also know that a majority of the country is in massive credit card debt. So it could very well be that the businesses mentioned in this piece are doing just fine, but that does not necessarily mean that the economy of the Hub City is doing well, because people are racking up even more credit card debt.

Whatever the case may be, these two stories seem to paint completely different pictures of the state of the economy in Hattiesburg.

SOURCES:

Negative personal savings (2006 figures):

"People are saving at the lowest level since the Great Depression, and that could be a problem for the millions of baby boomers getting ready to retire. In fact, the Commerce Department reported Thursday that the nation’s personal savings rate for all of 2006 was a negative 1 percent, the worst showing in 73 years."


Decline in wages (inflation-adjusted):

"Average weekly earnings, after adjusting for inflation, dropped by 0.9 percent in 2007, the fourth decline in the past five years. The lagging wage gains are cited as a chief reason many workers have growing anxiety about their economic futures."


Record credit card debt ($915 billion):

"While the fallout of the subprime loan industry collapse continues to play out, momentum is gaining on another potential economic calamity: Americans now owe a record $915 billion in credit card debt, according to a new report by Moody's Investors Service.
Credit card companies wrote off 4.58 percent in payments between January and May, almost a third more than in the same period in 2006, Moody's said.
As a result, lenders such as Citigroup, Bank of America, and American Express, already reeling from the subprime mortgage collapse, are being further weakened, according to a new report at MoneyNews.com."

TED ANDERSON NUTSHELLS THE PROBLEM WITH THE US/WORLD ECONOMY...

...or, macroeconomics for dummies--I transcribed this from the Alex Jones Show, top of the second hour (1/22/08):


1. Dollar losing reserve currency status

The problem we have right now is that the United States dollar is losing its world-class status. People are no longer using the U.S. dollar as a second alternative to their own currencies–when I say “people,” I mean people of other nations. They used to have great reserves of US dollars on hand and in stock; because of the Bretton Woods agreement the United States dollar was exchangeable for gold and silver for foreigners even though it was illegal to own here in the United States after 1933.

2. End of gold standard and Bretton Woods

Well, Nixon had a problem with the Vietnam War going on and deficit spending--that the United States dollar was falling so fast and gold was going up so quick that Fort Knox was going to be emptied. And in order to stop that from happening, he raised the price of gold, first from $36 to $42 an ounce, and then the dollar continued to plummet, so he just shut the gold window completely and ended the Bretton Woods agreement.

3. The crux of the biscuit: Money out of thin air

Since then, there has been no limitation as far as to how much money can be printed and how much deficit spending can go on. Since 1972, we had an economic collapse practically in 1980 when Jimmy Carter was in office.

4. The crux of the biscuit, part 2: World is abandoning dollar (see #1)

I mean, the dollar’s falling real hard, so the foreigners that are sitting on these reserves want to sell their reserves. At the same time, the market’s not big enough to absorb them. If the Chinese started dumping their $1.3 trillion of cash and bonds and bills into the marketplace, to trade back into some stronger currency, they’ll set up a stampede with other countries as well. And entire portfolios will be wiped out.

So they’re sitting in a situation where they know that the value of their resource is going down very fast, but if they try to sell it, it goes down even faster. So they’re just trying to quietly get rid of it.

MAYBE ALL I NEED IS A "SHOT IN THE ARM"...

Here's Bush's great idea to "save" the economy:

WASHINGTON (Reuters) - President George W. Bush on Friday called on Congress to give the U.S. economy a "shot in the arm" with an election-year package of temporary tax cuts and other measures worth up to $150 billion.

I like my ideas (that I posted on the HA forum)better:

Or, we could just end this goddamn war and save a good $5 billion a month--that'd be $60 billion in just 12 months!

Or, since Federal Reserve notes are just funny money anyway, just print up $150 billion, wrap it in plastic, put it on pallets, then just hand it out randomly to people across the United States. That's what we did in Iraq, after all.


Of course, that was only $12 billion--that we know of. And it stands to reason that we in the U.S. would be entitled to more of what is supposedly our own money, right?

Or, if the cash pallet method of distribution seems too likely to incite rioting, they could just put $1 million in the bank account of the head of every household with the click of a mouse. That'd come to more or less $105 trillion, but what's the harm, really? Our money isn't real anyway, so why not dream big?