Thursday, January 3, 2013

Fiscal Cliff Saga Over ... Now It's on to More Government Created Problems, More Consumer Uncertainty, High Unemployment and a Continuing Weak Economy

The Hippocratic Oath, among other things such as acting ethically and honestly, mandates that doctors should do no harm.

That would be a very good thing for government aristocrats to internalize as well. But they won't, since they're too interested in playing power games and furthering their own political careers.

But they're doing real harm. As more of We the Minions are on to their games, we don't like what we're seeing. And the more familiar more of us become with what's really going on in Washington, we realize that much of what the government knows best gang does in the name of 'serving' We the People causes significant and lasting real harm to the confidence and well being of all Americans. Except the aristocrats, of course.

Meanwhile, since the U.S. consumer accounts for nearly 70% of our economic activity, weak consumer confidence is a very bad omen for solid economic growth anytime soon. Yet the government aristocrats have a full calendar of tricks and negotiations in store for the minions' entertainment and viewing pleasure in 2013.

So if you disliked the fiscal cliff charade, the "best" is yet to come, and it will keep coming throughout the new year.

Both consumers and businesses have been reacting to the uncertainty out of Washington by sitting on the sidelines and awaiting the outcome of the political negotiations about such huge issues as taxes, spending, debt, deficits, energy policy, defense, immigration, government regulations, inflation, interest rates, Social Security, Medicare, ObamaCare, Medicaid, education spending, unemployment benefits, food stamps and other weighty government decisions.

So while the fiscal cliff sideshow may have ended for now, we ain't seen nuttin' yet. 2013 looks like a most interesting year full of political gamesmanship and leading to even more consumer uncertainty, resulting in continuing slow economic growth and high unemployment. All in the name of saving the middle class.

But the games being played and yet to be played in Washington will have a continuing big and negative impact on the attitudes and behaviors of We the Minions. Uncertainty and a lack of confidence does that to people.

It Was a Blue Christmas for Retailers summarizes the holiday selling season for retailers. Suffice it to say that it wasn't great:

"We have all heard of Black Friday. Last week, though, retailers had an awfully dark Wednesday—and not because Dec. 26 is also one of the busiest shopping days of the year.
A report from SpendingPulse, a service of MasterCard Advisors, said holiday spending in the two months up to Christmas rose by just 0.7% from a year earlier—a deep disappointment. . . .

The good news for retailers is that the picture is usually brighter once the New Year begins. . . And chain-store sales data for December due out Thursday will likely look better . . . . One reason is that retailers weren't shy about discounting.


"The worst thing you can do is get stuck with inventory," says Jack Kleinhenz, chief economist for the National Retail Federation.

He forecasts a 4.1% increase in retail spending in November and December versus 2011. That would be down from 5.6% a year earlier, but not bad considering lower inflation.

If Mr. Kleinhenz's forecast is borne out, it may come down to the last five days of the year. Those can account for a large chunk of holiday-season sales even in a normal year. The proliferation of gift cards and the timing of holidays in 2012 may have boosted that effect.

On the other hand, weekly data from the International Council of Shopping Centers look tepid. Its data for the week ended Dec. 29 show a promising 0.6% increase over the previous week on a seasonally adjusted basis, but this was boosted by calendar effects. Year-on-year, the increase was just 2.7%, versus a 5.3% increase the same week a year earlier.

The more pertinent question, and one that won't be entirely clear even after sales are reported, is just how much discounting was required to clear the shelves. Bottom lines may have suffered more than sales. Everyone loves a bargain—except for retailers."

Summing Up

Unplanned discounts are great for consumers and not-so-great for retailers.

Worried about getting stuck with excess inventory after Christmas, retailers may have discounted much more heavily than initially planned in an effort to make sure that their shelves ended the selling season empty or at least not filled to the rim.

If so, both slower than anticipated sales and heavy discounts to get those sales won't augur well for consumer spending heading into 2013.

My guess is the government knows best gang's antics and ongoing negotiations have had a big impact on the consumer's willingness to spend this season.

And looking ahead to 2013, the "fun" from Washington and many states as well has just begun.

Unfortunately, it looks like another unnecessarily difficult year for the U.S. economy unless the bureaucrats decide to grow up, behave like adults and seriously begin to address our nation's spending problems by taking decisive actions to get government largely out of the private sector's way. Dream on.

That said, things will inevitably get better sometime soon and perhaps by the latter part of 2013.

More and more of We the People are now on to the silly and counterproductive political games being played by our "public servants," and that's a good thing.

Once enough of us realize that the emperor has no clothes, we can take care of business ourselves.

A MOM based society creates powerful incentives to do what's right.

An OPM government led society is a loser.

If you doubt that, look at most of the the rest of the world. It ain't pretty, and it's certainly no role model for a stable and prosperous society of equals.

Thanks. Bob.

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