Two pieces of under the radar news today ... that are very much related to (dare I say emblematic of) what is still wrong in the economy.
1. The USDA today announced that there were a record 23,087,886 households (47,772,108 individuals) on food stamps in January.http://www.zerohedge.com/...
2. Despite the DOW and the stock markets getting hit today, there was one star performer that was up for almost the whole day and in the process touched a new all time high stock price ($79.28)... yes ... WalMart.
Is it just me that sees the connection, or asks the question ... How can this be?
Is it just me that sees the connection, or asks the question ... How can this be?
On the one hand we have close to 50 million people receiving food stamps, paid for with money the government has to borrow. And we would likely be correct in assuming that much of that money probably ends up being spent at walmart. And once it gets to Walmart, some ends up as profits which drives the stock price higher, yielding dividends for the shareholders.
It is not too much of a stretch (walmart being the poster child) to argue that the 1% are actually major beneficiaries of the social safety net, despite their often strident unwillingness to help fund it.
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
Let us look at this situation in a little more depth because I think it really demonstrates some major issues in the economy today.
The US has chosen to not follow the austerity path in the aftermath of the financial crisis. It has continued to run large budget deficits and to fund these by printing money. This has predictably raised objections from the right and from elements in the business community, who claim to want smaller budget deficits.
But let us take a quick look at where we are at at this point in the recovery. We have unemployment still high, with the real number higher and obscured by unusual participation rates, we have record cash on corporate balance sheets, record profits as a percent of GDP, record low interest rates and record high stock prices. Clearly someone is doing quite well with this arrangement, and I don't think it is the unemployed.
So an obvious question would be - what would things be like for corporations under austerity ? I think the likely answer is that their customers would not have as much money to spend overall, that they would be more demanding on price, and that in the end companies would make a lot less money in profits. That would ultimately mean lower stock prices and lower dividends - i.e rougher times for the 1%.
Maybe just maybe someone should point out to the 1% that as they are receiving the majority of the benefit from current economic programs ... that maybe they should consider chipping in a bit more by not fighting higher tax rates - and maybe even lobbying for them.
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
Maybe just maybe it is also time to start "fixing" what is really wrong in the economy.
The problem is too much debt. It is what started the recession and it is what has prolonged it. While lower interest rates have helped companies and banks reduce their borrowing costs (and thereby increase profits) the average saver has been brutalized and the average person with a student loan or a credit card debt has not experienced the wonderful relief of lower rates on their debt.
Instead of funneling truckloads of cash to the banks so that they can play the stock market (instead of lending) maybe Ben should fire up the helicopters and drop some money out in the hinterland, and in the inner cities, and in the suburbs, and ... anywhere away form wall street. And maybe instead of lending to banks at zero percent, maybe the fed should be refinancing student loans and credit card debt at ultra low rates .... I can guarantee you that the money saved in interest costs by these citizens would actually make it back into the real economy, creating real jobs.