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Consumer Spending Drought: 16 Signs That The Middle Class Is Running Out Of Money

Drought - Photo by Bert KaufmannIs “discretionary income” rapidly becoming a thing of the past for most American families?  Right now, there are a lot of signs that we are on the verge of a nightmarish consumer spending drought.  Incomes are down, taxes are up, many large retail chains are deeply struggling because of the lack of customers, and at this point nearly a quarter of all Americans have more credit card debt than money in the bank.  Considering the fact that consumer spending is such a large percentage of the U.S. economy, that is very bad news.  How will we ever have a sustained economic recovery if consumers don’t have much money to spend?  Well, the truth is that we aren’t ever going to have a sustained economic recovery.  In fact, this debt-fueled bubble of false hope that we are experiencing right now is as good as things are going to get.  Things are going to go downhill from here, and if you think that consumer spending is bad now, just wait until you see what happens over the next several years.

Even though the Dow is surging toward a record high right now, everyone knows that things are not good for the middle class.  A recent quote from CPA Howard Dvorkin kind of summarizes our current state of affairs very nicely…

“The fact of the matter is that America is broke — whether it’s mortgages, student loans or credit cards, we are broke. The old rule of thumb is that people should have six months’ of savings,” Dvorkin says.”If you talk to people, most don’t have two pennies.”

These days most Americans are living from paycheck to paycheck, and thanks to rising prices and rising taxes, those paychecks are getting squeezed tighter and tighter.  Many families have had to cut back on unnecessary expenses, and some families no longer have any discretionary income at all.

The following are 16 signs that the middle class is rapidly running out of money…

#1 According to one brand new survey, 24 percent of all Americans have more credit card debt than money in the bank.

#2 J.C. Penney was once an unstoppable retail powerhouse, but now J.C. Penney has just posted its lowest annual retail sales in more than 20 years

J.C. Penney Co. (JCP) slid the most in more than three decades after the department-store chain lost $4.3 billion in sales in the first year of Chief Executive Officer Ron Johnson’s turnaround plan.

The shares fell 18 percent to $17.40 at 11:28 a.m. in New York after earlier declining 22 percent, the biggest intraday drop since at least 1980, according to data compiled by Bloomberg. J.C. Penney yesterday said its net loss in the quarter ended Feb. 2 widened to $552 million from $87 million a year earlier. The Plano, Texas-based retailer’s annual revenue slid 25 percent to $13 billion, the lowest since at least 1987.

How much worse can things get?  At this point the decline has become so steep for J.C. Penney that Jim Cramer of CNBC is declaring that they are in “a true tailspin“.

#3 In the United States today, a new car has become out of reach for most middle class Americans according to the 2013 Car Affordability Study

Looking to buy a new car, truck or crossover? You may find it more difficult to stretch the household budget than you expected, according to a new study that finds median-income families in only one major U.S. city actually can afford the typical new vehicle.

The typical new vehicle is now more expensive than ever, averaging $30,500 in 2012, according to TrueCar.com data, and heading up again as makers curb the incentives that helped make their products more affordable during the recession when they were desperate for sales. According to the 2013 Car Affordability Study by Interest.com, only in Washington could the typical household swing the payments, the median income there running $86,680 a year.

#4 The founder of Subway Restaurants, Fred Deluca, says that the recent tax increases are having a noticeable impact on his business…

“The payroll tax is affecting sales. It’s causing sales declines,” he said, estimating a decline of about 2 percentage points off sales at his restaurants. “There are a lot of pressures on consumers,” Deluca said, adding “I think this is on the permanent side, but I think business will adjust to it.”

#5 Many other large restaurant chains are also struggling in this tough economic environment…

Darden Restaurants, which owns the casual dining chains Oliver Garden, LongHorn Steakhouse and Red Lobster, said blended same-store sales at its three eateries would be 4.5 percent lower during its fiscal third quarter.

Clarence Otis, Darden’s chairman and chief executive, said that “while results midway through the third quarter were encouraging, there were difficult macro-economic headwinds during the last month of the quarter.”

“Two of the most prominent were increased payroll taxes and rising gasoline prices, which together put meaningful pressure on the discretionary purchasing power of our guests,” he added.

#6 The CFO of Family Dollar recently admitted to CNBC that this is a “challenging time” because of reduced consumer spending…

At Family Dollar where the average customer makes less than $40,000 a year, the combination of a two-percent hike in the payroll tax, rising gas prices and delayed tax refunds has created a “challenging time and an uncertain time for the consumer right now,” said Mary Winston, the company’s chief financial officer.

“In our case, anything that takes money out of our customer’s wallet gives them less money to spend in our stores,” she told CNBC. “So I think all of those things create nervousness for the consumer, and I think there are sometimes political dynamics going on that they might not even fully understand the details, but they know it’s not good.”

#7 Even Wal-Mart is really struggling right now.  According to a recent Bloomberg article, Wal-Mart is struggling “to restock store shelves as U.S. sales slump“…

Evelin Cruz, a department manager at the Wal-Mart Supercenter in Pico Rivera, California, said Simon’s comments from the officers’ meeting were “dead on.”

“There are gaps where merchandise is missing,” Cruz said in a telephone interview. “We are not talking about a couple of empty shelves. This is throughout the store in every store. Some places look like they’re going out of business.”

This all comes on the heels of an internal Wal-Mart memo that was leaked to the press earlier this month that described February sales as a “total disaster”.

#8 Electronics retailer Best Buy continues to struggle mightily.  Best Buy just announced that it will be eliminating 400 jobs at its headquarters in Richfield, Minnesota.

#9 It is being projected that many of the largest retail chains in America, including Best Buy, will close down hundreds of stores during 2013.  The following is a list of projected store closings for 2013 that I included in a previous article

Best Buy

Forecast store closings: 200 to 250

Sears Holding Corp.

Forecast store closings: Kmart 175 to 225, Sears 100 to 125

J.C. Penney

Forecast store closings: 300 to 350

Office Depot

Forecast store closings: 125 to 150

Barnes & Noble

Forecast store closings: 190 to 240, per company comments

Gamestop

Forecast store closings: 500 to 600

OfficeMax

Forecast store closings: 150 to 175

RadioShack

Forecast store closings: 450 to 550

#10 Another sign that consumer spending is slowing down is the fact that less stuff is being moved around in our economy.   As I have mentioned previously, freight shipment volumes have hit their lowest level in two years, and freight expenditures have gone negative for the first time since the last recession.

#11 Many young adults have no discretionary income to spend because they are absolutely drowning in student loan debt.  According to the New York Federal Reserve, student loan debt nearly tripled between 2004 and 2012.

#12 The student loan delinquency rate in the United States is now at an all-time high.  It is only a matter of time before the student loan debt bubble bursts.

#13 Due to a lack of jobs and high levels of debt, poverty among young adults in America is absolutely exploding.  Today, U.S. families that have a head of household that is under the age of 30 have a poverty rate of 37 percent.

#14 According to one recent survey, 62 percent of all middle class Americans say that they have had to reduce household spending over the past year.

#15 Median household income in the United States has fallen for four consecutive years.  Overall, it has declined by more than $4000 during that time span.

#16 According to the U.S. Census Bureau, the middle class is currently taking home a smaller share of the overall income pie than has ever been recorded before.

Are you starting to get the picture?

Retailers are desperate for sales, but you can’t squeeze blood out of a rock.

For much more on how the middle class is absolutely drowning in debt, please see this article: “Money Is A Form Of Social Control And Most Americans Are Debt Slaves“.

But if you listen to the mainstream media, they would have you believe that happy days are here again.

Right now, everyone seems to be quite giddy about the fact that the Dow is marching toward an all-time high.  And I actually do believe that the Dow will blow right past it.  In fact, it is even possible that we could see the Dow hit 15,000 before everything starts falling apart.

But at some point, the financial markets will catch up with economic reality.  It is just a matter of time.

In the meanwhile, those that are wise are taking advantage of these times of plenty to prepare for the great economic drought that is coming.

Don’t be caught living paycheck to paycheck and totally unprepared when the next wave of the economic collapse strikes.  Anyone that believes that this debt-fueled bubble of false hope can last indefinitely is just being delusional.

During The Years Of Plenty, Prepare For The Years Of Drought - Photo Taken By Tomas Castelazo

Is Wal-Mart Destroying America? Facts About Wal-Mart That Will Absolutely Shock You

America absolutely loves Wal-Mart.  100 million customers visit Wal-Mart every single week in this country.  But is Wal-Mart good for America?  That is a question that most people never stop and ask.  Most of us love shopping in big, clean stores that are packed with super cheap merchandise, but the truth is that Wal-Mart is destroying America in a lot of ways.  As you will see below, Wal-Mart has destroyed tens of thousands of small businesses and countless manufacturing jobs over the past couple of decades.  Wal-Mart has become a gigantic retail behemoth that sells five times more stuff than any other retailer in the United States.  Unfortunately, a large percentage of all the stuff sold at Wal-Mart is made overseas.  What that is costing the U.S. economy in terms of lost jobs and lost revenue is incalculable.  But Wal-Mart is a perfect example of where our economic system is headed.  Our economy is becoming completely and totally dominated by highly centralized monolithic predator corporations that ruthlessly crush all competition and that will stoop to just about anything in order to cut costs.  In the future, will we all be working for gigantic communal entities that funnel all of the wealth and economic rewards to a very tiny elite?  That sounds very much like how communist China works, and red-blooded Americans should want no part of that.  America is supposed to be about free enterprise and competition and working together to build up this country, and Wal-Mart is destroying all of that.

The following are 20 facts about Wal-Mart that will absolutely shock you….

#1 The average U.S. family now spends more than $4000 a year at Wal-Mart.

#2 In 2010, Wal-Mart had revenues of 421 billion dollars.  That amount was greater than the GDP of 170 different countries including Norway, Venezuela and the United Arab Emirates.

#3 If Wal-Mart was a nation, it would have the 23rd largest GDP in the world.

#4 Wal-Mart now sells more groceries than anyone else in America does.  In the United States today, one out of every four grocery dollars is spent at Wal-Mart.

#5 Amazingly, 100 million customers shop at Wal-Mart every single week.

#6 Wal-Mart has opened more than 1,100 “supercenters” since 2005 alone.

#7 Today, Wal-Mart has more than 2 million employees.

#8 If Wal-Mart was an army, it would be the second largest military on the planet behind China.

#9 Wal-Mart is the largest employer in 25 different U.S. states.

#10 According to the Economic Policy Institute, trade between Wal-Mart and China resulted in the loss of 133,000 manufacturing jobs in the United States between 2001 and 2006.

#11 The CEO of Wal-Mart makes more in a single hour than a full-time Wal-Mart associate makes in an entire year.

#12 Tens of thousands of Wal-Mart employees and their children are enrolled in Medicaid and are dependent on the government for healthcare.

#13 Between 2001 and 2007, the value of products that Wal-Mart imported from China grew from $9 billion to $27 billion.

#14 Amazingly, 96 percent of all Americans now live within 20 miles of a Wal-Mart.

#15 The number of “independent retailers” in the United States declined by 60,000 between 1992 and 2007.

#16 According to the Center for Responsive Politics, Wal-Mart spent 7.8 million dollars on political lobbying during 2011.  That number does not even include campaign contributions.

#17 Today, Wal-Mart has five times the sales of the second largest U.S. retailer (Costco).

#18 The combined net worth of six members of the Walton family is roughly equal to the combined net worth of the poorest 30 percent of all Americans.

All over the country, independent retailers are going out of business because they cannot compete with Wal-Mart and their super cheap Chinese products.  Often communities will give Wal-Mart huge tax breaks just to move in to their areas.  But what many communities don’t take into account is that the introduction of a Wal-Mart is often absolutely devastating to small businesses….

A study of small and rural towns in Iowa showed lost sales for local businesses ranging from -17.2% in small towns to -61.4% in rural areas, amounting to a total dollar loss of $2.46 BILLION over a 13-year period.

When we buy stuff made by people working for slave labor wages in China, we destroy good paying American jobs and we make America poorer.  This is a point that I have tried to make over and over.

Wal-Mart often tells one thing to the public and then does another thing in private.  Sadly, the truth is that Wal-Mart does not care about U.S. manufacturing jobs.  Wal-Mart just wants to get products as cheaply as they possibly can, and most of the time that means getting them from China.

Just check out this first-hand testimony from an 81-year-old retired apparel manufacturer….

I was president of the Southwestern Apparel Manufacturers Association. There was a meeting sometime between 1985 and 1990. Walmart had contacted our organization and asked if they could meet with us at our beautiful Apparel Mart we had here in Dallas, which has now been razed, because all the independent merchants don’t exist that used to come to it. Two people from Walmart came down and they said they were going to be sourcing goods from overseas and we would have to meet those prices for consumer products and to get ready for it—we are going to be sourcing the world. Walmart was the only company that came out and said this.

It was sort of shocking: I was selling them some merchandise at the time. On the back of their trucks it was saying “Bring it Back to America!” They had the big “keep it in America” program going at that time on the big signs in the stores. Meanwhile when I reminded the buyer of that, she told me, “that is just for domestic consumption, we’re going to buy at the cheapest we can anywhere on earth.”

As I have written about previously, the United States has lost more than 56,000 manufacturing facilities since 2001.

We are losing millions of good jobs that cannot be replaced.  If you can believe it, the United States has actually lost an average of about 50,000 manufacturing jobs a month since China joined the World Trade Organization in 2001.

Last year, the U.S. trade deficit with China was the biggest trade deficit that one nation has had with another nation in the history of the world, and Wal-Mart played a huge role in that.

In fact, Wal-Mart has actually been forcing some U.S. manufacturers to pack up and move overseas.  The following is from a recent article by Amy Traub….

Walmart’s market power is so immense that the even the largest suppliers must comply with its demands for lower and lower prices because they cannot afford to have their goods taken off its shelves. Companies that used to manufacture products in the United States, from Levi’s jeans to lock maker Master Lock, were pressured to shut their U.S. factories and moved manufacturing abroad to meet Walmart’s demand for low prices.

Unfortunately, the vast wealth that Wal-Mart is sucking out of our communities is not put back into our communities.  The profits are funneled out to Wal-Mart executives and shareholders.  We may enjoy the low prices, but very little of the money that we give to Wal-Mart gets recycled in our local areas.

In the old days, you could actually support a family selling electronics or running a general store.  But you can’t support a family working at Wal-Mart.  The vast majority of the jobs that Wal-Mart creates are very low paying.  Large numbers of Wal-Mart employees are actually on welfare, and this is part of the reason why we have seen such an explosion in the number of the working poor in America.

At this point, more than 40 percent of all jobs in America are low wage jobs and the middle class is rapidly disappearing.

If we do not support American jobs and American manufacturers they will continue to go away and the welfare rolls in this country will continue to explode.

There is not going to be any prosperity in this country without jobs.  Unfortunately, most Americans simply do not understand how good jobs are being systematically destroyed in America every single day.

The path that America is headed on today is only going to end in complete and total disaster.  We are being transformed from a wealthy nation into a poor nation.  In the end, we will be dominated by a very tiny elite and everyone else will either be among the working poor or will be totally dependent on the government.

Our system is supposed to be about open, honest competition.  But that is not what Wal-Mart is about.  Wal-Mart is about crushing small businesses and manufacturers here in America and getting us all to buy their super cheap Chinese-made goods.

So what do all of you think about Wal-Mart?  Please feel free to post a comment with your thoughts below….

Black Friday Violence Worse Than Ever As American Consumers Fight Over Deals Like Crazed Animals

We all knew that this was coming, didn’t we?  Each year Black Friday violence just seems to get worse and worse.  What does it say about American consumers when they are willing to fight like crazed animals just to save a few bucks on cheap plastic crap made in China?  Not that retailers are innocent in any of this.  It certainly seems as though many of them purposely create wild situations on Black Friday where customers will rush like crazy people into their stores and nearly riot as they fight over discounted merchandise.  The more Black Friday madness there is, the more of an “event” it becomes, and the higher the profits of the retailers go.  This year there was more Black Friday hype than ever and there was also more Black Friday violence than ever.  It is being projected that this year a record-setting 152 million Americans will go shopping between Thanksgiving and Sunday night.  That may be good news for the big corporate retailers, but the shocking lack of character being displayed by American consumers all over the country this weekend is very bad news for the future of this nation.

Most Americans would agree that there is a tremendous amount of selfishness and greed on Wall Street, but as the videos posted below demonstrate, there is also a tremendous amount of selfishness and greed on “Main Street” as well.

This year, Black Friday violence included robberies, gunfire and shootings, but the most shocking incidents actually happened inside the big retail stores.

For example, as merchandise was being unveiled on Black Friday night at a Wal-Mart in the Los Angeles area, one woman actualy pulled out pepper spray and sprayed it at other customers that were gathered around her.

Did she do this because she felt threatened?

No, according to the Los Angeles Times, authorities say that the woman was just seeking a “competitive” edge.

It is being reported that at least 20 people were affected by the pepper spray.

The pepper spray incident just added to the wild and frenzied atmosphere inside that Wal-Mart last night.

The following is how the Los Angeles Times described the scene….

Employees attempted to hold back the scrum of shoppers and pick up merchandise even as customers trampled the video games and DVDs strewn on the floor.

“It was absolutely crazy,” he said.

Another customer said screams erupted after about 100 people waiting in line to snag Xbox gaming consoles and Wii video games got into a shoving match.

Alejandra Seminario, 24, said she was waiting in line to grab some toys at the store around 9:55 p.m. when people the next aisle over started shouting and ripping at the plastic wrap encasing gaming consoles, which was supposed to be opened at 10 p.m.

“People started screaming, pulling and pushing each other, and then the whole area filled up with pepper spray,” the Sylmar resident said.

Pepper spray was used at a Wal-Mart on the other side of the country as well.  Over in Kinston, North Carolina an off-duty police officer used pepper spray as an unruly shopper was being subdued.  Approximately 20 people (including some children) were affected by the pepper spray.

Most Americans are not really concerned over the fact that this country is rapidly heading into the toilet, but they sure will get worked up into a frenzy over some good deals.  Just check out the following video that was filmed in California.  In the video, a huge crowd can be seen storming the entrance of Urban Outfitters in the Thousand Oaks Mall on Black Friday night….

There are lots of other crazy videos of Black Friday madness on YouTube today as well.  Just check out some of the following examples….

*In Fresno, California law enforcement authorities were barely able to keep a stampede at the entrance of one store from turning into a riot.

*In this next video, you can see people going absolutely crazy over memory cards at about the 1:20 mark.

*On Black Friday night, American consumers will riot over just about anything.  For example, there was a huge panic over Tupperware at one Wall-Mart last night.

*Of course electronics is probably the hottest category in most stores on Black Friday night.  In some areas, the fighting over video games became incredibly intense.

*Some of the worst Black Friday rioting goes on inside Wal-Marts.  Just check out this shocking video of what happens inside a Wal-Mart on Black Friday night.

*Also, what happened last night at a Wal-mart Supercenter in Greenville, North Carolina, was nothing short of idiotic.

If this is how the American people will act just to save a few bucks on cheap plastic crap made in foreign countries, how are they going to act when the economy collapses?

If Americans will literally fight each other over saving 20 bucks, what is going to happen someday when millions of them don’t know where their next meal is going to come from?

Thankfully the economy is still in good enough shape that most Americans can participate in these orgies of consumerism.  But the reality is that the global financial system is in a massive amount of trouble, and it looks like we could be on the verge of another global financial collapse.

Do the American people have enough character to be able to deal with a full-blown economic depression?

In a recent article entitled “22 Signs That The Thin Veneer Of Civilization That We All Take For Granted Is Starting To Disappear“, I commented on the declining character of the American people….

Instead of teaching our children to love and care for one another, we have taught them to be incredibly self-involved.  Today, way too many Americans deeply love themselves, deeply love money and are deeply addicted to entertainment.  Each new generation seems to be even more prideful, even more arrogant and even more violent.  As a nation, we are losing our empathy for others, our compassion for the needy and our respect for the elderly.  Our family units are breaking down and thousands of our communities are being transformed into hellholes.

Over the past several decades, the biggest debt bubble in the history of the world has enabled us to enjoy unprecedented prosperity.  But it has been a “false prosperity”, and it is frightening to think about what America is going to look like when the good times finally end.

The other thing that is really disturbing about Black Friday is the fact that the vast majority of the products that Americans are fighting over are made overseas.

As I pointed out recently, 23 manufacturing facilities were shut down every single day in the United States last year.

Since 2001, the U.S. has lost a total of more than 56,000 manufacturing facilities.

This country is bleeding jobs, bleeding businesses and bleeding wealth at a pace that is nearly impossible to fully grasp.

We are becoming poorer as a nation every single day, and yet Americans are seemingly more enamored with consumerism than ever before.

Most Americans could not care less about where something was made.  The only thing that matters to them is how cheap it is.

It doesn’t matter to them that a record-setting 2.6 million Americans slipped into poverty last year or that there are 10 percent fewer middle class jobs in America today than there were a decade ago.

We have become a nation that is so self-centered that it is hard to find the words to describe it.

Rather than caring about what is good for America, most of us only care about what is good for ourselves.

The madness that we see every Black Friday is just one more sign that our society is coming apart at the seams.

America has become a nation that is absolutely saturated with greed.  Unfortunately, all of that greed is going to make the hard economic times that are coming much, much more painful.

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