Consumer Debt or Retail Sales : How Will OCT Increasing Employment Be Spent?

$787B ARRA Data Site

EWT 4 of A of Primary 2

Understand Popular News Media Goals

Understand Popular News Media Goals
The goal of popular "news" media is not to educate the viewership. Print or Broadcasting.
The goal of popular "news" media is to make a paycheck by selling advertising.
Advertising revenues create paychecks.
Bigger advertising revenues = bigger paychecks for investors, private or publicly traded.
Bigger advertising revenues are generated through two different factors: (1) Pandering to a larger audience of (2) fools whom will part with their paychecks.


Sniggering & Laughter
Biased deceit should be delivered with sincerity & earnestness.
Upon delivery of biased deceit, sniggering & laughing should be conducted behind closed doors.
In any given population there are masses that just don't care and there are the vocal minority.
Often, there are several opposing vocal minorities.
Interested Party A employs attorneys & lobbyists to pursue their Agenda A.
Interested Party B employs attorneys & lobbyists to pursue their Agenda B.
Whom is right? Whom is wrong?
Uninterested Party C sits around, does nothing, plays armchair activist to pursue their Agenda C of being unproductive as possible while still being able to pay the cable & electricity bill.

Party A wants better education for their kids that they cannot afford.
Party A will argue the State Government & residents benefit from the higher revenues from higher paying jobs a more competitive workforce entices to move to the State.
Party A sniggers & laughs behind closed doors after they earnestly ask for more taxes, Agenda A.
Party B responds with purple outrage!! at this preposterous proposal, as the State is heavily populated by fixed income retirees content with their standard of living.
Party B sniggers & laughs behind closed doors after they earnestly rebuke a request for more taxes, Agenda B.
Party A drops their collective jaw. 'Think of the children!" they plead.
Party A sniggers & laughs behind closed doors after they earnestly continue to ask for more taxes.
Party B responds with "Food, medication or taxes. Grandma can't afford all three. What do you want Granny to give up? Food?! Medication?!"
Party B sniggers & laughs behind closed doors after they earnestly again rebuke a request for more taxes.
This garbage can go on indefinitely.
Education. Health care. National security. Social Security. Energy policy. Whatever. Anything with a dollar value attached is fair game.
The news media loves!! this conflict.
They can print/publish/broadcast/discuss/debate this tripe all the way to the bank because Party C sucks up news as if it were thoughtful, useful and or actionable.
Party C is a consumer of Platform C.
What the public sees and what goes on behind closed doors are not the same thing.

Platform C generates the most revenue for its public or private investors when the editor or producer places the most emotional conflict in front of Party C.
Party C can't get enough unproductive stimulation. It's a drug. And a wise editor/producer knows to sell the most advertising dollars that the real audience is not the readership or viewership, but rather it is the advertisers.
The more advertising dollars a producer can sell the wealthier the editor/producer and platform become, so there is great incentive to adjust the readership/viewership to accommodate the greatest audience possible of fools.
Readership/viewership is adjusted by the publisher or broadcaster's programming choices.

Put yourself in the editor/producers shoes.
Ask 'What is the editor/producer thinking?"
"This is educational & informative." or "This salacious tripe will gobbled by dogs & pigs."?

This is why you read or see "guests" that fight & act ridiculous.
The editor/producer can pick & chose amongst a dozen alternatives.
The most ridiculous are most often chosen.


The truth... you have to figure out on your own, and it ain't in the popular news media.

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Real Money, Consumer Credit & National Debt

REAL MONEY is wages earned.
I work, you pay.
You work, I pay.
We are paid to do work for three reasons:
1 - I don't know how.
2 - I don't have time.
3 - I don't want to do it.

People pull resources out of the Earth, apply labor to it, creating material utility.
Fractional residual benefits of economies of scale accumulate over decades.
Think of this as increased efficiency.

A population of a million can produce goods and services more efficiently than a population of twenty.
Another way of looking at that is to see the average citizen from a population of a million has a higher standard of living than the average citizen from a population of twenty.
Over time, with population growth & increased efficiency, real money increases with or without consumer credit.
Consumer credit allows real money to increase at a higher rate.

CONSUMER CREDIT is ethereal fiat funny money fabricated out of the clear blue sky.
Credit is a promise of future labor.
I can work thirty years to save the money to buy a house then - or - I can mortgage a house now and promise future labor.
Same for car loans.
Same for school loans.
Same for credit cards.
It's all based on promised future labor.
The extension of credit is based upon how someone "feeeels" about the promise future labor.
As such, credit can expand and contract based upon how someone "feeeels".
When the economy is flat so is credit.
When the economy is roaring credit expands.
When the economy sucks credit contracts.
It will return when someone "feeeels" better about future labor.

NATIONAL DEBT is more funny money and is also credit, therefore, a promise of future economic activity by taxpaying citizens.
Critics like to complain about fiat money, but ironically seem to have little problem with bank money.
And just like bank credit, national debt can expand & contract depending upon the goals of a government.
Since the purpose of a government is to govern, zealously allowing an economy to run its natural course can be irresponsible.
The demand on governmental services is greatest when taxpayer revenue is at its least.
Stand by and a financial disaster will happen.
Financial disaster leads to social disaster and heads roll.
Intervene and resulting ballooning of any deficit spending/quantitative easing will be exagerated.
(I am of the opinion that complaining citizens are better than dead citizens, so by all means: intervene.)


Both of these examples begin the same way as they culminate into an unsustainable wave formation, or bubble.
The housing bubble collapsed not because of CDOs, CDSs and sub-prime loans.
The housing bubble collapsed due to housing production exceeding demand.
Once people couldn't sell their houses in a red-hot economy time frame the market became glutted, the wave became unstable and the whole thing collapsed under a cascade effect.

Zealotous fiscal conservatives promote a "let the chips fall where they may" approach.
Housing valuation decrease = consumer credit decrease.
Consumer credit decrease = consumption decrease.
Consumption decrease = industrial production & capacity utilization (IP&CU) decrease.
IP&CU decrease = unemployment increase.
Unemployment increase = further credit contraction & consumption decreases.
It's a negative feedback loop.

Tax revenue is generated through the simple act of money changing hands.
Consumption decrease = tax revenue decrease.
Citizens don't need the government when the economy is fine.
Citizens need the government the most when the economy is in decline.
Decreased tax revenue when the public increases demand for governmental support is unfortunate.
To increase government support involves increasing government or national debt.

There is always something to complain about.
If fiscal conservatives strictly constrain national debt as consumer credit contracts the national standard of living will grind to a near halt.
Fiscal liberals complain. People lose many jobs. Government loses many jobs. Heads roll.

If fiscal liberals loosely balloon national debt to partially offset consumer credit contraction the national standard of living will be somewhat preserved.
Fiscal conservatives complain. People lose some jobs. Government increases jobs. Heads remain attached to their bodies.

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The EPS Theory : A Divergence Between The Economy & Market

Since before the MAR 9th, 2009 market bottom everyone has noted the economy's degrading fundamentals while the market has since soared upward into "unsustainable", "unreasonable" & "disbelievable" levels.

"Really?", I wonder.

What model works where observations match predictions?
The"correct" model does.

Despite growing unemployment not expected to have meaningful improvement until mid 2010...
Despite ongoing huge months of inventory of existing homes for sale...
Despite the Damocles sword of commercial real estate defaults dangling overhead...
Despite vicious arguments between inflation & deflation...
The market keeps rising.
And rising.
And rising.

Why?

There is a growing divergence between the corroding fundamentals of the economy (misguidingly focused on unemployment) and the forgotten foundation of the market: Earnings drive the market but have little bearing on the economy.

Model A: 3% Unemployment
Let there be a labor force of 1,000 with 3% unemployed job seekers, equaling 970 laborers with jobs and 30 laborers without jobs.
The 1,000 labor force lives amongst a population of 2,000 total consumers.
Total annual consumption of the 2,000 consumers equals $20,000 across corporations with reportable earnings.
Think of Retail Sales as Revenues.
The Wages of the 970 employed, at $15, equals $14,550.
Think of Wages as Expenses.
Revenues minus Expenses equal Earnings.
$20,000 - $14,550 = $5,450 of reportable corporate Earnings

Model B: 10% Unemployment
Let there be a labor force of 1,000 with 10% unemployed job seekers, equaling 900 laborers with jobs and 100 laborers without jobs.
The 1,000 labor force lives amongst a population of 2,000 total consumers.
Total annual consumption of the 2,000 consumers drops to $18,950 across corporations with reportable earnings.
The Wages of the 900 employed, at $15, drops to $13,500.
$18,950 - $13,500 = $5,450 of reportable corporate Earnings
WOW!
Despite the massive wailing & gnashing of teeth over 10% unemployment - and - despite the natural drop in Annual Retail Sales (Revenues) that follows a drop in employment (Expenses), it is possible to have equal (maybe even greater!) Earnings.

Model C: Bazillions Unemployed
Let there be 900 laborers with jobs and a bazillion!! laborers without jobs.
(You're about to see why the unemployed really doesn't matter to the market).
The 900 labor force lives amongst a population of 2xBazillion!! total consumers.
Total annual consumption of the 2xBazillion!! consumers also equals $18,950 across corporations with reportable earnings.
The Wages of the 900 employed, at $15, remains at $13,500.
$18,950 - $13,500 = $5,450 of reportable corporate Earnings
WOW!
WOW! Oh, WOW! Oh, WOW!
Despite the chaos & anarchy of a Bazillion!! unemployed - coupled with - what would be an amazing per capita drop in the standard of living as evidenced by the Annual Retail Sales (Revenues) with employment (Expenses) still at 900, it is still amazingly possible to have equal Earnings.

So...!
Somewhere between the harsh actuality of Model B and the ridiculousness of Model C lies the answer as to the mechanics of "How" we have this huge disparity between "reality" (defined by unemployment/housing/debt/inflation/deflation) and the rise in the market.

Unemployment doesn't affect earnings!
Unemployment is not an expense to be subtracted from revenues.
Pay attention to Actual Retail Sales (Revenues).
Pay attention to Actual Employment (Expenses).
From those an approximation of Earnings can be derived.