When times were good, business’s everywhere realized that doubling in size, doubled profits. Now there is a problem of diminishing returns. The consumer is making choices on what to consume. In my quest to be shot for oversimplification, figure that a business that has 100 customers a day needs the first eighty to pay the bills and the rest is the return on investment or profit. Many businesses are seeing a 10 to 20 percent drop in consumer traffic. A drop in business like that is enough to give a store manager sphincter muscle lockup.
If you’re my age, a dentist chair is more than familiar. Now days, there are no long lines. No three week wait, they are going to do it today. I told my boss that I’d be a half an hour late because of a dental appointment—I spent 4 hours getting an inlay. I kept saying no, they kept saying yes. They wanted $400 to begin with. At $200, I gave in and said yes, kind of hard to believe that I have dental insurance. I don’t know what my HMO paid, but my cost wasn’t even close to what I had anticipated.
New Years, I bought chips and dip for the Rose Bowl and found out that it was on ESPN, my basic cable wasn’t good enough so I had to watch it on my laptop on ATDHE.NET. Then a week later, the Number 1 and 2 of college football played on ESPN and I had to watch that also on my laptop. I’m tossing the cable company; I can stick an antenna up in the back and get HDTV. Not the greatest solution, but I won’t be paying for all the Spanish channels I never watched.
The 10 to 20 percent drop in consumer spending is a real problem that is invisible to most of us. The good thing, there is no waiting to be seated or long lines at the checkout counter.
The neat thing about consuming less when it comes to public utilities, your rates increase. That might seem like I miss-spoke, but the utilities have fixed costs and if everyone cuts back, your share of the bill goes up,
Then when you get to government, 15 percent unemployment is about a 10% drop in tax collections. Sandwich that with decreasing property tax revenues. You don’t have to worry about a double dip; the politicians in charge haven’t even felt the first dip yet. There is a time lag where it all gets swept under the rug, and there is an awful lot under this rug.
People are getting less, but everyone still demands the plan they had yesterday. It’s time to realize, there are no government lifeboats, only government life vests made out of cinder blocks.
If you and the wife just retired with a half million dollar nest egg, you’re going to have lots of fun. Two percent of 500K is $10,000 per year to live on. Nothing like the 8% interest rates the banks use to pay, before Bernanke decided he needed to save us.
What we have here is diminishing returns; less earnings coming in and more savings going out. This is the new prosperity. Of course, government has been doing this for years; I wonder why it doesn’t work on the individual level?
Obama tomorrow will tell us that we are emerging from this recession. Think about it. We are getting less of everything and it is costing us more. Bernanke has saved us from deflation, and sentenced us “old farts” to financial retirement starvation.
Bernanke and Obama are kind of like hookers that grew old and fat. They were wise enough to know what worked in the past, but lack the insight to see what has changed.
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