Just a Holiday Reminder: Black Friday Is Utterly Meaningless (November 25, 2011)
You'd never know it from the media coverage, but Black Friday sales are essentially meaningless noise in the U.S. economy.
You know the economy and stock market are in deep trouble when the Mainstream Media elevates one essentially meaningless metric to "The One Meaningful Statistic" and then trumpets it slavishly. One such meaningless metric is Black Friday.
The Media has glommed onto Black Friday for a number of flawed reasons, number one being the MSM's ceaseless drive to reduce all complex problems down to something that can be expressed in a sound-bite voiceover and a video clip of a crowded mall.
The MSM loves binaries: two parties, two final contestants, and if Black Friday is "good," i.e. sales exceed last year's consumerist bacchanal, then the economy is "healthy." Any weakening of the consumer's lemming-like drive to buy, buy, buy means the economy is "weak."
This is of course absolutely backward: consumers buying shiploads of poor-quality crap made overseas means the economy is still on the slippery slope to implosion, as debt is being used to fund consumption while capital formation (savings) remains pathetic.
Since most of the crap (and it is crap--most Americans have either forgotten what actual quality is or they have never experienced it) is made overseas, the "boost" to the economy generated by rampant charge-card consumption flows to only one slice of the the U.S. economy: corporate profits.
U.S.-based global corporations skim most of the profits made when crap is made overseas; how much profit do you think the Chinese and Taiwanese suppliers of the iPad and iPhone components make? If you guessed 1%-2% of their part of the cost, you're right. So if a $300 device costs $100 to actually manufacture in China, the Chinese suppliers make a dollar or two. Apple skims about $100 and the distribution/retail channels skim the other $100.
I have covered this dynamic in depth over the years: for example:
Trade with China: Making Out Like a Bandit (March 30, 2006)
Trade and "Trade War" with China: Who Benefits? (October 5, 2010)
The key dynamic to understanding trade with China is U.S. corporate profits.
Although nobody dares state the facts lest the cargo cult fetish lose its power to conjure up another mind trick, holiday retail sales are a trivial slice of the U.S. economy, and the fluctuations in those sales year to year are essentially noise.
As I noted in Please, Santa, Let This Be the Last Christmas in America (that's supposed to "save" the U.S. economy) (November 23, 2010):
Holiday retail sales are a mere 3.4% of the U.S. GDP.
The cargo-cult fetish of focusing on Black Friday sales is worse than meaningless--it is profoundly misleading. What the economy needs is not more mindless debt-based consumption (the "aggregate demand" that the cargo cult sees as a "folk cure" for everything that's wrong with the economy) but the exact opposite: paying down debt, reducing the share of the national income skimmed by a parastic banking sector, a boycott of low-quality crap (i.e. 90% of what's bought on Black Friday) and an evolution beyond a model of "growth" that's dependent on ever-rising debt and consumption of low-quality, often needless junk made overseas to benefit Corporate America's bulging bottom line.
In summary: these are the retail sales you're looking for; the economy is "healthy," move along. Nice mind trick, and all you need is ceaseless propaganda, a credulous audience and a stock market seeking some excuse for a short-covering rally as the global economy implodes.
Of related interest:
The Last Christmas in America (December 23, 2010)
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