ODE TO THE ECONOMY 3
( article 1 of 2 today )
( article 1 of 2 today )
Supermarkets sell you cheap food ( cheap as in profits, not total costs to the consumer ) because of competition. Store X gives you loss leaders every week to get your sad sack sorry ass into the store. Almost always, you buy something else. Even if it is just something perishable you are almost out of and you want to save on vehicle wear and tear. That head of lettuce might have only netted the store ten cents, with the pound of hamburger losing them a nickel, but the lights and power and employees were already paid. Your entry cost them nothing and yielded a nickel.
No, you don’t stay open making a nickel at a time. But you do stay in business stealing customers who buy not just sale items but everyday priced items. The store can make zero off you one trip because the other three trips are profitable. The stores who only get business at a loss, the “cherry picker” customers? They price everything too high and only draw in customers for sale items. They are your next bankruptcy filers. Which is about half the grocery stores in town. Then what happens?
A grocery store is not the same thing as a gas station. A station is in effect completely robotized. The tanker truck comes and dumps the gas, a customer swipes his card to pay for it and someone only has to be there to minimize the chances of vandalism. One gas customer an hour or thirty, the costs barely budge. A grocery store can handle up to X amount of business for their costs, but anything over that does drive up their costs. Stocking the shelves is labor intensive. Even the more efficient ones must pay for product movement.
Some stores are so good they just open the case and throw it on the shelf. The prices on so low customers come to the run down building in the ghetto to shop. And they won’t be increasing their hours with more business. Remember, the ghetto. If they are a giant warehouse in the safer industrial area, there is still going to be increased manpower cost as more freight gets moved. My point is, getting an increase in business as your competitors close will involve your cost and then your prices increasing. This is what lack of redundancy causes.
Okay, how business USED to be done was that you had a position that wasn’t busy all of the eight hours. You gave them Make-Work to do ( one reason your popcorn costs $6 at the theatre is that you are paying people to stand around waiting for the next customer to buy snacks. Multiplexes somewhat eliminate this with less downtime than an older one or two screen ). At a grocery store, the guy bagging groceries faced the shelves. A clerk dusted them, and etcetera. Now? To be more “efficient”, fifty percent of positions are eliminated.
The remaining employees do at least 150%. Sometimes on bad days 200%. There is ZERO down time. Which means increased demand has no labor available to fill it. Think of it like a car dealership. Five salesmen hang around picking their ass. A customer comes in and there are extra people to go “help” them. But that is because they work on commission only. If they were hourly, like other retail stores, you would have ONE salesman. If two customers came in at the same time, they would have to wait their turn. You don’t wait your turn at Amazon because of robots.
A perfect grocery store would have one brand and size per item, with limited items. Each item would be an opened case, with open cases behind it. All meat is frozen, all produce in bags rather than loose. One guy supervises all the self check out scanners, and after a limited number of hours open that one employee would close up and re-stock the cases. The problem is, all grocery stores are like full serve gas stations that never got robots to perform all tasks. You can dump gas into a tank after hours, but you can’t gravity dump cases from the semi to the shelves.
And, all grocery stores are working on a century old design when labor was considered essential rather than optional. Even Sam’s and Costco types have a lot of labor to pay ( not to mention far more real estate costs ). More customers, more cost. But, you ask, aren’t we paying more now just having more stores open? Well, grocery stores have their own version of the convenience store, the specialty departments. The bakery and the deli’s. Offering ready to eat foods, at quite the premium mark-up. Absent those?
If customers stop buying luxury foods, those lost profits need to be made up by rising costs on commodities. So here is your grocery store, without retail competition. It isn’t raising costs because it can but because it must. Keep in mind no store is truly competition free. Just like the last time foods insanely inflated in price, you can always have a neighborhood food co-op. Any business can rent out their back room to the group one day a month, the semi delivers and the members save on bulk buying ( obviously, this would only work with a limited amount of choices. Say, shelf stable basics like flour and sugar and such ).
So the retail grocery store will still shave costs as much as possible. But his labor costs are higher, AND he makes far less since few customers can afford fried chicken or birthday cakes. You the customer get to pay that extra. Like to guess about clothing next? Imports are far more expensive as fuel shortages due to bankrupted transportation companies are widespread. And delivery costs are higher with less trucking companies paying more to drive over roads that are not maintained adequately anymore.
You want to buy a gun? Well, delivery costs have increased-see above-and so you can’t just impulse buy a gun with a $20 S&H on top of a $20 dealer markup. There are far fewer gun sellers, so now the mark-up is triple, as is the freight. Now it only makes sense to buy what is in stock, and buying in stock adds in a “shelf tax”. Inventory sitting is always marked up more. Plus, more gun makers went out of business so wholesaler costs are higher. Your $400 retail hunting rifle is now $600. And that is in today’s dollars.
Yet, as everyone is forced to raise prices, what happens? The same pool of wages is split far more. Everyone buys less. If you have one dollar and a can of peas goes from fifty cents to seventy-five, you don’t buy two cans but one. Multiply that across ALL goods and services. I tried explaining this to my supposed “superior”. Look at the math. Look at the downward donation of food. Less cans per year, as costs went up. They were still donating the same dollar, which was half the food. What did the boss do? Hired more people to tried to give away twice the free food.
As people buy less because they have no more dollars, less gets sold which means businesses go out of business. Prices go up even more as less customers have wages to buy anything and each sold item must take on the burden of less volume sold. If ammo is ten cents and you can buy ten giving the seller ten cents profit, his cost is nine cents each. If his costs go to a dime, your ammo is now $1.10. If you only have a buck, and buy nine, his profit dropped by as much as your costs increased.
So now he charges you 12 cents each. So you buy eight. His profit just dipped again. See how this is going? Every buyer and seller in a self feeding loop. Understand now how inflation and immigration is preferable to this demand destruction? It used to be a lot easier when the economy wasn’t consumption but destruction. Go to the factory and build bombs and they would need more tomorrow. But as soon as they replaced bomb makers with bomb making machines, there was no civilian economy anymore.
We replaced that wartime economy with a consumer economy, but we forgot the buyers of crap needed a job. You can only increase demand so much with welfare payments ( which is really corporate welfare, as they are the ultimate beneficiary. Who makes more on ObammyPhones? Tyrone or Wal-Mart? ) to illegal immigrants. Ah, self-feeding negative cycles. Fun futures for all.
( .Y. )
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Man I love how you can take a complex subject and explain it in simple terms! When Ford started paying his workers way better than anyone else he did it (in part) to make new customers for his cars. He also lowered his cost to produce those cars so the workers could buy one. He got them with volume!ReplyDelete
Right, Ford made profits from volume. And that has been the business model ( even when the only business was fighting WWII ) ever since. Until now. The Chinese copied that and it is also biting them in the ass. They ran out of empty buildings to construct in Ghost Cities in China and are now doing the same in Africa ( awaiting the workers to mine or farm ). Japan concreted over most of their country since their economic depression started. We just build more highways to take more traffic to closing malls. Everyone is pretending we are still capable of buying the volume, on no wages. I don't even really get upset about this stuff anymore, it is so amusing. Kind of like listening to the crew of the Titanic arguing about who gets the limited lifeboats, while everyone is locked up below in steerage. And nobody knows where the key is. The band plays on to distract us but the violins strings are breaking.ReplyDelete
Yes. Since I have not worked all year, I have not bought anything other than food or perishable commodities. I, like the other 20+% not in the labor force and all of those underemployed or payed at shit wage scale are also opted out of the consumer economy. All that holiday spending we see is on credit that takes the rest of a year to pay back. It is a self cannabilizing loop for sure. There will be a breaking point, and only take a small percentage number to collapse the system. This is why Minions should be stocked the hell up for a total unavailability.ReplyDelete
Granted I'm in a bit of a bubble, but I seemed to notice an almost complete acknowledged awareness Christmas was here this year. I saw ONE house with lights up. The same house with actual visitors on X-Mas morn. I wonder if the Grinch Mode is more acceptable than admitting there was no capital or credit to consume.Delete
complete LACK. I forgot "lack". Sorry!Delete
Damn you hit this one clear out of the park!ReplyDelete
No joke I read this twice to make sure I understood the message and you're making to much sense
Have a great day minions
"...you can’t gravity dump cases from the semi to the shelves."ReplyDelete
Sure you can. At Walmart I saw a forklift grab a palette of Coke 12 packs, drop it in the middle of a BIG aisle, the driver snatched the plastic wrap off'n it and sat a price sign on top, then he hauled ass back to grab some more stuff. I imagine there will be more and more of this sort of thing as we get closer to the edge.
Walmart has 28 checkout lanes but I have NEVER seen more than 6 of them open at one time. Ever. They used to have 32 lanes but yanked 4 and started the pick-up service. I have yet to see anyone in that pick-up lane. My take is, if I have to go to the store to get the stuff then I'm going to get ALL the stuff I want. I'm funny that way. I like to pick out my own stuff. No dented cans, squashed bags of chips, etc.
Gas station-truck pulls up and dumps gas. Leaves. Grocery store-vendor must check in pallet with receiving clerk. Another guy takes it out to floor. Even as a pallet, TWO people must be paid to process goods on to the floor. Zero employees to receive gas. That is my point.Delete
Don't forget - the biggest thing they want to sell is debt. Buy more now! Pay me later. Plus interest.ReplyDelete
Debt is fun! No money down! Weeee!ReplyDelete
Lord Bison, Very detailed writeup but I have a question or two..as regards your can of peas example. If price goes up for canned peas people will resort to the time proven economic tactic of "substitution". They won't buy canned peas but rather dry peas. If 100% pure maple syrup gets too spendy switch to maple flavored corn syrup. Same with ammo. Buy 22 cal instead of 5.56 or if things go really crazy buy crossbow bolts, right?ReplyDelete
Always appreciate your views. BTW love the hair,did your hair dresser get a little something on Boxing Day?
The can of peas was to illustrate how a business goes out of business as customers are forced to buy less that THAT product. Unless all food production is controlled by one company, substitution hurts one company at the expense of another. My hair stylist was rewarded at Happy Festivus with a half dozen pair wool socks ( hell to the yeah! ).ReplyDelete
I also noticed a marked decrease in the number of houses in my area (southern New England) that had outdoor Christmas lights.ReplyDelete
Fun filled fact. Maine is the Whitest state ( something like 97% ). Of course, no jobs and high cost of living.Delete