Scribbler's Macroeconomic View

Perhaps the idea that “the new saving is trading down” has been significantly challenged by the same store sales news this morning. The new saving is not the same level of consumption at a lower margin retailer – the new saving is saving. Meaning, consumers not spending all their money. People are bothered because we may not be spending money at a level equal to or greater than we earn it.

<o></o><o></o><o></o>Much like to babble regarding decoupling a few years ago, the premise that consumers are not looking out for their best interest at all times is flawed. People are always ready to find a deal – there is no aversion to shopping at a lower margin retailer for a good deal. So the idea that people, when faced with a difficult economy, only then begin to look out for their best interest and avoid the high-end and gravitate to the low-end I have always found suspect.<o>

</o>What are the signs of deflation? Deflation is marked by an increase in the propensity delay consumption, because there is a better deal to be had by waiting. Everyone loses in deflation, except savers. The low margin retailers lose, the high margin retailers lose. Companies with large debt exposure find the situation untenable as revenue decrease leaving less and less profit. Commodities begin to fall, as prior supply rates prove to be more than ample for the lowered demand.

Sounds vaguely familiar.