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To: AllansAlias who wrote (48801)	8/2/2002 2:43:16 PM
From: reaper	Read Replies (2) \| Respond to of 209892

<<They are telling us that the consumer is going down. >> yeah, consistent w/ my note of this AM about the 'hope' window closing; debts need to be paid with cash, not dreams (or Paul ONeil press conferences <g>) if i may interject w/ some fundamental economics here (make some use of my university degree <g>); this is actually a paraphrase of something i posted on the CFZ back probably 6-9 months ago. everybody has been saying that "the consumer is going to save us". any economist who says this needs to re-visit his copy of Keynes' 'General Theory'. if i may quote: “The traditional analysis is faulty because it has failed to isolate correctly independent variables of the system. Saving and Investment are the determinates of the system, not the determinants. They are the twin results of the system’s determinants, namely, the propensity to consume, the schedule of the marginal efficiency of capital and the rate of interest. These determinants are, indeed themselves complex and each is capable of being affected by prospective changes in the others. But they remain independent in the sense that their values cannot be inferred from one another. The traditional analysis has been aware that saving depends on incomes but it has overlooked the fact that income depends on investment, in such fashion that, when investment changes, income must necessarily change in just that degree which is necessary to make the change in saving equal to the change in investment.” Keynes' central insight here is that the CAUSAL CHAIN in capitalism runs from INVESTMENT to INCOME to SAVINGS, not the other way 'round. Which is to say that the ability of the consumer to "hang in there" over the last year is no more than the lagging effect of the last several years of corporate investment and the consumer income that it generated. With investment outlays having fallen like a rock (and still going down), it surely follows that consumer income will shrink (which has slowly been starting to show up, as tax with-holding receipts have been flatish yr-yr for most of 2002 (adjusted for the change in with-holding thanks to the tax break) after being up 2-4% for most of 2001) and subsequently the consumer will re-trench. So with investment down, the consumer shoe will drop, as surely as night follows day; and it looks like it is happening NOW. Cheers

To: AllansAlias who wrote (48801)	8/3/2002 7:05:12 PM
From: yard_man	Respond to of 209892

FWIW. WMT has expanded agressively here -- a number of new supercenters in just the last year. The backlash, of course, is not new -- it's been there, but now some are questioning giving WMT tax breaks to locate such stores in their neighborhoods and are asking the question: What happens to price competition in these smaller locales with WMT being so dominant? My own view is that they have over-expanded to a considerable degree and are hitting the wall on their expansion potential in the US ... don't know about overseas.