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The Well-Off Shop While the Peasants Grab Their Pitchforks

Times are tough…

U.S. Consumer Credit Fell $9.5 Billion in August

August marked the largest drop in consumer credit in almost a year according to a statement released by the Federal Reserve on Sunday.

The $9.5 billion decrease follows an $11.9 billion increase the previous month. The Feds also announced that non-revolving credit such as student loans and the financing of automobiles fell by the largest percentage in three years. Non-revolving loans were down by $7.23 billion in August.

The drop in consumer credit means Americans are either paying down old debt or simply lack the confidence based on the current economy to buy non-essential goods.

Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York told Business Week:

“Consumers were cautious over taking on additional debt at the end of the summer after the volatility in the stock markets and the uncertainty caused by the failure of Congress to work together to bring down these trillion-dollar deficits.”

… but not for everyone:

Stocks Tumble; Wealthy Keep Shopping

When stock markets tumble, wealthy U.S. shoppers typically cut back their visits to such luxury emporiums as Saks Inc. (SKS) and Nordstrom Inc. (JWN). Yet even as the markets have seesawed, they’ve kept right on spending.

Exhibit A: Saks and Nordstrom yesterday reported September sales that exceeded analysts’ estimates, while luxury retailers as a whole outpaced all other segments except gasoline-selling wholesale clubs.

Affluent Americans aged 24 to 49 who have a yen for high living and bling are helping drive luxury sales, says Unity Marketing, which conducts quarterly shopper surveys. One cohort, called the “X-Fluents” — for “extremely affluent” — are responsible for 23 percent of luxury sales in the U.S., up from 18 percent in 2007, the Stevens, Pennsylvania-based firm said in a Sept. 14 client presentation it provided to Bloomberg News.

“The U.S. marketplace is more concentrated among young people,” said Unity President Pam Danziger. “They are more predisposed to luxury indulgence and represent more promising targets to luxury brands.”

X-Fluents were out in force again last month, she said.

Another group that Unity has dubbed “Aspirers” are also spending more on luxury, according to Danziger. They favor “flash, bling and status” and now account for 18 percent of luxury sales compared with 16 percent in 2007, she said.
…Their wherewithal stems from job security, bonuses and stock options, Pedraza said. Many are clustered in financial services and Silicon Valley, removed from the economic challenges other Americans face.

Cars, of course, are where the real action is:

Luxury-Car Sales Defy Crisis

FRANKFURT—Luxury-car sales continued to surge in September despite Europe’s deepening debt crisis and slowing economic growth in several major markets, making it likely that BMW AG, Daimler AG and Volkswagen AG’s Audi brand will report solid third-quarter earnings growth.

“We made solid gains right across the globe and once again achieved record sales for September, which contributed to a record third quarter,” BMW sales chief Ian Robertson said Monday in a statement.

The Munich-based firm expects to hit its 2011 sales target of more than 1.6 million combined for its BMW, Mini and Rolls-Royce brands, he said, which would represent a sales record for the group. BMW expects to remain the world’s best-selling premium auto maker, ahead of its German rivals Audi and Daimler’s Mercedes-Benz this year.
Sales for the company’s core BMW brand rose 9.3% in September to 128,446 cars. Demand was particularly strong for the compact sports-utility-vehicles X3 and X1. In the first nine months of the year, the brand’s sales were up 15% from a year earlier at 1.02 million cars.

Last week, Daimler’s Mercedes-Benz brand posted 120,982 car sales for September, up 2% year-to-year. The brand’s sales in the first nine months of the year rose 7.6% to 919,288 cars.

“We will continue to grow in the fourth quarter as well, so we are on track to make 2011 the most successful year in our company’s history,” Mercedes-Benz sales chief Joachim Schmidt said.

Some thoughts:
The growing disconnect between “X-Fluents” and the rest of us is the culmination of a trend that began decades ago with soaring executive pay in the U.S. Back in the 1980s I wrote a few “highest-paid executives” articles for a state business magazine, and even then it was obvious that American corporations had come up with a kind of perpetual motion salary increase machine: A company would hire a benefits consultant to advise its compensation committee on the CEO’s pay. The consultant would look at other companies in the field and report to the committee what their CEOs made. The committee would then match the average, plus an extra 10% or so for it’s obviously-above-average CEO. This new, higher “comp” would then go into the mix for the next consulting study, thus ratcheting up CEO salaries in an arc that had little to do with performance.

And let’s not even get into the games public companies play with stock options.

The other reason the rich feel richer is that they own most of the world’s financial assets. The average American’s retirement savings is tied up in their home, which is still falling in price, while top-5% Americans are diversified in stocks and bonds, which had nice runs in the past few years. So (recent volatility notwithstanding) they’ve been gradually feeling more and more flush as the markets have recovered from their 2009 lows. It seems completely reasonable, when your portfolio doubles, to reward yourself with a new toy.

Still, you’d think, given the growing disparities of wealth and rapidly spreading angst among the have-nots, that the world’s CEOs, investment bankers, hedge fund managers and trust fund babies would have the sense to dial back the conspicuous consumption. But they don’t seem to notice the dynamic, and now the Tea Party and Occupy Wall Street movements, enraged by what looks like a rigged game, have entered the mainstream. The peasants have grabbed their pitchforks and headed for the castle.

Later addition:
The idea that opposing huge concentrations of wealth and ostentatious toy buying is leftist or anti-capitalist or collectivist is misguided. The fact is, you can’t have a capitalist democracy without radical upward mobility. Everyone has to see a clear path to the next wrung on the ladder, and if a small group of people — in this case bankers, career politicians and the military industrial complex — seem to be hogging all the wealth and holding everyone else back, then the other 90% will just vote to take what the rich folks have. You end up with high marginal tax rates, wildly overoptimistic pension and health care entitlements, capital controls and eventually, to pay for it all, currency debasement. In other words, exactly what we’re in the process of getting. That’s bad if you believe in free minds and free markets.

28 thoughts on "The Well-Off Shop While the Peasants Grab Their Pitchforks"

  1. Way2Be@JR for the Later Edition. You nailed the real grievance and source of unrest as the lack of upward mobility. I would only add Big Pharma to your list of bankers, career politicians and the military-industrial complex who have rigged the game.

  2. I really think that Chris, Agent P and Brad are off on what they are talking about in regards to john R point here guys!

  3. The elites had failed America. On a macro basis, anyone would be able to see that US decline will accelerate from now onwards. The main problem is, the elites are paid too much to make self serving decisions and tell the public that things are getting better. This is repeated in every western nations. It is a result of globalisation to the extreme. The only country with responsible elites is Germany. Their manufacturing base had not been eroded. Elites should do some soul searching and get the country back on track. It will be hard if you are earning too much. The old taxation system would probably be the best system.

  4. “…Their wherewithal stems from job security, bonuses and stock options, Pedraza said. Many are clustered in financial services and Silicon Valley, removed from the economic challenges other Americans face.”

    See the abundance of the above here on a daily basis. You’d think we were in a ‘bubble’… But as someone above mentioned, ‘real things’ – not paper-pushing financial services are going to be en vogue come the next ‘crisis’ washout. Silicon Valley? I’m right in the middle of it. Lot’s of stuff going on here, but we’re not immune. Things like ‘job security, bonuses and stock options’ however, can cast a spell of False security over those not grounded in the realities of the present. This isn’t the early 1990’s any longer.

    And lastly, the ‘tea party’. I think we need to clear the air on just what this ‘tea party’ permutation is, and what it isn’t.

    The tea party (in its current form) is a co-opted group of dissatisfied voters who have somewhat of a bifurcated allegiance to ‘free market’ principle. The original article (Ron Paul) largely remains true to its libertarian roots, whereas the co-opted version (predominantly Neo-Con faction of the Republican party), prefers a ‘smorgasbord’ approach to Constitutional governance – i.e., they want certain parts of free market principles to remain, but they also want the (highly Un-Constitutional) war machine to roll on, unabated and without accountability due to the constant ‘threat’ to our ‘freedoms’ by ‘those who want to kill us’…

    In remedial terms: Hands off our Military-Industrial ($$$ making) complex, and don’t ask any questions, lest you be labeled ‘unpatriotic’…

    Unfortunately, you can’t have both dear AM talk-show-commentariat tea-party, Ron Paul hating Neo-Cons…

    1. Mr/Mrs/Miss ‘Agent P’,

      I agree in full with your take on the NeoCon element in the Tea Party movement. As a Christian, I become livid at the false prophets pitching eternal war in the name of Jesus. In his book “Overthrow: A Century of Regime Change from Hawaii to Iraq”, Stephen Kinzer does an excellent job of surveying 125 years of what Eisenhower called the ‘Military Industrial Complex’. Kinzer just recounts the plain facts of history, as the most apolitical journalist I’ve read in a long time.

      An equally cogent analysis of the swaggering, bloodthirsty lunacy today is a book entitled “The New American Militarism: How Americans Are Seduced by War” by a decorated Vietnam vet and former West Point instructor, Andrew Bacevich.

      The Tea Party has not yet grown a rational brain to go with its brawn. One of the tasks of AmericaAgain! Trust has been to tap that brawn and begin to train its intellect in basal history, civics, and economics before the movement dies in its crib.

      With respect to issues such as the so-called ‘FairTax’ and Herman Cain’s inane ‘9-9-9 Plan’, the average Tea Party participant usually starts off as a highly resistant listener. The Tea Party, like all movements based on mob action, makes for tough students. We’ll see.

  5. I doubt the French revolutionaries had a coherent response when interviewed by Faux News. OWS and the Tea Party and the beginning of the boil which is going unnoticed by those just hoping to maintain the value of their 401(k)s.

    An inability to satisfy the satisfied will not stop heads from rolling when the boiling point is reached.

  6. I’m amused by the moniker “X-fluent”.

    To my ears, it sounds like a cross between “effluent” and the “excrement” that’s in the effluent stream.

  7. Brad, ‘Occupy Wall Street’ is quite obviously NOT “Main Street”, for goodness’ sakes.

    Protesting “against the oligarchy that seized control of our government and institutions” is well and good, but it doesn’t necessarily follow that these revolutionaries have a morally or an intellectually defensible stance as to the outcomes they seek.

    Behind protesting the predators who’ve owned the three branches of federal government for the past 175 years there’s envy; plain jealousy of the rich.

    As I suggested above, the antithesis between the Tea Party movement and the ‘Occupy Wall Street’ mob (a distinction lost on Judge Andrew Napolitano and apparently on John Rubino if I read his monograph aright) is that which existed between the the American War for Independence and the French Revolution.

    Yes, Wall Street (and the vast majority of the financial industry generally) breeds amazing wealth alongside fecklessness and avarice; but the Occupy Wall Street gaggle only seeks avarice of its own. Law of the jungle or, as John characterizes it, rubes with pitchforks, out for blood. Arab Spring, on Main Street.

    The Tea Party preceded the mob actions in the Middle East and now in Europe, but is of a fundamentally different nature, based on different ideals like the limits sert out in the U.S. Constitution for ALL THREE branches of the criminogenic federal beast, now unable and unwilling to “check and balance” itself.

    Now it falls to the sovereign States, and the sovereign People. Although urban maladies may well continue to fester and pop for yeears, I believe that across the vast American countryside in rural and suburban America, We The People are only beginning to realize our apex sovereignty over our governments AS A MATTER OF LAW.

    Therte’s a gulf of difference there, in rule of law versus rule of the mob with torches, brick batts, and as John puts it, pitchforks.

    The American ‘Tea Party’ movement of producers, parents, and small business owners is very definitely NOT equivalent — in fact it is *antithetical* to — the riots of government parasites, unionists, pensioners, and powerless peasants who neither arer aware of, or in any case have no desire for, restoring the rule of law in their countries.

    About 12 years ago in their book “The Sovereign Individual”, James Davidson and Lord William Rees-Mogg foretold these uprisings; the dawning of the Information Age on the flailing dinosaurs– redistributionist, corrupt nation-states. Not long after that book, another excellent expose on our government’s moral and literal bankruptcy was “Empire of Debt” by Bill Bonner and Addison Wiggin.

    Both books foretold these things, all those years ago. The force-massing power of the Internet was bound to begin toppling long-regnant rackets and corrupt fiefdoms, as the moveable-type printing press eventually doomed the Medieval guilds and many monarchs. Having said that, there will be a range of revolutions across the world in the coming generation — but only We The People have already codified in our Supreme Law, everything we need to put things right. I predict that we shall do so in surprisingly short order.


    1. David, I don’t subscribe to your conspiracy theory of history nor do I find your characterizations of the Wall Street Boycott protestors anything more than childish name calling. Conversely, your characterization of Tea Party protestors is mere hyperbole.

      I am readily familiar with the “sovereign citizen” and the so-called “patriot movement” and find the legal theories found in each, absent merit.

      1. Brad, the “legal theory” I espouse is the U.S. Constitution and the “Principles of ’98” promulgated by James Madison (the primary author of the Constitution) and Thomas Jefferson (the primary author of the Declaration of Independence), both ‘Founding Fathers’ and both seminal minds in the formation of this republic. I don’t give a frog’s quivering thigh about your characterizaations of reality. It remains reality.

        D.M. Zuniga
        Founder, AmericaAgain! Trust
        Author, ‘This Bloodless Liberty’

      2. Brad, you have a point about my hyperbole with regard to the Tea Party. It would have been more accurate to say that what I described is the heart of the movement, yet there is a good segment of that movement comprised of unthinking, reactive droids and glassy-eyed conspiracy theorists. I carry no water for either subset; my characterization of the original ideals of the movement still hold.

        I also agree that there are a plethora of lunatic legal theories in what is loosely termed the “Patriot Movement”. I agree that they are almost entirely lunatic ideas with no basis in law: ideas about name capitalization, about U.S. citizenship, the U.C.C., admiralty law, ad nauseam…

        If you read my monograph linked above, entitled ‘Exposing the Fool’s Gold Standard’, I really can’t see how you would lump me in with such theorists. You may not have read it, thus reacted dismissively. If you read it and still react as you do to it, then there’s no help for you on that score. Plug away on your own wavelength and perhaps you’ll find merit elsewhere.

    2. I was really excited by the original third party movement that arose from the Ron Paul campaign in 2007-8, and was sadly disappointed to see it devolve into the astroturf Tea Party in which average people were bused in and given placards and talking points like so many Murdoch marionettes. The original Paul campaigners were truly educating themselves, while the Tea Party participants were quoted incessantly all over the left-wing blogosphere, saying hilariously incorrect things. (All mass movements will have their share of ignorant participants.)

      How did David Zuniga and Bruce C. miss this guy: http://bit.ly/qywPFa ? He was all over the web a few days back. There are lots of college kids of the old Paul campaign sort — like this guy — who are participating in the Occupy X protests. If you aren’t hearing any of the smart participants being quoted, it’s because that’s the policy of the mainstream news. They haven’t yet figured out how to co-opt Occupy X, so the plan in the meantime is to belittle them and laugh at them. The smart people will never get airtime under those conditions.

      1. “Mr/Mrs/Ms Paper-is-Poverty”,

        The exception does not prove the rule; despite a handful of rational people among them, a mob of 600 piss-stained groundlings can have no salutary lasting effect, as one would expect.

        As I explain on pages 62-64 of my book ‘This Bloodless Liberty’, a third party will never be allowed in America. The tactical divide-and-conquer plan was hatched in The War to Enslave the States; after the smoke cleared from Lincoln’s War, the perennial donkey-elephant antithesis has fulfilled the same tactical purpose: keep the citizens at one another’s throats in approximately equal, offsetting force perennially. Let the pendulum of electoral results swing from time to time to allow the serfs to think themselves ever on the cusp of victory. Meanwhile, the perennial victory remains in the hands of mercantilists who buy, sell, and trade members of Congress and presidents as one trades baseball cards.

        The mission of AmericaAgain! Trust will be to cut Congress’ puppet strings from those powerful individuals, families, and industries by indicting members of Congress severally on STATE charges that harmonize with their activities, using funds taken from entirely within their own sovereign state. Ironically, our tactical idea was first hinted at in Federalist 28, penned by none other than Alexander Hamilton, godfather of the mercantilist cause.


  8. The same protest that rocked Britain and France, felled dictators in Egypt and Libya has now reached our shores. Honorable people both on the left and on the right should view Occupy Wall Street as a protest against the oligarchy that seized control of our government and institutions.

    There are elements of the Tea Party associated with Occupy Wall Street and they are welcome. We know what it takes to maintain a sound dollar, trust in our institutions. Integrity, fiscal and monetary is not the exclusive purview of the right or the left.

    1. I think your giving the “Occupy Wall Street” protests way too much credit. Not one interview nor even quote that I’ve heard from any protester has been intelligible. Nevertheless, just as people interpreted Obama’s leading campaign rhetoric as an expression of their own desires, many people seem to be projecting their own issues onto the inarticulate.

      As you wrote, “Honorable people both on the left and on the right should view Occupy Wall Street as a protest against the oligarchy that seized control of our government and institutions.” They “should”, huh? Why, because you think that’s what they’re trying to say? Why can’t they just say it for themselves so we observers won’t have to speculate?

      There seem to be a lot of visitors to this site who believe in “elites” who are supporting the one-world government theme, and some believe that they are behind these protests. By purposely making the protests non-specific and unintellectual the maximum number of “useful idiots” can be attracted to gain attention and threaten chaos. Their very intention is for earnest people to reveal and diagram their own anxieties by trying to “make sense” of the nonsensical so that they can be manipulated emotionally later on.

      I’m not saying there aren’t legitimate issues to protest, I’m saying that these “Occupy _____” protests are not what they seem. It’s really sad (and scary) to see so many confused young people being used.

      1. Here ya go Bruce, straight from the horses mouth:

        Occupy Wall Street is leaderless resistance movement with people of many colors, genders and political persuasions. The one thing we all have in common is that We Are The 99% that will no longer tolerate the greed and corruption of the 1%. We are using the revolutionary Arab Spring tactic to achieve our ends and encourage the use of nonviolence to maximize the safety of all participants.


        And, oh by the way, that took me all of 30 seconds.

      2. By refusing centralized organization — thus keeping the protests non-specific — they are also avoiding being co-opted and re-directed by the big political parties or other interests. As soon as some group or committee is “in charge” they become the target for such efforts.

        1. Good point PIP. The unions are endorsing it but outside of the public sector unions are mostly ineffectual. It’s right side equivalent, the Tea Party was assimilated into the Republican Party almost immediately.

  9. John, while I’ll concede the similarity of the insipid ‘march’ tactics, the Occupy Wall Streeters are piss-stained groundlings looking for rubber chickens and free lunches whereas the Tea Party mass is equal parts small businessmen, concerned Soccer Moms, College Republicans, and piss-stained groundlings.

    The Libertarians comparing the two ‘revolutions’ are grasping at straws; other than similar modalities (marching with posters) they are antithetical. Specifically, the Tea Party is not at all concerned about America’s wealthy; that has not once been the subject of a Tea Party rally or any part thereof. The Jacobin loonies in this ongoing socialist uprising are, however, full of spite and envy towards the rich.

    Pitchforks and Molotov cocktails are obvious tools for revolutionaries, but marching with posters is pure idiocy — destructive to the cause — for self-governing apex sovereigns.

    The average American citizen is indeed the apex sovereign under our constitutional arrangement. No pitchforks for law enforcement; the legislatures and courts of the sovereign States (and to some extent, our governors) are our tools and intermediaries to arrest the criminogenic D.C. Leviathan that has ailed, assailed, and enslaved its own masters for over a century. Of course, the Tea Party horde doesn’t know this yet; we’ve not marketed our AmericaAgain! Indictment Engine(TM) to the productive masses, yet. So they do the Jacobin marches still, and throw their share of rubber chickens withal.

    That will change, as you shall presently see not long from now, God willing. A rule of law violated for 150 years will not be restored in a few election cycles — and not by elections at all, per se. Tenth Amendment law enforcement is a new New Deal; this will take some time.

    Many of the losers under restored rule of law will be the huge, artificially healthy financial speculation industry and its derivative remoras. In other words, those castles will begin to be bought up by those who produce real commodities and services. The crap-shooters will be driven out — yes, Stephen, rather like dogs, actually. To the poor house or offshore, to greener pastures for their useless wares.

  10. The problems are many; it’s like a recipe: a portion of corporations, a healthy portion of dirty politicians – mix equal parts left & right, so there’s no taste difference, – then add 2 parts clueless citizens (often called, “consumers”). Next, add a good helping of trade imbalances, the kind that come from the rare reserve currency plant. Then, the special ingredient, exponential growth made from a flawed monetary system and unwise national use of energy. Bake until the federal reverse loads of unconstitutional powers. Feed it to a fat and happy society as bread and circus.

    Amazingly, people are waking up, and the message is getting out that something is terribly wrong. The goal seems to be to focus the message on the need to change the monetary system, along with political laws (term limits anyone?) for starters.

  11. The castle inhabitants will shoot them down like dogs, after a “reasonable” amount of letting them blow off harmless steam, if they enter the castle or harass its inhabitants.

  12. Surely you can’t be against EVERYONE who has money and is spending it? They’re not all multi-billionaire CEOs and banksters.

  13. I mentioned to my wife around 2000-2001 that the wealth gap appeared to be widening significantly. We agreed on the simple fact that a strong middle class was the only insulation between the upper class and “the great unwashed masses”. Hopefully they, the rich, are aware of this as well. I fear this is all about to end very badly.

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