It's the Economy, Stupid!

[easye]

A general thread to talk about .... ahhh.... the economy?  

www.npr.org/2023/04/27/1171993308/economy-gdp-growth-recession-mcdonalds

The U.S. economy is losing steam. Bank woes and other hurdles are to blame.

From banks to burger joints, the U.S. economy is showing signs of stress as nervous shoppers watch their spending and anxious lenders keep a tight grip on credit.



A report from the Commerce Department Thursday shows the nation's gross domestic product grew at an annual rate of just 1.1% in the first three months of the year, compared to a 2.6% pace in the previous quarter. Growth was weighed down by declining inventories and housing investment.



The economy is projected to lose more steam in the months to come as rising prices and higher interest rates take a toll on families and businesses.



"Our base expectation is for a mild recession in the U.S.," McDonald's CEO Chris Kempczinski said this week.

If you claim there is going to be a recession for long enough, eventually you get to be right!  I know the big, international Mega-Corp I work for has been predicting a recession and making decisions based on this belief for the past 12-18 months.  

If enough other companies and industries feel the same way for long enough, does it actually become a self-fulfilling prophecy?  I mean, they are the ones who power the economy and many leading indicators via large equipment orders, shipping contracts, and other big ticket purchases.  Plus, their thinking also influences their large swathe of employees too, who then start to make consumer decisions based on these projections as well?  Since we all know that the economy is based on feelings and not facts, do these "Predictions" by CEOs and Mega-corps have an undo influence on whether their is actually a recession?  

[maddocgrotsnik]

In the U.K., recession is feeling kind of inevitable.

Political levers are frantically being pulled to prevent pay rises, whilst inflation and cost of living keeps on going up. So other than essentials (rent/mortgage, bills, food, taxes etc) folk just aren’t spending like they once could. As an example, my combined gas and electric bill is now £100 a month, where it was around £60 this time last year. Petrol is also more expensive.

Now, I myself am doing OK. Whilst my disposable income is squeezed, it is still there. But now I’m doing pub once a week, where a pint is up from £3.80 to £4.70, and take away food twice a month. That all trickles down through the economy, as local businesses see higher costs and lower income.

But hey, the millionaires and billionaires are doing alright, so I guess everyone else being skint is just the price of doing business, yeah?

[easye]

Yeah, the UK is in a much worse position than the US is right now.

[crispy78]

Mmm, we're getting helpful advice at the moment from the Bank Of England saying "just accept you're poorer". Fucking cheers for that.

www.bbc.co.uk/news/business-65308769

[Disciple of Fate]

Plenty of 'regular' people are starting to jump in on the crab bucket by complaining that others shouldn't strike for wage increases, because that would lead to price increases and make everything more expensive. Meanwhile we have companies shamelessly announcing they're raising prices to improve profit margins.

[herzlos]

Yeah, prices going through the roof has nothing to do with staff asking for long overdue pay rises. Accepting you're poorer only works to the point where you can still afford to live.

Like, I've accepted that our energy bills have gone from £150/month to £350/month, and that our food shopping has doubled, and that diesel costs £1.60/l now. All of that sucks, and has knocked maybe £300/month off our of available income but the reality of that is that it just means we need to save longer for a new house and not that we need to choose whether we want heat or dinner tonight.
And we're not even worried about the base rate launching up yet as the mortgage is fixed for another 2 years. If my mortgage doubled too, we'd be completely fucked.

Inflation is currently bonkers, but the price increases are on the back of profit and not cost increases. Not that there haven't been cost increases but not to the extent prices have risen by.

[easye]

The part that irks me, is the record corporate profits.

They are not raising prices to cover supply chain costs, they are raising prices because they have the cover of supply chain costs to raise prices. I guess they are all just piggy backing on to what Drug companies did with Epipens and Insulin to goose their stock prices; except now everyone is doing it.

As a capitalist culture, we really need to smarten up and just link all social programs to the COLA index that automatically kick in annually. It removes the desire to artificially raise prices just because wages/benefits go up. This would help nip what we are seeing today in the bud.

The worst part is that our Central Bank responses to the wealthy trying to put "poors" back in their place via inflation is to help them out by punishing poor people with higher interest rates, killing jobs, and access to credit for large purchases.

[maddocgrotsnik]

I just don’t understand the “but if we raise wages” argument.

But. Disclaimer. I fully appreciate me not understanding, and it not making sense, are not the same thing. At all.

Yet in my uninformed position? If….prices are going up on essentials. As in things….I kind of need to pay for to stay warm, cosy and alive, and my wages are year on year increasing less than inflation….I only end up with less disposable income, which I can spend on fewer goods. And that works overall…..how?

This is a challenge. But not a Dunning Kruger challenge. I have freely admitted the limit of my knowledge and indeed acknowledged “I’m probably missing something”.

But….seriously. What the fuck?

[skyth]

It's based on the mistaken belief that costs charged are based on how much something costs to make rather than the actual highest we can get for it metric.

[easye]

The people making the argument that increased labor costs believe that the business will pass the higher cost onto the consumers, so by asking for more wages to cover COLA increases you are fueling the higher costs.

However, there has been plenty of data showing that the increase in costs is not being driven to cover increasing supply chain or labor costs, they are being driven up above and beyond these expanded costs and are instead being used to drive profit and share prices.

www.npr.org/2022/11/15/1136935160/corporations-are-booking-record-profits-is-it-thanks-to-price-gouging

Corporations are booking record profits. Is it thanks to price gouging?

So far this year, wages have risen about 5%, and prices have risen more than 7 1/2%. Companies are not raising wages as fast as they're raising prices. And that gap could be where some of these profits are coming from. Why haven't we asked for bigger raises? After all, companies say they are desperate to hire, and workers have a lot of power right now.

[herzlos]

It comes from the completely garbage argument that "If I pay my staff £1/hour more I'll go bust!" or "If we pay nurses enough to live on, then we'll need to put taxes up!".

In virtually all cases, the money is there but the capitalist class don't want to spend it. A business who can't afford a modest pay rise for it's staff is going to have been completely sunk by the cost increase of everything, though to be fair I've seen a lot of smaller businesses just give up when seeing their predicted energy bills for the year, but those are almost all owner-operator places with a handful of staff.

Giving nurses the payrise they want will cost about £4bn. The same Government saying we can't afford that spent £9bn on useless PPE from their friends/sponsors. Now obviously giving everyone in the public sector a 200% payrise would cripple everything, an inflation level payrise shouldn't actually affect them, because inflation.

[easye]

First Republic Bank is on the brink of collapse.

www.cnn.com/business/live-news/stocks-economy-banking-inflation/index.html

That would be the third or fourth bank collapse in as many months.

[easye]

Update: It did collapse and that makes it the 2nd biggest bank collapse in US History.

I am sure nothing bad could happen due to this, nothing at all!

[easye]

First Horizon Bank stocks tumble after a failed merger with TD Banks.

Will this be the next bank to fall?

[Disciple of Fate]

Can't wait for a second once in a lifetime financial crisis, just because the US is regulation averse in some of the most impactful/harmful parts of the modern economy.