Wal-Mart, Disney and other major U.S. companies tied to Bangladesh factory fire that killed 100+

Profit. Profit above all. That's America's new MO. Cut safety nets, kill unions, reduce incomes, engage in harmful speculation and financial engineering. Then, when the ordinary incomes of workers can't afford the products these companies sell, they must find cheaper and cheaper ways to produce the stuff, often employing slave labor toiling away in horrible conditions.

We saw this here in America back at the turn of the 20th century. Remember the Triangle Shirtwaist Fire? Eerily similar. In that disaster 146 people, many of them children, perished in the flames or jumped to their deaths trying to escape the inferno. The company had locked the doors to the stairwells and exits. Same seems to be true in the Bangladesh fire.

The Triangle tragedy ushered in a new era of improved safety standards and unionization. I'm not hopeful we are going to see this happen in Bangladesh.

You can't sustain a business/economic model based upon reducing wages and income to support profit. Eventually something's got to give. It's just too bad that along the way to change you need so much tragedy and hardship to wake people up to how screwed up this is.

Demand is income-dependent

Over the past three and half years, growth in U.S. consumer spending has averaged a paltry 0.2 percent adjusted for inflation, the weakest in the post-World War II period, Morgan Stanley says...

Over the past year, pay for blue-collar workers adjusted for inflation fell 12 cents from the previous year, according to the Bureau of Labor Statistics. That was the steepest decline since the stagflationary days of 1980.

Pay for all workers has fallen 16 cents this year in real terms. [emphasis added]

Read the rest at The Huffington Post

U.S. Consumer Spending The Weakest In The Post-World War II Period

by Reuters

Morgan Stanley's Stephen Roach sees the balance sheet recession taking years to play out.

Personal saving hits lowest level in four years

Households have been drawing down savings as incomes stagnate. Savings can only fall for a period of time before people start cutting back consumption to rebuild those savings.

In 2007, just before the economy crashed, the savings rate had fallen to 2.0%. What followed was a pullback in consumption that weakened the economy and contributed to the overall downturn.

The savings rates is now down to 3.5% (down from a peak of 8.3% in May ’08). While 3.5% is better than 2.0%, unemployment is still far higher than it was in 2007, so it’s reasonable to think that 3.5% (or thereabouts) may be the new, 2.0%. Incomes have to rise from here for this trend not to become problematic.

Consumers have recession hangover

Americans are making progress in working down their heavy debt burden, but are struggling to break out of another funk holding back the economy: their deep pessimism.

Some economists point to a big drop in household debt as a sign that American consumers - once considered the driving force of the world economy - are primed to return to more spendthrift ways.

But standing in the way of a stronger recovery, and possibly President Barack Obama's re-election as well, are unprecedented levels of concern that better days may not lie ahead.

Research suggests that economic growth will suffer from a sinking feeling among consumers that their incomes will continue to lose ground to inflation. Even though households are digging themselves out of debt, the painful 2007-2009 recession could leave a lasting scar on their willingness to spend.

"Given people's expectations, the outlook going forward does not suggest much upside for consumption," said Jeff Greenberg, an economist at Nomura in New York. "A lot of people will be radically different consumers."

Polls show record levels of pessimism about future income despite slow improvements in the economy. Indeed, Gallup surveys have found Americans are even gloomier about their finances now than they were during the recession's darkest days.

Read the rest at The Huffington Post

Americans' Pessimism Holding Back Recovery

by Reuters

Loan growth surging, but incomes are not keeping up

Total loans and leases have increased by over $200 bln since the end of March, so private credit expansion is replacing falling government spending. That’s good because it’s keeping the economy supported, but it can only go so far as incomes have to be able to support the expanding debt service. The problem is, incomes have been falling.

Take a look:

But personal income has started contracting...

So it doesn't look like this is sustainable for very long.

"Horizontal money" (private credit creation) needs income to sustain it.

"Verticle money" (the government's fiat) adds to income.

It's a lot better to have the latter than the former, at least during times like now.

Mish — Real Disposable Personal Income Drops Second Consecutive Month; Drop is Highly Deflationary

Mish parses the reported data on income decline. Read the whole post at MISH'S Global Economic Trend Analysis

Real Disposable Personal Income Drops Second Consecutive Month; Drop is Highly Deflationary

This is doubly interesting because Mish is a subscriber to the Austrian school, and he is one of the few on that side that is calling deflation rather than inflation now.