Junior Mogambo Ranger (JMR) Terry L. sent a column by Robert Morley, who is described as "columnist", with the headline "What Garage Sales Tell Us About Our Economy".
Perhaps because the incident was so fresh in my mind, I thought that he was referring to the few precious heirloom articles from the back of my closet that I tried to sell at my neighbor's garage sale, hoping that maybe I'd, you know, make a few lousy bucks that the wife and kids wouldn't know about.
Apparently, people are appalled that I would have been living with such trash up to now, and they rudely laughed at the idea that anyone would actually buy any of my treasures, and then they got mad at me because my heirlooms were, so they said, "stinking up the joint".
So, if you ask me, "What Garage Sales Tell Us About Our Economy" is that the people are rude and stupid to reject a genuine, collectible, original Thigh-Master exercise device just because it had some sticky stuff on it that smelled bad. And even though I explained that the rust and dirt were valuable "patina", it was no dice, so I slunk home and threw the damn thing in the kid's closet, and now I have to listen to her complain about it stinking up the joint. It is always something around here!
Fortunately, the article was NOT about that, and the subhead was, "As people struggle to put food on the table, a wave of second-hand goods is sweeping the nation."
This turns out to mean that "Struggling with billowing debt and rising prices, faced with a rapidly deteriorating economy and job market, cash-strapped Americans are selling family heirlooms, prized possessions, scrap, and just about anything with value."
And the way he knows this stuff is that "Internet garage sale sites are booming. According to the Associated Press, Craigslist, one of the more well-known online flea markets, has seen the number of for-sale listings soar 70 percent since last July. AuctionPal.com says its sales rose a blistering 66 percent from February to March."
Furthermore, pawnshops are busy, and "People are pawning out like crazy", says Nat Leonard, a pawnshop owner in Philadelphia. He went on, "People are cleaning out their houses of gold, silver, whatever, to get money just to fill their cars with gas," which he must know first-hand because "Leonard's sales volumes are up 20 percent over last year, with increasing numbers of first-time customers."
Well, to be fair, this is always what happens at the beginning of a downturn, and around here towards the end of every month, as that is when I always run out of money to spend in trying to drown my sorrows in liquor. So I would be surprised if all this was NOT happening!
Naturally, I concluded that there was nothing new here for me, and so I was just about to get up and leave when he said something that stopped me in my tracks.
He said, "I've got business owners coming in to pawn things just to make their payrolls. I've never seen that before." Never seen it before! This really IS interesting!
And what is the result of all of this sudden supply? Being as familiar as I am with the whole supply/demand thing because it is the only thing I think I actually kind of sorta understand, I think I can safely say that the demand for people's old stuff has to be down, including a genuine collector's item like a Thigh-Master, as the supply rises, making prices fall, as Mr. Morley attests when he writes, "Secondhand online merchandise is already selling for 25 to 35 percent below last year's prices" according to Brian Riley, senior analyst at Tower Group.
From here the path gets ugly, as Mr. Morley explains that "There is coming a time when the consumer will be tapped out, and the debt-fueled consumption binge will end. When it does, consumer confidence will be replaced with fear and eventually panic. This panic will result in increased asset sales and reduced spending as workers attempt to pay off their debts (or save their homes). Evaporating confidence will cause consumers to rethink current and future spending plans. The economy, hit with a lack of demand, will slow, corporate earnings will fall, stock markets will plummet, and layoffs will become prevalent. As more people enter the unemployment line, the deflationary spiral will intensify."
And it gets worse, as "If that happens, the resulting economic instability will lead to a vicious cycle of consumer spending cutbacks, a plummeting economy and soaring unemployment. Home prices, along with many other domestic-demand-driven assets, will be sucked into a deflationary spiral, likely stimulating a banking crisis as thousands of bad loans must be written off. Yet simultaneously, import prices will soar as the federal government continues to inflate and spend money in a vain attempt to stimulate the economy and keep paying promised Social Security and Medicare liabilities. The dollar will fall further as boatloads of rapidly depreciating greenbacks wash up on America's shores as America's foreign debt holders try to spend their U.S. dollars before they become worthless."
There is probably more, but I can see by the look of horror on your face that you have heard enough today. We'll take it up again tomorrow, or whenever I sober up after hearing this Awful, Awful News (AAN) myself. Brrr! The blood runs cold!
The MOGAMBO GURU, e-economic newsletter,
by Richard Daughty, the angriest guy in economics.
Editor's Note: Richard Daughty is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the editor of The Mogambo Guru economic newsletter - an avocational exercise to heap disrespect on those who desperately deserve it.
The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning and other fine publications.